U.S. V. GEORGIA PUB. SER v. COMM'N.

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Argument of Cox

Chief Justice Earl Warren: Number 81, United States, Appellant, versus Georgia Public Service Commission.

Mr. Solicitor General.

Mr. Cox: Mr. Chief Justice and may it please the Court.

This case, which is here on direct appeal from a three-judge court sitting in the Northern District of Georgia, raises two questions, the second and third questions on the merits, which were raised in the previous case.

It comes before this Court on direct appeal from a judgment dismissing the Government's complaint for an injunction.

The Government sought an injunction against the enforcement of the Georgia rate schedules on intrastate shipments of goods being shipped on the federal government's bill of lading.

The facts are in no way in dispute.

They may be summarized as follows.

But there are in Georgia 25 federal military establishments and a number of civilian federal establishments.

It's the obligation of the government, in a considerable number of cases when an employee is transferred from post to post for the convenience of the government, to arrange for the transportation of his goods or to reimburse him for the cost of transportation as the government may choose.

The usual practice, and indeed the historic practice, has been for the federal transportation officers to arrange the shipments of these household goods.

They negotiate a rate or award contracts to the lowest bidder.

The property of all the employees will then be shipped on a single government bill of lading.

And, by government bill of lading, I mean not only one to which the government is a party, but a government form of bill of lading which has in it, as I shall point out in more detail later, a number of clauses which are not contained in the usual uniform bill of lading or other bills of lading of that type.

In 19 -- then, the property is paid for of course or the shipment is paid for by the government check in due course of which incidentally usually involves an extension of credit that would be prohibited in the case of a private shipper.

In 1960, there were about 1,100 carrier shipments within Georgia of the household goods of either military or civilian personnel on these government bills of lading.

The procurement activities are governed either by the Armed Forces Procurement Act in the case of property for civilian employees of the Department of Defense or the property of military personnel.

They are governed by Federal Property and Administrative Services Act, which is substantially the same, in the case of shipments of the household goods of civilian personnel.

I will discuss the Act and the regulations a little later.

It's enough to say that in our view, they require procurement officers to obtain the lowest rates possible without regard to state law.

Now, Georgia has a statute of regulating intrastate truck shipments.

It appears on page -- appears on page 69 in the back of our brief, at the beginning of the appendix.

Under Section 613 of their Motor Vehicle Code, the Commission is given power to proscribe just and reasonable rates, fares, and charges for transportation by motor common carriers.

In another section, the Commission is given power to issue rules and regulations necessary to implement the Act and, pursuant to that power, the Commission -- the Georgia Commission has issued a regulation which appears over on page 85, that is very pertinent here.

It requires all shipments to be made under a uniformed household goods bill of lading.

In other words, if this applies, the government cannot adhere to the usual government form of bill of lading.

And down the last sentence in Rule 15, property of two or more families or establishments will not be accepted for transportation as a single shipment.

In other words, the making of a mass shipment of the household goods of 500 or 600 or more people is prohibited at least to the extent that each must be made as a separate shipment under a separate bill of lading.

In July 1960, there was to be such a mass movement, although perhaps not as large as 500 or 600 employees, of employees of the Department of Public Health from Savannah to Atlanta.

Now, the procurement officers of the federal government invited bids.

They received 15 bids -- 13 bids.

Eight of them simply quoted the Georgia rates on household goods.

Five bids were below the Georgia rates and the government accepted the lowest of those bids from Consolidated Van & Storage Company.

Thereupon, the Georgia Public Utilities Commission threatened to revoke the license of Consolidated Van for -- or the permit of Consolidated Van for violating the Georgia Utilities regulation.

A proceeding was started before the State Commission to revoke the license despite the fact that consolidated immediately broke its contract -- or immediately sought to be excused from its contract with the government, the United States sought to intervene before the Georgia Commission but was denied the leave to intervene, and thereupon, the United States filed this bill in equity seeking to enjoin the state authorities from threatening perspective truckers with prosecution under the state law if they should bid below the state rates on government shippers.

The bill sought to enjoin the enforcement of the state regulation upon two grounds.

First, that it was inconsistent with the procurement statutes and policies.

Second, upon the ground that it violated the implied constitutional immunity of the United States.

Here as in the California case, a three-judge court was convened, the issue in due course was limited to household goods.

Originally, the complaint sought to cover all shipments on government bill.

Georgia took the position that her statute, for some reason that I don't understand, didn't apply to shipments of government-owned property but that it applied only to government shipments of property on behalf of its employees.

As so limited, the case came before the three judges on a motion for summary judgment and judgment was entered dismissing the government's complaint.

The three-judge court said that it had difficulty in distinguishing the California Public Utilities case from the Penn Dairies case but that it thought Penn Dairies case was controlled.

We then brought the cases here by a direct appeal.

The first question raised by the Court's order postponing argument on the question of jurisdiction is whether the Court does have direct jurisdiction on this appeal.

We think it plain that it does for the reasons that I stated in the argument of the California case yesterday, that one of our two grounds for seeking an injunction against enforcement of the state law plainly raised a direct constitutional question.

Justice William J. Brennan: Meaning that this is (Inaudible) case?

Mr. Cox: No.

Justice William J. Brennan: Or an immunity.

Mr. Cox: Meaning, by that, so far as it's an immunity -- implied immunity case, there is a direct constitutional issue and that, whether the Supremacy Clause case would give -- would require a three-judge court or not, needn't be considered because if there's -- a three-judge court is required as it is on the implied immunity ground, then it hears and disposes of all the issues and the direct appeal is proper.

The two questions then which require some discussion are other questions of substance.

First, whether the Georgia rate regulation as applied to these shipments under government bills of lading is inconsistent with the controlling federal statutes regulation, and we submit that it is.

The second question is whether Georgia's attempt to regulate the rates for shipments under government bills of lading violates the implied constitutional immunity of the United States and we submit that it does because it's an attempt to regulate the terms on which the government may contract.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Cox: Yes.

I plan to develop that.

Let me indicate briefly why I say that.

In the first place, so far as the argument based on the procurement regulations is concerned, we think that cost -- if it's inconsistent with the federal statutes, a cost impact is sufficient.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Cox: So far as the employee cost at which --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Cox: The practical -- there are further practical consequences which I would like to explain.

This requires a great deal more paperwork.

It requires a great deal more personnel.

It would slow up, in some respects, the shipments.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Cox: Yes.

I think, in a sense, they are.

Nearly everything in the end could be reduced to cost.

I suppose, as I was going to use this illustration later, that a state building code purports to require iron beams of a certain size, fireproofing of certain types and style, is that cost or is that what we get?

Indeed, a good part of my argument is that the one runs into the other and that, when you're directly regulating the government, no distinction should be drawn.

Justice Arthur J. Goldberg: (Inaudible) isn't that correct?

Mr. Cox: Well, the Public Utilities Commission of California, yes.

And, as to -- also, the court made something of the interference with the shipments in that case, the practical consequences, I submit that from the standpoint of the essential reasoning, that was unrelated because the essential reasoning was that the procurement statute and regulations in the view of the court, and I think quite rightly, called for the government to get goods by methods that involved competition at the lowest possible cost.

And, anything which was inconsistent with that policy declared in the statute had to yield under the Supremacy Clause.

It seems to me, that is just applicable when the only consequence is cost, as it is when it interferes with the physical movement of the goods.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Cox: It's related to cost, personnel, time which could probably be offset by more personnel, trouble, inconvenience and that kind.

There's nothing more.

Chief Justice Earl Warren: Am I right of my recollection, Mr. Solicitor General, that by statute the government does assume itself the obligation of transporting the personal effects of --

Mr. Cox: Yes.

Chief Justice Earl Warren: -- of officers from one place to another when they're transferring?

Mr. Cox: This is the government's responsibility, both in the case of officers and civilian personnel transferred to the convenience of the government.

Chief Justice Earl Warren: Then whatever they pay would be -- would affect the government --

Mr. Cox: Oh yes.

Chief Justice Earl Warren: Wouldn't it?

Mr. Cox: Immediately.

Indeed, the shipments -- historically, these shipments have been handled by government procurement officers under government bills of lading.

Indeed, it has been the historic policy of Congress to have these shipments arranged without regard to utilities regulation.

For example, Section 22 of the Interstate Commerce Act exempts government shipments and government's bills of lading from the regulation of rail carriers, and Section 317 exempts them from the regulation of truck carriers on interstate shipment.

Historically, the procurement -- and I use the word “historically” advisably.

Historically, the procurement has been arranged in these civilian and military household goods have been shipped without regard to state utility regulation statutes.

And, in the very few cases which -- in which there has been any challenge to that, because most of the states have accepted it at least acquiesce, the government has quite uniformly been successful.

The California Utilities case is the most important of those, being the only decision by this Court, and we think that, despite the factual difference that Justice Goldberg calls attention to, that the regulations are the same, the statute is the same, their policy is therefore the same and that this is -- Georgia statute is more of an -- more inconsistent with the policy than the California statute was because the California statute at least opened the door or crack and said maybe you can get our permission to negotiate, whereas this permits no such negotiation at all.

The opinion below, as I said earlier, followed the Penn Dairies case.

Here, as in the California Milk case that we argued earlier, we distinguish the Penn Dairies case partly on the ground that the statute has been changed primarily on the ground that there had been these two very significant changes in the regulations which the Court held to be a decisive distinction in the California Utilities case.

We see no difference between the cases in terms of the ownership of the goods, whether they're household goods or military goods, because in each instance the same statute and procurement regulations control and, each instance, it is the appropriated funds governed by those statutes which as the Chief Justice pointed out, will ultimately bear the added expense.

The statutes -- the comparison between the regulations involved in the California Utilities case and this case is a matter of detail.

It's all gone through in our brief and it seems to me that it would be a useless expenditure of the Court's time to go through those minute points and read them all aloud here.

But we do submit, I'm sure the Court will find it so, that the statutes -- that the statute is the same.

The regulations are substantially the same in each case.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Cox: Well, if I understand Your Honor's question, you are now looking forward to the part of the case where we rely on the implied constitutional immunity.

I was just about to turn --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Cox: I was just about to devote the rest of my argument to that very important point and with Your Honor's permission, I would like to fit it in rather than take it up separately.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Cox: Because we do, in this case as in the California Dairy case, argue that the statute here, the Georgia statute, is unconstitutional because it attempts directly to regulate the terms upon which the United States may contract for the transportation of goods.

And we think that that is under the precedence and reasoning of this Court and under, by principle, a violation of the implied constitutional immunity.

It may be worth recalling very briefly some of the established benchmarks.

It set a law, of course, that the United States does have some degree of implied constitutional immunity.

Congress may expend the immunity by statute, it -- and has done so on occasion.

It may waive some of it by statute, and it has done that on occasion.

If, as I now assume for the purposes of argument, there is no relevant legislation, then it's for the Court to define the scope of the immunity in the absence of and pending in a more legislative declaration of policy on the subjects.

There are two principles which are well set.

The first is that a state may not directly regulate or pass the property, instrumentalities, or activities of the United States.

One of the clearest illustrations would be a general property tax on a courthouse or post office building.

In the field of regulation, as the Court's decision sufficed several illustrations, a state may not restrict the kind of fertilizer that's distributed on the programs of the Department of Agriculture.

It may not, as the Court held in Arizona against California, require approval of a dam to be built by the United States or for the United States.

And, I should emphasize in this connection that the idea of direct regulation does not require that the United States be mentioned by name.

The property tax is on all property.

The statute doesn't mention the United States.

It would clearly be invalid.

In Arizona against California, the statute regulating -- or requiring a license to build a dam and requiring plans and specifications be approved didn't mention the United States, but it was held to be a direct interference.

The second rule that is well established is that a state is not barred from imposing nondiscriminatory tax or regulation upon one doing business with the United States merely because this would add to an -- it would impose an increased economic burden on the United States.

In the tax field, the familiar illustration I suppose are the income taxes that the states levy or a tax upon the articles which a contractor may purchase, such as a bulldozer, shovels, or things of that kind, to perform his construction contract with the United States.

These are cases where the regulation states or the -- states what the contractor may do in relation to his activities rather than in relation to the United States.

For example, examples of valid regulation are the minimum -- state minimum wage and overtime loss which may be applied to one performing work under a government contract, safety measure of the boarding that goes over the girders when a building is being constructed, or I would suppose the type of scaffolding that might be used in doing the brickwork in erecting a courthouse or post office.

Those kinds of state laws are clearly permissible and not a violation of the implied immunity, but I would compress them, and I think this is important, with the direct regulations.

A state can't apply its building code to the buildings of the United States because this bears directly on the kind of building the United States gets.

It can't regulate the size of the iron beam or the fireproof.

It can't, as I suggested earlier, regulate the kind of a dam that may be built by the United States.

All those are direct regulations and, therefore, would be invalid.

Justice Hugo L. Black: May I ask you, Mr. Cox, are you directing this argument to the position that the Interstate Commerce Clause would be violated these things?

Mr. Cox: No, that the implied sovereign -- no, that the implied sovereign immunity would be violated.

No, these shipments are all intrastate shippers and so, there was some suggestion in the government's original complaint that there might be a violation of the Interstate Commerce Clause.

We make no such argument here.

That point has been dropped out of the case, if it had any merit.

We certainly don't press it now.

So, I'm speaking of the implied sovereign immunity without regard to interstate commerce.

Justice Hugo L. Black: The government's power provides the goods on its own terms?

Mr. Cox: Yes.

This case, we think, falls within the immunity, we assert, as a general proposition that a state may not directly regulate a contract of the United States, whether the statute is formally addressed to the United States or not.

If it is formally addressed to the United States, it makes it more dramatic but we think the real point is whether the -- in terms addressed to the United States or otherwise, the state is attempting to regulate a contract of the United States.

Justice Arthur J. Goldberg: Mr. Solicitor General, do I understand you correctly that the (Inaudible) for the state and on the state itself had a minimum wage provided for the workers on the contract that are not -- the contract that is now being served to the United States?

Mr. Cox: I would think that was covered by Stewart & Company against Sadrakula and that it was not a violation of the implied immunity.

Safety equipment, the other things that he does in his relations with the outside work, if I may put it that way, although I include his employees as the outside world, I mean the world other than the United States, are up to him and if we bear -- this would be true even under a cost-plus contract, Mr. Justice Goldberg.

If we choose to do our business in such a way that there is no slack and that the burden of the minimum wage bears directly on us, we can't claim immunity on that ground.

That's the King & Boozer case as applied to a sales tax, and I think the same would clearly be true in this instance with respect to regulation.

Also, I don't want to tie the two together completely.

Justice Arthur J. Goldberg: Now, does the state regards to this rules on public property (Inaudible) to provide minimum wage to personnel and the carriers as a (Inaudible) property of the state to find a third or to find a form of public service (Inaudible) in order to provide them public service.

Mr. Cox: That's the second -- that comes directly to the United States.

We're no longer one step remote and I would think that it was clearly done, not permissible for the state to do that, unless Congress chooses to waive the implied immunity because the court -- I want to make two points.

I will try to develop each.

One point that I wish to make, and I'll turn to it in a moment, is that this Court has always been careful, except in the Penn Dairies case, to preserve a distinction between regulating the contracts of the United States and regulating the activities of the contractor in relation to his employees or his dealing with other independent businesses.

It is repeatedly said that the contracts may not be taxed or regulated.

Second, it seems to us, and I'm going to develop the argument, that all the reasons that apply to cases like Arizona and California, where it was held that the state could not require that the dam plans be approved for a federal dam, are equally applicable to a case like this Georgia Utilities Regulation case.

Now, if I might deal first with the authorities and then expand to the reasons, the first instance to which this distinction between regulating contracts and regulating the contractors was drawn was in the well-known case of Railroad Company against Peniston in 18 Wallace and in Mr. Justice Bradley's opinion.

There -- from there, he said, “The case differs toto coelo from that wherein the government enters into a contract with an individual or corporation to perform services necessary for carrying on the functions of the United States, such as for carrying the mails, or troops, or supplies, or for building ships or works for government use.

In those cases the government has no further concern with the contractor than in his contract and its execution.

It has no concern with his property or his facilities independent of that.

How much he may be taxed by, or what duties he may be obliged to perform towards his state is of no consequence to the government, so long as his contract and its execution are not interfered with.

In that case the contract is the means employed for carrying into execution the powers of the government, and the contract, and not the contractor, is exempt from taxation or other interference by the state government.”

This passage -- the distinction was not observed in many years, as the Court then began to contract the scope of the implied governmental immunity.

This passage was, quite frequently, relied upon by the Court and always, I think, with the same distinction in mind that I draw here in the landmark case of James against Dravo Contracting Company.

Chief Justice Hughes quoted this passage at some length.

It was quoted in the City of Detroit case, I think in Justice Frankfurter's opinion.

The same role was stated, indeed, laid down as part of the holding by Justice Reed for the court in the curse -- in the cursed Scurlock case in which the -- excuse me, Kern-Limerick Company against Scurlock in which the Court held that a state could not tax the purchases of the United States.

There was a dissent upon the question of whether purchase is made by a contractor as agent for the United States.

The goods that were going to be consumed in the course of his performance as a contractor was really a purchase by the United States, but there was no disagreement with the proposition that a tax on a purchase of the United States would be an invalid tax.

Now, it seems to us they're quite apart from the weight given to this distinction in the courts opinions, that also as a matter of principle or reason, the state should not have the power to regulate the contract of the United States, that is the actual terms of what the government may get from the contractor or what the government has to give the contractor.

I think the reasons that I am going to stress are the same reasons that support the general statement that a state may not directly tax or regulate the property, transactions, or activities of the United States.

Justice Potter Stewart: What if the state had a regulation that every contract -- every building contract for construction of buildings must include the provision signed by the -- by the builder and by the contractor that the contractor pay a minimum wage?

Mr. Cox: I suppose that, in that case, the substance of the contract might control over the form.

I don't think that's my case.

I think that is a problem, is it not, a form in substance.

The substance is that the relations of the contractor with his employees are being governed.

If there were an effort to make the government or the private party in the case of private construction responsible for the payment of those wages in the event that the contractor did fail to do it, then I would say that was invalid.

I've been a little troubled about the reverse case, Justice Stewart, but I think to put it illustrates the distinction I tried to get.

Suppose that the government put into its contract with the private contractor, a stipulation that he wouldn't pay laborers more than $1.50 an hour because it thought the state rates were outrageous.

I think I would have to say then that the substance should control that this wasn't a matter of what the United States gets or what consideration it pays directly but rather was an attempt to expand out into this indirect area.

And therefore, I would not think -- we don't have the case and I don't want it commit anybody for the future but intellectually, I would think that my argument should not extend that far, that I'm really concerned with what we get or what we immediately pay and that, if you can visage these terms in contracts that attempt to control more remote relations that they prop -- that they pose a somewhat different case --

Justice Potter Stewart: My case, my hypothetical case would have a direct impact upon the contract which the government would have to sign.

Mr. Cox: Yes, it --

Justice Potter Stewart: It would increase the cost to the government over what it might otherwise have to pay.

Mr. Cox: The mere increase in cost is, if the impact is indirect, is not alone enough.

That is set.

That is clear from the --

Justice Potter Stewart: And, there --

Mr. Cox: In the minimum wage case that I gave Justice Goldberg.

Justice Potter Stewart: And Penn Dairies itself, isn't it?

Mr. Cox: What?

Justice Potter Stewart: Penn Dairies involved increased cost.

Mr. Cox: Yes, but I think it involves something more than increased cost.

It involved an attempt to regulate the contract of the United States and in a different sense than I think in your case.

For example, suppose that a state provides, by statute, that no construction company within Arizona shall sign a contract for the construction of a dam that does not contain plans and specifications which have been approve by the State Dam Commission.

Clearly, that is just as much an interference with the activities of the United States.

As a statute, it says no one shall build a dam that hasn't been approved.

And, I think this direct and indirect is hard to articulate but the way that I have put it to myself, and I submit that it has merit, is that your case is different because, also in form it has been made a part of the contract between the contractor and the United States, in substance, it really has to do with the contractor's relations with somebody else.

Now, I think perhaps one can put this in words by saying that if the state attempts to regulate what the United States gets or what the United States itself pays out, that then, it is a direct regulation of the contract within my rule that in the other cases may be not.

That's the best I've been able to do in --

Justice Hugo L. Black: I think that the government protects itself against such a situation as that, by doing its own work, paying the wages it saw fit.

As I imagine, that would draw a completely distinct line.

Mr. Cox: It will be perfectly clear that the government was not subject if it does the work itself.

Of course, it has been stated on several occasions that one of the reasons that state regulation of the activities of the government is a violation of the implied immunity, is that it may interfere with the performance of federal functions through independent contractors.

In one case, it -- the language expressly speaks of an invalid statute as being one that would affect or embarrass in any substantial measure the power of the United States to secure aid from independent contractor.

That's not one of the older discredited cases and the point I'm trying to make here is that these -- that a regulation of the contract does embarrass the United States in -- or may embarrass the United States in carrying out its activities it -- through independent contractors.

And, I mentioned earlier I think that it's equally an interference with the government's activities for the state to say “you shall not build a certain kind of building” or “you shall not erect a certain kind of dam” or to say that “no contractor shall contract to build a certain kind of building or to erect a certain kind of dam.”

Now, of course, the degree of interference will obviously vary from case to case.

In the illustrations that I have used, I have been putting cases where what the government actually gets is building a dam or some other public work is affected -- would be affected by the state regulation.

But in the California Utilities case, if one had gone to the general constitutional point that I'm now relying on, there would've been a very clear argument that to apply the state utilities rates to government shipments, government bills of lading, of military paraphernalia would directly interfere with the movement of military traffic.

That's a very dramatic description of that in Justice Douglas' opinion.

Now, that -- on the fact of it, Justice Goldberg, looked as if it was simply rate regulation.

But in fact, it had these other indifferent consequences.

I said here that there were interferences.

Most of them end up in money but they are not immediately money.

For example, if the 50 states are empowered to regulate these transfers of government properties, civilian or military, then it will be necessary for the United States to deal with 50 state Commissions to have numerous, I guess not 50 but, numerous different forms of bill of lading, numerous different tariffs to compute, and it would require a very substantial complication in the already large transportation units in the government.

Take as another illustration, remember we are not dealing simply with the rate here.

We also have this Georgia regulation saying that you must ship on a uniform household goods bill of lading and that only one family's goods may be accepted as a single shipment.

That has a good many consequences.

For one thing, it would make it necessarily, apparently, to weigh each shipment separately, each family's goods separately.

Sometimes, the government arranges terms that don't involve weighing the shipments at all.

Other times, they can be weighed on men.

Here again, there is trouble, expense, and possible delay.

If there must be an individual bill of lading for each family, consider the consequences if you're moving 500 military personnel or civilian personnel in the Defense Department.

Instead of what I'm told, it would be about one hour to prepare a single bill of lading, you would have to prepare 500 bills of lading.

It wouldn't be 500 hours.

I'm told that if we're done on that scale, it would be about 15 minutes per bill of lading but, instead of one-hour's work, you're now in 125-hours work.

And, this is just in preparing the bill of lading, going through for processing it through payment, withdrawing the checks and so forth.

But now I should agree, of course, that in the end those things are money and they usually hire more people from the government, but it's trouble and delay as well.

Second, the bill of lading contains substantive terms and the government bill of lading contains terms that differ from those under the Uniform Bills of Lading Act.

I'll take two as illustrations.

The uniform bill of lading normally contains a time limit, with -- within which, any claims must be presented for damage to or loss of the goods.

That time limit is not -- it's not the same in the government bill of lading and, if my memory is right, there's none there at all.

This is the substantive term that isn't just money.

Justice Arthur J. Goldberg: Well then again, Mr. Solicitor General, will there be variations that are principally illegal or discriminatory?

Mr. Cox: They're -- none of them -- none of them discriminatory, no.

Justice Arthur J. Goldberg: What about unreasonable?

Mr. Cox: Well, it -- no, I don't think that -- well, I don't really -- I can't -- I don't argue that they are unreasonable.

I do argue that they're significant.

Let me give one last illustration.

The government -- you know, the government bill of lading now contains quite uniformly a clause requiring the carrier to stipulate that he won't engage in any kind of discrimination and employment by reason of race and color under the precedent executive order.

Of course, no such clause is in the uniform bill of lading and perhaps we could find some other way of putting it in.

Also, it's not altogether clear to me because most utilities regulation says you can't add to the requirement.

So, this is not solely a matter of money at all.

Now, I submit that there is no distinction between regulating the terms on which the United States may contract and the terms on which one may contract with the United States.

A contract is a relationship.

It's an integral chain.

And I think to face up to it squarely, that the great fault in the Penn Dairies opinion, which is out of keeping with the -- which is contrary to the line of authority that I read, is that it doesn't deal -- not only that it doesn't deal with this difficulty satisfactorily, but it seems to me that it doesn't face up to it at all, that when you regulate the terms on which one party may contract with the other, you necessarily regulate the terms on which the other party may contract with the first.

You can't prevent John from marrying Mary without preventing Mary from marrying John.

The two with -- it's an integral thing.

It's like if you turn over the face, the adverse side of the coin, you necessarily turn over the reverse side of the coin.

And if you -- so here, if you regulate the price the utility must charge, you necessarily and inevitably regulate the price which the government must pay.

Indeed in this particular case, unlike Penn Dairies that I really don't think I understand on this distinction, in this particular case, the government has to have the intrastate shipment made by carrier permitted to do business in Georgia and therefore, by carriers operating under the regulations of the Georgia Utilities Commission, unless there's a sovereign immunity.

In the Penn Dairies case, the Court adverts to the possibility that the federal government might have bought milk outside Pennsylvania and brought it in.

In the California case, that's a practical matter than Pennsylvania.

In the California, that is only a theoretical possibility that they'll bring milk over the Sierras.

And in this case, it's an absolute impossibility because anybody carrying goods in Georgia intrastate is, according to Georgia, subject to the regulation.

Justice Byron R. White: Mr. Solicitor General, Congress may waive this sovereign immunity by sovereign immunity clause.

Mr. Cox: Yes.

You said “may Congress waive.”

Justice Byron R. White: Yes.

Mr. Cox: Yes.

Justice Byron R. White: And, would you say that in effect, in the Penn Dairies case, the Court shall put Congress who waived it in the form of a regulation and statutes for procurement?

Mr. Cox: Well, I haven't thought of that argument, but I'd be glad to embrace it.

I think it's a --

Justice William J. Brennan: Yes, Penn Dairies is a little --

Mr. Cox: I think it's a distinction, but I really think with thrust of Penn Dairies.

Justice William J. Brennan: Penn Dairies is a little troublesome for your --

Mr. Cox: It's against them.

There's no -- I simply -- my main point is that I think that it's -- it just overlooks, at least it doesn't deal with, I shouldn't say overlooks perhaps, the fact that when you regulate one side of the contract, you inevitably regulate the other side.

There's no play in the joints.

I do submit that that has to be dealt with before one can get the -- possibly get the Penn Dairies result.

Now, I've attempted in arguing this point of the implied constitutional immunity this far, I'm afraid it's a somewhat scattered way, to cover three points,first, precedence, second, the argument that a regulation of a contract of the United States does directly interfere with the activities of the United States and, third, that a regulation of the terms on which one may contract with the United States is necessarily and inevitably a regulation of the terms on which the United States may contract with the other party.

There is one final point that I would like to deal with.

I said earlier that the reasons that support the view that the United -- that the state may not directly regulate or tax the property activities or instrumentalities of the United States are applicable here.

The third one comes -- and the third point comes to grips more immediately with this matter of an economic burden.

Part of my answer is that what appears to be only an economic burden is often much more, and that one can't really distinguish between wholly economic burden and those that have to do with what the United States does, as I tried to suggest with the size of the iron beams or the character of the fireproof, but I would urge to the Court that there's an important difference here.

That, the cases contracting the extent of the sovereign immunity, which was recognized in some of the earlier cases like O'Keefe against Graves and the Panhandle Oil case and the Indian Motorcycle case, that the reasons for contracting that are not applicable here and that the usual statement summarizing the net effect of those cases is not inconsistent with the proposition that we espouse here.

But the usual statement is to the effect that a state regulation or tax upon one doing business with the United States is not unconstitutional merely because it imposes an economic burden on the United States.

Now I submit, Your Honors, that that is quite different from saying that if the only effect of a direct regulation of the United States is economic and nondiscriminatory, then the state may do it, but those are two entirely different things.

Something which is not a regulation of the United States but has an economic -- puts an economic burden on the United States because of the economic enterprise is different from something that is a regulation of the United States and puts an economic burden on it or is a tax on the United States and puts an economic burden.

The general property tax is an illustration of that.

I suppose it's purely economic.

Now, the broad immunity which the earlier cases or the middle cases, began to recognize was cut down I suppose, basically, for three reasons.

In the first place, extending it to the activities of everyone who did business with the United States, as the number of people doing business with the United States increased, it began to cut off important sources of state revenue.

State income taxes on any federal employee or -- income tax on a contract with a government would've been invalid.

A second reason, I take it, was that this threatened to create sort of a class of especially favored citizens who because they did business with the federal government, were immune from state regulation.

And a third reason, which I think is important, is that you really didn't know in those cases just who was getting the benefit of this immunity, that in the general run of it, it was quite likely that part of the immunity was really going to the benefit of private persons and not affecting the United States.

For example, in income tax, the immunity from state income tax on a contractor who is doing government work, you really didn't know how much of that had been -- would be passed on to United States or how much he would just pocket the difference himself.

I submit that these reasons are not applicable to a case where the state is attempting to regulate a contract of the United States.

The terms on which the United States may buy or sell the product it gets, the way the goods are carried, things of that kind because, in those cases, there is no play in the joint.

It's -- I don't know whether the -- these analogies are helpful or hurtful but I've thought of this as one often does with direct and indirect like the links of a chain.

If you yank on the contractor by making him pay the tax or by making him pay minimum wages, if it affects the United States, there may be some play or a cost-plus contract, the chain is already tongued.

But, in the general run of cases, this role played the joint.

But if you regulate the terms on which one may contract with the United States, the effect on the other party in the contract is immediate and indissoluble.

It's as if you had only one link.

Justice Arthur J. Goldberg: Solicitor General, (Inaudible) when a carrier who charged your rate would be that and the wages that he pay the workers who (Inaudible) would that be a burden on the United States?

Mr. Cox: I would think that that would be an attempt to regulate the contract of the United States.

I think Your Honor states the question a little too broadly.

I suppose that a state, if it saw fit, could protect the contractor by saying that he shall not pay more than certain maximum wages against the -- protect him against the excessive demands of labor union.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Cox: Well, you might have either kind of law.

I would say that the kind of law I used, is notably, would be valid for the reasons I've stated.

I think, Mr. Justice Goldberg, that the -- my answer to you is correct and I think that one has to face up to the proposition that there are times where the governmental immunity may have consequences which do not seem, in the particular case, to be desirable.

I would concede that that is true.

For example, if the immunity did extend all the way to the producer prices in the California Milk case, I think that the -- I know that the executive branch would consider that as undesirable result and something was done about it in this instance.

In other words, the general -- it seems to me, the general principle that a state may not regulate the activities of the United States is a sound one and a specific problem for the policy making branches of the government to deal with by waiving the immunity or as a matter of policy, insisting on compliance with the state law.

I don't think the court can say that, “Well, we think the rate regulation in the California Utilities case was unsound, but we think it is a sound regulation in the Georgia case.”

I think that, in general, it is a sound principle until Congress acts that these direct attempts to regulate the activities of the United States or contracts of the United States should be immune.

They historically have been immune, and we submit that they should be held immune here.

The few minutes I have left may I reserve, Mr. Chief Justice?

Chief Justice Earl Warren: Mr. Rodgers.

Argument of Paul Rodgers

Mr. Paul Rodgers: Thank you Mr. Chief Justice and may it please the Court.

I'd like to begin by briefly recapitulating what I say to be some of the significant facts in this case.

The first fact is that this involves the movement of the household goods of nine families.

This movement of the household goods was from Savannah to Atlanta, Georgia.

The movement was strictly intrastate commerce.

These household goods are owned and used only by employees of the United States Department of Health and they are not, in any way, owned or used by the United States.

This movement originated and terminated at the private dwellings of the employees.

There is no question of session involved in this case or any area over the United States exercise its jurisdiction exclusively like a federal reservation.

Thirteen of these carriers submitted bids.

Common carriers submitted bids in response to an invitation of the federal procurement officer.

Now, each of these carriers was required -- was required to apply under state law the higher Commission tariff.

There are two tariffs in Georgia.

There's a higher tariff and, as I say, the lower tariff.

Each of those was required to apply the higher tariff.

Eight of those carriers did apply such a tariff.

Five of them cut their rates.

The lowest one, insofar as the government was concerned, was Consolidated Van & Storage Companies Incorporated.

Consolidated bid a substantially lower rate.

However, what consolidated bid is approximately the same or lesser rate than prescribed by the lower Georgia tariff.

Now, at the time this movement was made, there was in effect a lower Georgia tariff which was available to the United States which the United States did not use.

And so, because of that fact, I do not believe the government could even make a clear showing of an economic burden on the fact that is presented with this case.

Now, of course, in the argument on the merits, we assume that there is, for the sake of argument, an economic burden and I believe it's a safe assumption because this type of state regulation is permitted then, of course, they will affect to some extent an economic burden upon the United States.

In setting this case for argument, this Court requested that counsels, in addition to the merits of this case, address themselves to the question of jurisdiction.

Now, the complaint that was filed in the District Court attacked the constitutionality of the state law on three grounds.

First of them was direct violation of several clauses of Articles 1 and 4 of the Federal Constitution.

The second ground was an unreasonable burden on interstate commerce.

And, the third ground was the conflict with a federal property and Administrative Services Act of 1949 and supplemental regulations.

Now, obviously, grounds one and two, if they are good grounds, would of course give this Court jurisdiction independently.

Of course, the question I'm addressing myself to is whether or not the complaint alleged a question of unconstitutionality within the meaning of Section 2281 of the U.S. Code Title 28.

Now, the first two grounds would involve direct violations.

However, after the case began and after the Court -- the three-judge court was convened, pursuant to a motion for a more definite statement being granted, the thrust of the Government's complaint was limited or sharpened to where it just involved the carriage of the household goods and personal effects of a personnel of the United States in intrastate commerce within the State of Georgia.

And, of course, the goods involved in this particular case were the goods of employees of United States Department of Public Health.

Now, based upon such a sharpening of the complaint, I do not believe that the clauses which were alleged to be violated in Article 1 and 4 are any longer relevant.

Such clauses are the congressional power to establish host roads to raise and support armies, to provide and maintain a navy, to provide for the militia, to exercise exclusive legislation of a real property held by session, and to make all need for rules and regulation respecting property belonging to the United States.

I believe the sharpening of complaint defeats those constitutional attacks.

The second one is the burden on intra -- on interstate commerce had been abandoned by the United States.

I believe it was somewhat farfetched to begin with.

Now, third ground, which I believe is independently gives this Court jurisdiction, is a conflict between the Federal Property and Administrative Services Act of 1949 and the Georgia statutes.

And, of course, the Georgia statute is -- two of those is 68-613 and 68-614 of the Georgia Code.

613 empowers a state Commission to prescribe rates to motor common carriers and 614 prohibits common carriers from discriminating as to rates and services.

Now, the parties, the United States and Georgia Commission, have resolved between themselves any preliminary questions of statutory construction which would address themselves to a state court.

As between these statutes, there is a clear and definite conflict and, because of that, I believe this case, on that ground, presents a sole immediate constitutional question as defined by this case -- as defined by this Court in Kesler versus Department of Public Safety and, of course, if you recall, that case recently decided that this Court involved an alleged conflict between Utah Financial Responsibility Act and the Federal Bankruptcy Act.

And it's interesting to note that that conflict there -- that no conflict was found to exist, the federal and state regulation was found by this Court to be compatible.

Next, I'd like to turn to the merits.

Now, the United States allows more federal acts.

This movement was made and illustrated by the complaint and illustrated by the clear terms of the statute.

This movement was made on the Federal Property and Administrative Services Act of 1949 and was not made under their Armed Services Procurement Act which was involved in the Public Utilities case, and by Public Utilities case, I mean the California decision -- the California public service decision written by this Court in 1958.

Now, the procurement provisions between those two statutes are quite similar.

Substantively, there's no difference.

However, what is significant is some accompanying provision contained in Federal Property and Administrative Services Act of 1949.

However, before a banning in the Armed Services Procurement Act, our consideration of that, I'd like to call the Court's attention to the 1962 amendments of the Armed Services Procurement Act which is set forth in the appendix to the state's reply brief in Paul versus United States, the case you just heard.

And in the 1962 amendments to the Armed Services Procurement Act, there were some additional safeguards established for federal procurement, and in that, in those additional amendments, the Congress was careful to expressly state that it would not affect rates established by law or regulation, which I believe is consistent with the policy of federal procurement throughout, except where there are definite interferences of the federal function which were involved in the Public Utilities case.

Justice Hugo L. Black: How do you distinguish it then on that case?

Mr. Paul Rodgers: You mean between --

Justice Hugo L. Black: You say that there, there was actual frustration for the federal policy, do you not?

Is that it?

Mr. Paul Rodgers: Yes, sir.

That is correct.

Now, the basis of that -- in the Public Utilities case, I'll cover this more fully later on but, I'll answer your question --

Justice Hugo L. Black: You could wait if you would.

But I just --

Mr. Paul Rodgers: Well, to put it in a nutshell, in Public Utilities, there were involved military movement.

The movement of war material and a state regulation there violated the secrecy requirement and the speed requirement of military transportation.

And, also, you had a state statute there that was formally addressed the United States and said the United States, that you can have law raised only if we submit ourselves to your jurisdiction, and the Court -- this Court has never tolerated that type of state legislation.

I think, on those considerations, there was a direct interference of the federal contract whereas, in this case, the effect, if any, is economic and its indiscriminant and it does not limit the United States in moving these household goods in any way except imposed an indiscriminant economic burden.

Chief Justice Earl Warren: Would the character of the employment involved here make any difference to you?

Mr. Paul Rodgers: Yes, sir.

I distinguished --

Chief Justice Earl Warren: Do you think it was Armed -- Armed Services, family of Armed Services, would that, in your opinion, be different from this which was a housing project?

Mr. Paul Rodgers: You mean on -- in the case of household goods --

Chief Justice Earl Warren: Yes.

Mr. Paul Rodgers: -- in distinguishing the movement of military material?

Chief Justice Earl Warren: Yes.

Mr. Paul Rodgers: Yes.

I think that the nature of the commodity transport is very important as well.

I think a very important distinction is found there.

Now, as to the derivation of the statute, now, I have set forth in Appendix A of brief, the statute -- the federal procurement statute which were in effect when Penn Dairies was decided, now, you -- the Federal Property and Administrative Services Act and the Armed Services Procurement Act were both derived from those provisions in Penn Dairies.

And, subsequently -- I believe the Court will find that, subsequently, there's no difference.

And I think that brings into play an important rule of construction which this -- which is well-recognized, and that is when the highest court has interpreted statutory language which is, again, reenacted in subsequent legislation.

The Congress, the legislative body, is held to know of the construction plates, the one that I believe -- I'm sure they did because of Penn Dairies, the landmark case, and who have adopted that judicial interpretation in the enactment of the subsequent statutes.

Now, the Penn Dairies case is almost tailor-made for disposing this case for this provision of this case.

And, if you will permit me, I would like to read several -- a couple of excerpts.

The Court stated, in Penn Dairies, it is to be noted that while these statutes direct government officials to invite competitive bidding -- that's the federal statute, they direct government officials to invite competitive bidding by contractors undertaking to furnish army supply and also require them to accept the lowest response for a bid, if any is accepted.

They do not purport to set aside local price regulations or to prohibit the states from taking punitive measures for violations of such regulation, that was referred to as the contract -- the prior contractor.

Evidence is warning that Congress, in authorizing competitive bidding, has been so concerned with securing the lowest possible price for articles furnished to the government that it wish to set aside all local regulations affecting price.

On the contrary, Congress has regarded the field of public contracts as one of which to exercise its supervisory -- legislative powers in safeguarding interests which may conflict with the needs of the government used solely as purchase.

An unexpressed purpose of Congress to set aside statutes of the states regulating their internal affairs is not likely to be inferred and ought not to be implied with a legislative command, read in the light of its history, remains ambiguous.

Now of course, that statement there calls into play a comment made by the Solicitor General, and he states that, historically, the government procurement contracts have been immune from any effect of the state regulation, but you have the decision in Penn Dairies in 1942 which is clearly against that.

I do not see how you can -- how you can obtain any historical justifications from the precedence established by this Court.

The Court goes on to say, “It would be no more than speculation for us to say that Congress would consider the government's pecuniary interest as a purchaser of milk more important than the interest asserted by Pennsylvania in the stabilization of her milk supply through control of price.

Now, we find an easy analogy there between the state interest in procuring a pure milk supply, and the state's interest in establishing a sound -- an economically sound transportation system.

Now, as far as deriving the regression you can from other Acts, we find there are many Acts that Congress has adopted which are solitary which have a sound economic effect in this nation but viewed from the government's position strictly as a purchaser.

They may be thought to be adverse when viewed in that limited context, but to view the impact in the national economy, the government's purchasing power, Congress has only used that purchasing power as a -- to have ebullient effect on the national economy.

For instance, you have your Buy American Act, providing for preference in use of American-produced goods on all public works contracts.

As to labor, we have the Eight-Hour Law, the Davis-Bacon Act, and the Walsh-Healey Act which fix sanitary standards, governing the form of labor on public contract.

There's also a long history of legislation whereby Congress authorizes various instrumentality to provide the payment in lieu of taxes.

The Tennessee Valley Authority, the Department of Interior, the Atomic Energy Commission, Saint Lawrence Seaway Development Corporation, and many other federal departments are authorized in their dealings throughout the nation, where if they were a private enterprise, they would be taxed to make payments because it's the law of the tax department to make payments to your state and local governments and there, again, we can see a congressional regard for the needs and the requirements of state and local government and, of course, that philosophy -- that congressional philosophy is consistent with the philosophy that's filed to this Court in its tax decisions.

Justice Arthur J. Goldberg: Mr. Rodgers, (Inaudible)

Mr. Paul Rodgers: Off hand, I do not recall any that's directed to material, Your Honor.

Justice Arthur J. Goldberg: No service?

Mr. Paul Rodgers: No charged services, except of course, at the effect that I think that Penn Dairies plays in construing current federal procurement statutes.

Now -- returning now to Federal Property and Administrative Services Act of 1949, there are various provisions in there which to my mind indicate the congressional intent that federal procurement under that statute would be subject to state economic regulation.

One of them is found in Section 201 (a) which authorizes the administrator, with respect to transportation of the public utility services, for the use of the executive agencies to represent these agencies in proceeding the involvement of carriers or other public utility before federal and state regulatory bodies.

Now, the Solicitor General's brief tends to discount that by saying, “Well, that's up to the discretion of the administrator, so it doesn't really mean anything.”

But, it strikes me as odd that if there was congressional intent that your state regulatory agency would have absolutely no control over federal procurement or no effect on it, I should say, or a federal procurement strikes me as odd, they would have an expressed provision, they are authorizing appearances before a state Regulatory Commission.

And of course, we also have a well-recognized policy that's present in both Acts -- both procurement Acts, and that is that a fair proportion of government procurement will go to small business.

Now, of course, it's a well-recognized economic fact, or at least to begin with anyway that big business can't supply cheaper prices than small business, but yet, the government goes out of its way to favor small business, so that aspect of our economy, the small business aspect of our economy will not become extinct.

And of course, you have the executive devices to stimulate the economy where they are financial set-asides for labor surplus areas, for major disaster areas, and of course also for small business.

Then, Section 203 (g), we find extensive provisions, two sections devoted to the fact that in dispose of the government surplus, that it will in no way impede the government's price support programs in the agricultural area, and the administrator is directed to coordinate his activities with the Secretary of Agriculture in such a manner to where the agricultural price stabilization programs of the federal government would not be adversely affected.

And then, we go on to the next section, Section 502 (d), which I think is very significant and that section reads in Court “Nothing in this Act shall impair or affect any authority of any executive agency,” I refer to federal executive agency, “to any executive agency with respect to any favors of any program conducted for purposes of resale, price support, grants to farmers, stabilization, etcetera, or rehabilitation.”

Now, I believe these provisions of course indicate a very clear desire on the part of Congress to take advantage of economic regulation to not -- to disturb that.

Now, the Solicitor General in his brief says, in effect, well all that may be well and good but that does not apply to state economic regulation.

Well, I believe that the implication is clear that it does.

I believe, if it doesn't, I respectfully submit that Congress is suffering from schizophrenia.

If on the one hand it has a Dr. Jekyll and Mr. Hyde complex, if in one hand it protects federal courts, federal economic regulation but on the other hand, slashes and disfigures state economic regulation.

To me, the two forces are entirely inconsistent and I think the implications from this Act are clear that state economic regulation, where it doesn't impose any direct interference with the federal government, is to be abided by for the welfare of the national economy, and as I hope to show to your satisfaction later, to the welfare providing a strong transportation system in this nation which of course enhances the national defense of this nation.

Now, I believe that the doctrine espoused by this type of -- by the Solicitor General, this doctrine espoused is -- to describe it succinctly, is pennywise and pound-foolish because I do not believe it's the intention of Congress that federal procurement officers should engage in cutthroat competition which has a detrimental effect upon the national economy.

Now, moving on to the effect of Penn Dairies decisions, the Penn Dairies decision and that is, in that case, the State of Pennsylvania, in the interest of protecting its milk supply and in the interest of providing a pure milk supply, promulgated certain minimum rates so that supply would be enhanced.

And of course, this Court held, I think wise and so soundly so, that that regulation should apply to the federal government because all in effect, all it did was imposed an economic burden.

Now, it looks like to me that in this -- what the Solicitor General says that what we're trying to do in this case is to dictate the term of the government contract, I think that that is the language is too strong for this.

I don't think that it's applicable.

I believe that this had just as much effect upon the regulation of the federal contract in that case as it does in this case, and it is -- I do not think it is a regulation of the federal contract.

I believe it has an effect upon it but it does not regulate it.

Now, the Solicitor General relies heavily upon the Peniston case, a case decided -- not upon the Peniston case.

He relies heavily upon the dissenting opinion in the Peniston, Justice Bradley's standing opinion which has received some added dignity because it has been referred to a couple of times in cases fairly recently.

But it is a dissenting opinion.

The holding in the Peniston case, I think, militates against the Solicitor General because it upheld state taxation of the property of a federal instrumentality and also the Peniston case is decided in the last century.

But, I think that this -- that the regulation here in Penn Dairies does not dictate the terms of the federal contract any more than it does say -- where a state law requires the payment of minimum wages.

You could say just as easily there that the state is dictating the terms of the federal contract and for that matter to the tax cases because, of course, in every -- the -- an economic burden is imposed on the federal government, that right there affects the terms of the contract.

So of course, under the Solicitor General's theory, there right there dictates the terms of the contract and that theory is sound by the Attorney General, then he recall for a tremendous realignment of the decisions of this Court, not only the tax field but in these other regulatory fields as well.

And of course this Court, just recently this past month in Illinois' tax case, has again reaffirmed its position as the tax case is about economic burden, incidental and indirect economic tax burden being imposed upon the federal government.

It has upheld that as a result of state taxations.

Now, as to the application to Penn Dairies, I'd like to read a couple of excerpts.

There is no qualm to the Constitution which purport, unaided by congressional enactment, to prohibit such regulations.

And the question with which we are now concerned is whether such a prohibition is to be implied from the relationship of the two government established by the Constitution.

Now, in this aspect of the Penn Dairies opinion, the Court is addressing itself to this Doctrine of Implied Governmental Immunity.

The Court goes on to say the mere fact that nondiscriminatory taxation or regulation of the contract impose an increased economic burden on the government is no longer regarded as bringing the contract within any implied immunity of the government for state taxation or regulation.

The trend of our decisions is not to extend governmental immunity from state taxation or regulation beyond the national government itself and governmental functions performed by its officers and agents.

We recognize that the Constitution presupposes the continued existence of the state's functioning in coordination with the national government with authority in the states to lay taxes and to regulate their internal affairs and policy.

And a state regulation like state taxation inevitably imposes some burdens on the national government of the same kind of those imposed on citizens of the United States within the state's burden.

Since the Congress has -- since the Constitution has left Congress free to set aside local taxation and regulation of government contractors which burden the national government, we see no basis for implying, from the Constitution alone, a restriction upon such regulations which Congress is not seen fit to impose, unless the regulations are shown to be inconsistent with congressional policy.

Even the case of agencies created or appointed through government's work, we have been slow to infer an immunity from Congress which Congress has not granted and which congressional policy does not require.

Now, consistent with the philosophy reflected in Penn Dairies, we find the same philosophy in the tax cases, the Dravo case, where the Court reached the same conclusion even on the assumption that tax burden would be passed upon the federal government.

Again, there's a clearer definition of that doctrine, Alabama versus King & Boozer, that say all of these tax cases are consistent with the case rendered -- the decision rendered by this Court on this past Monday.

Now, Justice Holmes in the Panhandle case, which was subsequently -- the majority decision of which was subsequently repudiated in Alabama versus King & Boozer, Justice Holmes wrote one of his famous dissenting opinions and a couple of excerpts from that opinion, I think, apropos to us in this case.

The first is to come down more closely to the question before us, when the government comes into a state to purchase, I do not see why it should be entitled to stand differently from any other purchaser.

It avails itself with the machinery furnished by the state and I do not see why it should not contribute in the same proportion that every other purchaser contributes for the privileges that it uses.

It has no better or other right to use them than anyone else.

The cost of maintaining the state that makes a business possible is just as necessary in the element of the cost of production as labor or code.

The question of interference with the government, I repeat, is one of reasonableness and degree, and it seems to me that the interference in this case is too remote.

Now, that dissent of Justice Holmes subsequently became the majority decision of this Court and it's continued as such until this day.

Now, another case which I think is significant is the Esso Standard Oil Company case versus Evans.

That's another tax case.

In that case, this Court held that the constitutional doctrine of implied intergovernmental immunity does not invalidate a state privileged tax in (Inaudible) storing gasoline, measured by the quantity of gasoline stored as applied to a contract of the United States who store gasoline owned by the federal government.

I think that these tax cases should logically apply with even stronger effect in the case of regulation, the case that we're presently with anyway, and even in the tax cases, of course the Court, in the tax cases, the money collected by the state goes directly to the State Treasury and, of course, that goes to, ultimately, to strengthening the vitality and soundness of state and local government.

But at the same time, the -- any economic burden sustained by the United States in the case before us goes directly to strengthening the transportation system -- the intrastate transportation system which is used by the United States as well as for private use, and there is a more direct benefit in return achieved in these type of cases, I think, and even in the tax cases.

So I think, logically, the philosophy of the tax cases should apply with even greater force in cases of this nature.

Now, to move on to the Public Utilities case, now, the case there and I think to get the full impact of the decision of this Court in that case, it's well to begin with the decision of the District Court because the District Court wrote a very long opinion in that case.

And, the District Court was very much impressed with the conflict between the interest of national defense and state regulation.

I have quoted that extract somewhat at length, in my brief.

I'll refer to a few on the specific.

The Court said, “In this atomic age, speed in the movement of men and supply is vitally necessary.

It would greatly impeded the discharge by the United States of its constitutional power and responsibilities by inevitably causing delays in such shipments when time is of the essence.

And in many situations, would expose to the public patterns of movement and traffic which would be subject to interpretation by the intelligence agents of foreign powers and might jeopardize the security of the United States.”

Then, of course, the Court goes on and comment upon the fact that the regulation in Public Utilities, this California regulation, California statute was formerly addressed to the United States specifically and sought to bring the United States under the heels, so to speak, of state regulations.

And, it goes on to this unique type of economic discrimination, this unique type of rate discrimination that was inherent in the Public Utilities case.

Now --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Paul Rodgers: No, sir, not to military supplies.

That -- we only interpret our regulation as applied to the movement of household goods and personnel of the United States.

We do not interpret our regulation at all applied to the movement of military supplies.

I believe that question has been foreclosed by the Public Utilities decision and, of course, we do not challenge that at all.

We do not challenge Public Utilities.

We seek to distinguish Public Utilities because we do not think that Public Utilities is designed to govern cases of this nature, the movement of --

Justice Arthur J. Goldberg: A household effect (Inaudible)

Mr. Paul Rodgers: Well, of course that's not involved here but I would think that would be on the same -- that would fall in the same classification of household goods to these employees because, of course, our military defense is not intended upon the rapid movement of the household goods.

In fact, frequently, the servicemen are sent overseas.

We'd have to wait quite a long time before we get the household goods over there, and I don't think the movement of household goods has ever been interpreted as being vitally necessary to the national defense, of course, it makes some contribution to the morale and that I think they should be moved.

But I think then, when you balance these two things in relation to the national welfare, I believe the federal government's interest in having a strong intrastate transportation system is more vital to the economy of the nation and to the national defense than the rapid movement of household goods.

Of course, I think that under our regulation, this household goods can be moved rapidly anyway.

But I would -- I don't see any real justification or distinguish between the household goods or military personnel and to these employees.

Justice Hugo L. Black: Are you basing a constitutional distinction on that?

Mr. Paul Rodgers: Well, I think, on the constitutional as to the implied immunity, it turns upon the degree of interference.

And, I think the degree of interference to a large extent is dependent upon the commodity moved.

Now, of course, it's one thing for state regulation to slow down or to destroy the seeker's requirements, say, on the movement of guided missiles and quite another for state regulation to have an effect upon the movement of household goods.

In other words, I think there has to be a weighing of degree in the constitutional sense.

Justice Hugo L. Black: So that in one case, by a household good be shipped by the government, the Constitution would not give them immunity, but if military goods were shipped, it would.

Mr. Paul Rodgers: Because of the degree of interference, yes.That's correct and that is as to the implied immunity.

Of course, I think that this does not violate the implied immunity.

I think even we assume to say, just for the sake of further consideration, that there is an implied immunity, I think that the federal legislation is such, that it indicates a clear indication that that immunity should not apply in procurements of this nature.

Justice Hugo L. Black: If one should not agree with you on that distinction, what would you then say about the California case?

Mr. Paul Rodgers: Well, if there is no --

Justice Hugo L. Black: How would you distinguish it?

Mr. Paul Rodgers: Well, then I would try -- I would then say, well -- you mean a -- I would say then that you thought that violated the implied immunity of the United States, I would say then that this movement here is on the Federal Property and Administrative Services Act which would cause these related provisions, required on this context, a different result as to household goods and the movement of military supplies under the Armed Services Procurement Act, and that it was the intention of Congress, as reflected by the Federal Property and Administrative Services Act to waive any immunity that the United States might have.

That would be my second line of defense.

Justice Hugo L. Black: That you do not reach a constitutional point there, that you depend on the interpretation of the congressional enactment, is that right?

Mr. Paul Rodgers: Well, that's -- what we say -- we say, first, that state regulation does not conflict with congressional policy.

We say second, that congressional policy is actually on the side of state regulation in this case.

And we say thirdly, that there is no violation of the implied immunity of the United States in this case.

Justice Hugo L. Black: Do you rely on any congressional enactment since the California case was decided?

Mr. Paul Rodgers: Well now, the California case only involved the Armed Services Procurement Act.

This movement here, made in this case, is made on the Federal Property and Administrative Services Act.

So --

Justice Hugo L. Black: Can you draw the distinction and the attitude of Congress in connection -- as shown by those two Acts?

Mr. Paul Rodgers: Well I think of course, the procurement provisions are substantially the same, however, I think there are other provisions in the Federal Property and Administrative Services Act, which indicate much more clearly than the Armed Services Procurement Act, that Congress intended that procurement of this nature be regulated by state regulation.

And of course, even as to the Armed Services Procurement Act, Congress has just passed the 1962 Amendment to that, whereby it set up additional safeguards for armed services procurement and made those safeguards -- made exceptions though as to cases where the prices were set by law or regulation.

But, getting back to the Public Utilities litigation, we find that -- getting back to this economic discrimination that was being suffered by the United States.

Now, your usual commodities in movement -- your usual commodities for transportation in this nation is like household goods and things of that nature, there has been commodity rates promulgated for that, and those commodity rates -- oh, I think my time is up.

Chief Justice Earl Warren: We'll recess now, Mr. Rodgers.

Mr. Paul Rodgers: Thank you, sir.

May it please the Court.

Where we left off involved a consideration of the litigation in the Public Utilities case and I was just getting to the point about the unique economic discrimination that the United States was being subjected to in that case.

Now, we all know that your military supplies, materials of war, are somewhat exotic, they are not the usual items for transportation for which commodity rates had been established for.

Now, your civilian goods, just about always, move at commodity rates, which are somewhat lower than your class rates.

Now, the class rates are devised to satisfy legal requirement.

In other words, every carrier, every regulatory agency promulgates rates which apply to any kind of shipment anywhere at any time.

For instance, I think one illustration used by General Lasher, a witness for the government in the Public Utilities litigation who made the comparison of the shipment of oranges from Maine to Florida when, of course, no movements like that ever occur but there's a rate for it, and that rate is high.

So because they were not commodity rates promulgated governing the shipment of exotic military supplies and war materials, the government, if it complied with state regulation, would be forced to comply -- to pay these higher class rates which you civilian shippers were not subjected to.

Now of course, involved in our case is household goods which is a frequent item of transportation and which all regulatory agencies have promulgated rates for.

And, you do not have that economic discrimination inherent in this case.

Going on reviewing this, General Lasher testified, nothing must be placed as an impediment to the complete flexibility and flow of movement of supplies to our troops in foreign theaters whether it's in peace or in war.

Going on, there are many items which move today, which are not described, some items which are willfully misdescribed in order to hide their identity, and their moving in quantity.

Were we have to go through a regulatory body, we would never be able to accomplish this.

And there's also great emphasis on the testimony of the District Court placed upon the secrecy requirements.

On the subject requiring secrecy in certain cases, Coronel Hall stated that reeling over a period of time every military shipment is in a sense a security shipment.

Coronel Hall added he did not think it would be possible to reveal unnecessary data for logical and reasonable rate approval purposes in connection with many of the shipments, which are secret in nature.

If everything is made public, we might as well publish it in the newspapers.

And the decision based upon this in this, this Court, and I think quite frankly so found a definite conflict because of the requirements -- the secrecy requirements and the speed requirements of transporting military goods, it found that California's regulation for program of regulation seriously interfered with that.

And because of that distinction, I believe, and also this economic discrimination, this Court reached the result it did in Public Utilities.

But, in reaching that result, this Court carefully distinguished Penn Dairies, carefully distinguished Esso Standard Oil Company versus Evans, Dravo, King & Boozer.

It carefully distinguished all of those cases and preserved that policy which has been reaffirmed since then, time established with those cases.

Also, it's interesting to note that on the same day this case -- that this case decided Public Utilities, it decided three more cases -- United States versus City of Detroit, the United States versus Township of Muskegon, Detroit -- and also City of Detroit versus Murray Corporation of America.

And in those cases, taxes were imposed upon individuals having leased government-owned property and revive the leases that any economic burden derived in the state tax may be passed onto the federal government.

But yet, all three of those cases, this Court in the same day decided Public Utilities and handed down those three decisions and also in the City of Detroit case, Justice Black commented approvingly upon the Penn Dairies case.

Now, in the brief, the Solicitor General places great reliance upon Kern Limerick, Inc. versus Scurlock.

Well now, that case right there is entirely consistent with Penn Dairies, with King & Boozer because in that case, by virtue of drawing the federal contract, the tax -- where the state tax was being imposed directly upon the federal government and this Court has never tolerated any such as that and because of that, the Kern Limerick decision falls in line with the rest of these decisions and they placed great reliance upon Arizona versus California.

Well in that case there, the state -- in the construction of a federal dam, the state tended to have a hand in the prescription and specifications for the construction of that dam, but of course, the federal government cannot tolerate that because you cannot tolerate the imposition of state standards on the construction of a dam.

Just in the case of Johnson versus Maryland, the state tried to have a hand in determining the qualification of persons who could drive federal mail trucks.

Well, all of that right there is a direct interference as distinguished from the indirect effect -- indirect economic effect in this case because, in our case, there is no prohibition upon the movement of the household goods.

The federal government move household goods in such volume whenever and wherever it pleases.There's no impediment there, nothing but the indirect economic burden which has been sustained numerous times by this Court.

Now, I would like to devote the next few minutes to a consideration of these noneconomic burdens which the Solicitor General asserts.

Now of course, I believe he places, and I think, a great emphasis on these noneconomic burdens because I believe that the trend of decisions as to the economic burden is quite clear.

He says one thing.

For instance, he refers to the uniform bill of lading.

Now, that tariff provision is at page 85 of the brief for the United States and he says, “Now, state law requires that there'd be a uniform bill of lading on each shipment.”

Then, he moves on from that and he says, “And that's going to take the federal government a great deal of time,” but that's against the clear terms of the tariff provisions.

The tariff provision places the responsibility of making that uniform household goods bill of lading on the carrier, not upon the federal government.

The obligation is placed upon the carrier.

The federal government is not burdened with that.

The carrier must provide the uniform bill of lading.

The government goes ahead and issues its government bills of lading as before.

It doesn't make any difference whether the government issues one or 100.

That's completely unrelated to this requirement of uniform bill of lading that's imposed upon the carrier and not the federal government.

And then, he goes on to say, “Well, there's a conflict between the GBL, the government bill of lading, and the uniform bill of lading.”

He only referred to two things.

First that he said was that the uniform bill of lading specified at the time which claims must be presented, and there's nothing in the GBL.

Well, I don't see any conflict.

I think the provisions -- I think the two bills of lading on that basis are compatible.

He has another one as to discrimination, I believe, he referred to in the GBL.

Well, that's certainly compatible.

There's no state law requiring otherwise, and the two bills of lading are entirely compatible.

The next provision he tried try to assert a noneconomic burden, first, this provision about the property of two or more families or establishments will not be accepted for transportation as a single shipment.

Now, that right there is designed as to rate regulation.

It doesn't mean there must only be the household goods to one founded place at one truck at one time.

That regulation there is designed at the economic -- in other words, you can't combine that with other shipments and, thereby, try to get a lower rate because that's rate discrimination, but that's -- all it means is that each shipment must be considered separately for pricing purposes, for figuring the rate.

Now of course if you're going to move, say in this case like nine families from Savannah to Atlanta, there must be an evaluation of the weight of each family.

In any system of transportation, you've got to have some mechanism for keeping the goods straight.

You can't steer one's household goods together and then try to pick them out of the journey, especially going to nine different places in Atlanta, the goods must be kept separate.

As far as paperwork is concerned, there must be an individual weight determined for each one and when that weight is determined, it's just as easy to apply the state rate as it is a rate achieved otherwise.

So I say that the economic burden -- that the noneconomic burdens asserted by the Solicitor General upon examination of this are nonexistent.

We go on now to this next one about -- in the next one, he says -- he goes onto the next one and he says “Now, if we have to follow the state regulation, we may have to comply with, say, 50 state systems.”

When now, on the other hand, if you have this cutthroat competition, so to speak, that the government desire to stimulate or how the Solicitor General desire to stimulate these cases, then of course, the federal procurement office are going to be continually advertising, formally advertizing.

They are going to continue to be negotiating contracts and renegotiating, and those contracts and the rates they provide for are going to be as (Inaudible) and vary, as there are a number of carriers seeking to do business for the government in intrastate commerce.

Contrasted to that is if you have state regulations.

You have a relatively few number of rates which must be applied.

So actually, the burdens are far less upon federal procurement officers.

This thing about having to apply with state regulatory systems is actually simpler than this process of continually seeking competitive bids and continually negotiating.

Now they go -- he tried to go on to say that -- well, even though we have competition, even though the government procures its transportation and the competition ignores state regulation, well, that's not going to really affect the returns of the carriers anyway because returns have already been sent.

Now, they set that up but that is plainly economically fallacious because once a return is set to give a fair return to a carrier, if he attempts to do business in an unregulated segment and does not follow state rate regulation, if he cuts rate, then clearly that's going to adverse -- adversely affect the return.

And they say -- and of course, in some cases, we may have to pay more than a state rate.

Well, that's entirely hypothetical and I believe that if any group of carriers ever got together and tried to enforce a higher rate upon the federal government than what civilian shippers have to pay, I'm sure then that the Solicitor General would become an advocate of state regulation.

I'm sure they would say then to the carriers “Don't you know you're regulated by state -- the State Commission?

Don't you know you're violating your rates?”

And I believe that -- and of course, furthermore, that's hypothetical.

Also, as far as this talk about exceeding the demand, exceeding the capacity and had to pay more for it, I think it's a practical matter from the very nature of the business.

I doubt if any carrier ever would be in the position, whereby he'd have to go out and buy new trucks because there are large firms in this nation to make a business of leasing trucks of a common carrier.

And so, for a big job, a carrier has available to these companies where he can lease additional trucks, and expand and contract his capacity as the bid increases and decreases.

Now, I hope that I have shown the Court satisfaction.

There is no significant economic burden -- a noneconomic burden to speak of.

However, in the case Davies Warehouse Company versus Bowles, there was a significant noneconomic burden placed upon a federal administrator.

In that decision this Court stated, and I'd like to read a couple of excerpts, “Simplicity of administration is a merit that does not inhere in a federal system of government, as it is claimed to do in a unitary one.

A federal system makes a merit, instead, of the very local autonomy in which complexities are inherent.”

The existence and force and function of established institutions of local government are always in the consciousness of lawmakers, and while they're weight might vary, they may never be completely overlooked in the task of interpretation.

At a time when great measures of concentration of direction are concededly necessary, it may be thought more farsighted to avoid paralyzing or extinguishing local institutions, which do not seriously conflict with the central government's place.

Congress has given no indication that it would draw all such state authority into the vortex of the war power, nor should we rush the trend to centralization where Congress has not.

Now next, I'd like to address myself to this criminal statute facet of the case.

The Solicitor General then says -- now, there's a criminal provision which states that anyone aiding or abetting in the violation of these statutes is subject to a misdemeanor and consequently if our federal procurement officers were caught doing such a thing, we would be -- they would be imprisoned.

But, I think that is clearly fallacious.

I think, furthermore, an examination of the criminal statute and the California criminal statutes, the statutes are quite different.

The California criminal statutes are far more extensive, far more sophisticated in their application.

They actually made -- they actually pointed those statutes to persons involved in non-utility businesses.

The breadth of those statute is much clear than Georgia statute.

Now, I think, interpretation of Georgia statute would be governed by such cases as United States versus Farrar and others, United States versus Gebardi.

United States versus Farrar held that a person who purchased intoxicating liquors under a federal Act was not the one that the Act was designed against.

And the purchaser was not covered by the Act.

It was just the seller.

And, I think that Gebardi versus United States, the Board of Prosecution on the Mann Act held there they federal -- that the criminal statute was not applicable to a woman.

It was the procurer that the criminal statute is aimed at.

I think the same interpretations here can be placed upon the Georgia statutes.

But even if we can see everything that the Solicitor General said as to the breadth of the criminal statute, I think there is a clear distinction between a noneconomic -- I mean an economic -- an incidental economic burden being imposed on the United States, that does not interfere with the federal function.

And in comparison to that, the imprisonment of a federal official, so that right there, very clearly is an interference with the function of the federal government.

And this Court has never tolerated such interference as that and, so long as it sits, I'm sure it never will.

And very clearly, no state has the authority to imprison a federal official.

Now cases like that which were (Inaudible) Johnson versus Maryland, they held the arrest of that postal employee was illegal.

In Ohio versus Thomas where you had the governor of this federal soldier's home, they held his arrest for not displaying a state oleomargarine sign is illegal and also in Neagle, which is a famous case where a federal marshal shot a man, killed the man in self-defense of a Justice of this Court.

But in case after case, it's quite clear that these state criminal statutes cannot apply to federal officials and that no state has the authority to imprison a federal official.

Justice John M. Harlan: (Inaudible)

Mr. Paul Rodgers: Well, that's another -- I'm glad you mentioned that.

The Georgia -- it has never been construed by the courts.

This Act right here was passed, I think, in 1932.

The Georgia Public Service Commission has never construed this thing applicable to the shipper.

I mean this case's problem is you never construe it applicable to the shipper and the prosecution -- there had been many prosecutions under this, they have -- those prosecution, if I had not been involved in many myself, those prosecutions have been directed to the carrier and not to the shipper.

And I think -- and of course, that constitutes an administrative interpretation that the statute is not applicable to shippers.

Justice John M. Harlan: (Inaudible)

Mr. Paul Rodgers: No, sir.

No -- there's no state decision on it but, of course, I think it's clear that that's beyond the power of any state to imprison a federal official.

Now, as to this regulation by Georgia, the regulation of intrastate transportation, this regulation is the type of regulation that's been adopted by just about all the states.

It's not unique.

It's a standard guarding variety type of regulation.

And of course, we have what it affected here, not only Georgia's program of intrastate regulation, we have that of the other states as well.

I see my -- yes, sir?

Justice Arthur J. Goldberg: (Inaudible)

Mr. Paul Rodgers: Yes, sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Paul Rodgers: Well --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Paul Rodgers: I don't know.

I was not assigned as counsel at that time to the Commission.

I think it was somewhat -- I think the federal government should've been afforded a hearing, but apparently, they already made up their mind as to what the law was.

I think that's rather the sharp practice.

I think, as you said, I don't believe that's really relevant to this.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Paul Rodgers: But I was not assigned as counsel to the Commission at that time.

And I'm not sure just what the reasoning was behind that.

Now, drawing on to the three basic distinctions between Public Utilities and Penn Dairies -- now, the first one is by the very address of the state legislation itself.

The state -- California State regulation said the State Commission may permit common carriers to transport property with reduced rates of the United States to such extent and subject to such conditions as it may consider just and reasonable.

Well, that is a former address.

That singles out the United States and points to it.

Now in an economic sense, and of course that's how the Solicitor General attempts to push this over, economically, this is really more favorable to the state than Georgia's regulation.

But in the constitutional sense, it's offensive because the United States is singled out, and it's made the expressed subject of state regulation.

The imposition is no longer indirect, indiscriminant, or incidental.

It is then direct and this Court has never tolerated that kind of state legislation.

And of course, I believe I've covered the next distinction already and that is that the difference in the commodity transported, and the third one was the economic discrimination because of the variation between class and commodity rates.

But I would like to say, in closing, that we have here a state regulation on the yard before this Court today.

It has a broad base.

Most of the states have it.

It's a solitary force for providing -- it enhances the national economy.

It's a solitary force for enhancing the national defense.

And Congress has shown no disposition to interfere with it.

Congress has shown the disposition to protect it and I say this nation cannot afford to be -- to have that type of regulation interfered with and it would be substantially because the government is the greatest spender in the nation and the economic force of this government is, of course, tremendous in all the state price support programs which have ebullient effect upon the national economy and the national defense.

Thank you for your attention.

Chief Justice Earl Warren: Very well.