NLRB v. NATURAL GAS UTILITY DISTRICT

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Argument of Dominick L. Manoli

Chief Justice Warren E. Burger: We’ll hear arguments next in Number 785, National Labor Relations Board against the Natural Gas Utility District.

Mr. Manoli you may proceed when you’re ready.

Mr. Dominick L. Manoli: Mr. Chief Justice, may it please the Court.

This case is here on a writ of certiorari to the Sixth Circuit.

The board issued its order directing the respondent utility district to bargain collectively with the union which a -- the voice of the district in an appropriate unit had previously designated as her bargain representative.

The district contending that under the laws of the State of Tennessee that it is a political subdivision for an arm or instrumentality of the state has refused to comply with the order.

The statute specifically excludes from the definition of the term employer, the United States or any state, or any critical subdivision thereof.

The two questions presented here are first, whether for purposes of the Labor Act, federal standards or state law governs the determination whether an entity is a political subdivision within the meaning of the statute or an employer within the meaning of the statute.

Secondly, if federal standards and not state law govern that determination whether boards find it that the district here is not a political subdivision within the meaning of the Labor Act but an employer is entitled to affirmance.

The court below rejecting the board’s view held that state law is controlling with the respect of the determination of whether an entity is a political subdivision or not and on the basis of the state, the code of the State of Tennessee and the Supreme Court’s -- and the decision of the Supreme Court of Tennessee confirming the legislation.

It held that the district here was a political subdivision within the meaning of the Labor Act and therefore not an employer.

Chief Justice Warren E. Burger: I do not recall from the briefs at the moment Mr. Manoli but does the -- does Tennessee’s law permit private corporations that is a telephone company for example to exercise the right of eminent of domain?

Mr. Dominick L. Manoli: Yes it does.

There are cases that are cited in our brief indicating that --

Chief Justice Warren E. Burger: I wasn’t sure whether they applied with – for Tennessee cases.

Mr. Dominick L. Manoli: If they are Tennessee cases, (Voice Overlap) --

Chief Justice Warren E. Burger: That’s fairly common, isn’t it every where?

Mr. Dominick L. Manoli: Sir?

Chief Justice Warren E. Burger: That’s fairly common, isn’t it?

Mr. Dominick L. Manoli: Yes it is.

Chief Justice Warren E. Burger: The railroads and telephone companies?

Mr. Dominick L. Manoli: Yes, eminent domain is not a unique characteristic of political subdivisions.

Private concerns quasi-public you might say have been given that sort of authority.

Now, I want to summarize perhaps a little bit more at length than I normally as the case in this Court.

I do want to summarize one of the facts, custodian facts that relate to the district’s status as an employer under the act or as the other side would have it as a political subdivision under the Act.

The district sells and distributes natural gas without profit to residential homes, commercial businesses and industrial firms in Hopkins County, Tennessee.

It was incorporated in December 1957 under the Tennessee Utility District Law.

Under the provisions of that law, a group of local real property holders in Hawkins County filed a petition with the county court setting forth the statement of the need for the service to be supplied, the estimated cost and the names of free local residence proposed these commissioners of the district.

After a hearing, the chairman of the county court, the chairman of the county court is a judge.

The chairman of the county court found that public convenience and necessity justified the creation of the proposed district that it was economically sound and desirable and accordingly granted the petition.

The chairman of the county court as required by the state law appointed its commissioners of the newly created district, the three persons nominated in the petition.

The district was financed through the private sale of bonds and no public money was used.

The district constructed a natural gas distribution system with the proceeds of the bond sale.

Under the statute, the gas system became subject to a lien in favor of the bond holders until the debt was paid.

Principal and interest on the bonds are payable solely from the revenues of the district.

The rates charged by the district must be sufficient to pay its expenses and as bonded in datedness.

The district has no power to levy or collect taxes and its service charges are not to be construed as taxes.

The powers of the district are vested in and exercised by three member board of commissioners.

The commissioners are not subject to county or state regulations.

They adopt the necessary rules and regulations and set the district service fees.

They control the labor relations of the district.

And under their supervision, the manager of the district hires and fires employees and sets their wages.

Neither the state nor the county has any control over the district’s employees.

The state statute also gives the district the power of eminent domain as the Chief Justice has already alluded to.

And it authorizes the board of commissioners to inquire into any matter relating to the affairs of the district and to carry out this function to issue subpoenas and administer oaths.

Finally, the enabling Tennessee statute provides that a utility district is a municipality or public corporation and exemption from state, county or local taxation.

The Supreme Court of Tennessee has upheld this tax exemption on the ground that such a district is an arm or an instrumentality of the state.

As I stated earlier, the court below concluded that state law governs the determination whether an entity is a political subdivision or not and under the laws of Tennessee as confirmed by the highest court of that state, the district here is a political subdivision and therefore refused to enforce the board's bargaining order.

The Fourth Circuit on the other hand in dealing with a related type of problem has rejected the contention that state law governs the determination of whether an entity is a political subdivision or not and as held the federal standards govern the determination of whether or not that particular entity is a political subdivision or not.

The act --

Justice Potter Stewart: You know that’s interesting to be --

Mr. Dominick L. Manoli: Sir?

Justice Potter Stewart: Any difference between you and your Brother on the other side this morning as to this issue.

He agreed that federal law is applicable?

Mr. Dominick L. Manoli: The -- I’m not entirely sure if he agrees on that.

But of course the (Voice Overlap) --

Justice Potter Stewart: (Voice Overlap) but if I can understand --

Mr. Dominick L. Manoli: There is the court below.

Justice Potter Stewart: In this language he said so in his brief.

Mr. Dominick L. Manoli: The court below of course took it a --

Justice Potter Stewart: Yes, but there’s no issue between you here today as far as I know.

Mr. Dominick L. Manoli: I had not fully appreciated that.

Now, both the act and this legislative history are silent as to the meaning that Congress sought to attribute to the phrase political subdivision of a state.

The obvious purpose of course, of Congress was to avoid, to avoid interference and to the labor relations the employment relations of -- between a governmental entity and its employees.

Now, I shall not attempt to give any kind of a comprehensive definition of what a political subdivision is.

Indeed the cases tell us, the cases tell us that an entity may be a political subdivision for purposes of one statute and not another.

Now, any definition of a political subdivision for the purpose of the statute, must I think taken to account the basic purpose which underlies the Governmental exemption in the statute, namely the avoidance of interference.

The avoidance of interference into the employment and labor relations between a state, between a governmental entity and its employees.

So therefore the threshold question in this case as it was in the Missouri Transit Workers case decided by this Court several years ago.

The threshold question in this case here, do we have that kind of state involvement in the creation, the administration, the operation and particularly the labor relations.

The employment relations of the districts, do we have that kind of state involvement here that should bring in to play, should bring in to play the congressional purpose to bar the labor board from intruding, from intruding into the labor relations of a governmental entity.

I submit that the answer to that question is that we do not have that kind of state involvement.

The state did not directly create the district.

It was formed by private individuals.

It is not administered by publicly elected officials or their designees.

It has not become assimilated or incorporated into the state or local government so as to become one of its constituent parts.

The county judge exercises no independent judgment in appointing the districts commissioners except in the remote contingency that two of the commissioners may not be able to agree on filling a vacancy.

The Tennessee statute requires him to appoint those persons nominated in the petition filed by the local property owners.

Utility system is owned by the district itself and is not state property.

Unknown Speaker: (Inaudible)

Mr. Dominick L. Manoli: There are three commissioners Your Honor and they serve -- the -- those who are first appointed following the volume of this petition, the affirmation by the county court.

They served as I recall for a staggered period of two, three and four years.

Thereafter, any successors would serve for a period of four years, as far as I recall.

Unknown Speaker: (Inaudible)

Mr. Dominick L. Manoli: Sir, I’m sorry, I didn’t hear it.

Unknown Speaker: Supposing they’re involved during their terms in some kind of directions in that way?

Mr. Dominick L. Manoli: There is in Tennessee an ouster statute.

And under this ouster statute, the ouster statute provides that where an official of a municipality or political subdivision is failing to perform his duties that the Attorney General of the state or the city attorney or the county attorney as the case maybe, may bring ouster proceedings in court, whether any such power has ever been exercised with the respect to any of these districts and we are told that there are approximately 270 of them in the State of Tennessee, I don’t know.

Now, the utility system is owned by the district itself and is not state property.

It has no authority to levy taxes and must meet its expenses and obligations from its revenues.

The district is completely autonomous in the conduct of its affairs.

The state exercises no supervisory power over the conduct of the district's day to day affairs or its operations.

Indeed, the Tennessee statute expressly bars any state public utility commission from exercising any jurisdiction over the management and control of the system or its rates or charges.

Finally, the district alone exercises the power to hire and fire employees.

The state does not control either directly or indirectly the terms and conditions of employment for the district and apparently on the basis of a decision by a Circuit Court of Appeals in the State of Tennessee.

Apparently these employees are not deemed to be subject to the state restrictions applicable to the state or municipal employees with the respect to strikes and picketing.

Essentially, the district appears to be -- the board found that essentially it’s a private venture to be sure for the benefit of the community and for the benefit of the community but nonetheless a private venture having no identity or relationship to the state.

Now of course, as the State of Tennessee as seen fit to its legislature to characterize, to label this district here as a political subdivision of the state as a municipality.

But that factor cannot be dispositive of the status of this district here for purposes of the federal legislation.

As this Court said some years ago, the Labor Act is a federal legislation administered by a national agency to solve a national problem on a national scale.

And the general principle is that normally that Congress intends that it's law shall have uniform application so that its programs would not be impaired.

Now, of course, a state has an important interest in defining its political subdivision and the board of course pays considerable attention to the state's legitimate interest in defining its political subdivisions.

But that interest it seems to us must be weighed, must be weighed against the policies of the statute and the uniform application of those policies which this Court had repeatedly confirmed Congress intended.

Now, local considerations, local problems may prompt a state, may prompt a state to characterize as a political subdivision, what is essentially a private venture.

Having no real identity or relationship to the state and over which a state exercises no control.

If state by state characterizations of an entity as a political subdivision were to be determinative of the problem, then the result might well be a patchwork of policies, a patchwork of policies and exemptions from the provisions of the statute which have no relation to the underlying purpose of the governmental exemption in the statute, namely the avoidance of interference and the employment in labor relations between a governmental entity and its employees.

I don’t believe (Inaudible) say that in this particular case that the State of Tennessee has seen fit to label a district as a political subdivision not because it really regards as an armed or instrumentality or a department of the state but rather because it sought to give us some kind of tax exemption and thereby encourage you, encourage local citizens, local property holders here to create these districts.

Justice Potter Stewart: What about the normal governmental corporation at the state level, say a Housing Authority.

Mr. Dominick L. Manoli: The Housing Authority?

Justice Potter Stewart: Has the board exercised authority in that?

Mr. Dominick L. Manoli: The board has never had that case Your Honor.

Justice Potter Stewart: Well, what about it?

Do you have some general -- any other experience with local governmental corporations that are spun off with state authority?

Mr. Dominick L. Manoli: Yes, there had been a number of cases which are cited in our brief and the principle which the board has applied to these cases, to these cases and of course it turns upon the particular facts --

Justice Potter Stewart: Well, you wouldn’t say a city isn’t a state, would you?

Mr. Dominick L. Manoli: Sir?

Justice Potter Stewart: You wouldn’t say a city isn’t the state, it is interstate.

Mr. Dominick L. Manoli: No, but that’s a political subdivision.

It’s a political subdivision, I don’t think anybody would quarrel, that the city is a political subdivision specifically (Voice Overlap) --

Justice Potter Stewart: What about a home rule city where the state has any business for any local affairs whatsoever?

Mr. Dominick L. Manoli: But, I would still regard that as being a political subdivision of the state.

Justice Potter Stewart: So that that the state doesn’t exercise any day to day control.

Isn’t really determinative, is it?

Mr. Dominick L. Manoli: Well, of course that’s one of the elements of this problem here is whether or not there is that kind of control.

You don’t single out any particular single fact but as a whole.

What do you have here?

Do you have that kind of connection, that kind of relationship to the state here?

Justice Potter Stewart: To the state?

I thought you said the city is the state.

I mean, you'd look at the city as a political subdivision.

Mr. Dominick L. Manoli: Yes.

Justice Potter Stewart: Whether the state has got any control over it or not.

Mr. Dominick L. Manoli: Well, but the statute specifically exempts a political subdivision of a state. I mean, that’s what the statute says.

And I don’t --

Justice Potter Stewart: Well, then why isn’t an irrigation authority or water district in a political subdivision, the state says it is, this is an entity that’s doing a job the state is authorized to do and the state has chosen instrumentality to do it through.

Mr. Dominick L. Manoli: Well, the state has not really chosen that Your Honor because here, it’s been a group of private -- it’s been a group --

Justice Potter Stewart: It’s got a statute on the books.

Mr. Dominick L. Manoli: It stands on more relevant -- have a statute on the books just like an incorporation statute which permits private individuals to set up a private corporation.

And this is really not much different than that.

How to be sure?

To be sure this particular district has been given certain advantages, to be given the advantages and no tax and no taxation.

And again the (Voice Overlap) --

Justice Potter Stewart: So you would say that a municipal or -- a municipality that sets up a separate municipal corporation to conduct, to own and operate its electrical and water system.

Mr. Dominick L. Manoli: Yes.

Justice Potter Stewart: Would not be a political subdivision?

Mr. Dominick L. Manoli: Oh, yes.

The board has exempted that very kind of a district.

Justice Potter Stewart: But what’s the distinction for having to say so?

Mr. Dominick L. Manoli: Well the board --

Justice Potter Stewart: The city just creates pursuant to a state law, a separate municipal corporation which condemns and then operates the formally private electrical system.

Mr. Dominick L. Manoli: Yes.

Justice Potter Stewart: Same building, same job that’s done before, same employees and the board of directors of this separate municipal corporation runs it.

Mr. Dominick L. Manoli: Well Your Honor, the board has taken the position in defining the term political subdivisions under the statute so as to exclude, so as to limit, so as to limit a political subdivision, that kind of an entity which is either been directly created by the state so that it is either a department of the state or not or the administrative arm of the state or those entities which are administered by individuals who are either directly responsible to publicly elected officials or to the electorate at large, the general electorate.

Chief Justice Warren E. Burger: What about the post office?

Mr. Dominick L. Manoli: The new post office, the new post office corporation Your Honor?

Unknown Speaker: (Inaudible)

Mr. Dominick L. Manoli: But that’s been specifically brought under the federal -- under the Labor Act.

Unknown Speaker: (Inaudible)

Mr. Dominick L. Manoli: Well, I don’t know precisely what the setup of the new post office is, but the statute also excludes wholly owned Government corporations whether the new post office is a wholly owned Government corporation or not but in any event, Congress under the new legislation has specifically brought a new post office system under the the Labor Act.

Justice Potter Stewart: If enacted -- the State of Tennessee, specifically created this specific corporation.

Mr. Dominick L. Manoli: Yes.

Justice Potter Stewart: And assigned you in doing these specific functions(Inaudible)

Mr. Dominick L. Manoli: I think not, that’s right.

Because it’s been directly created by the state and it’s an armed department of -- an arm or an instrumentality of the state itself.

Justice Potter Stewart: Well, this corporation is created by a statute whereas provided for the board of directors and that the federal --

Mr. Dominick L. Manoli: Suppose that the crux of the matter is how closely are the public officials identified with the running of employment and labor relations of the particular entity?

That’s a very important factor in this type of case.

Justice Potter Stewart: Why is the board of directors (Inaudible)

Mr. Dominick L. Manoli: In this case here?

They’re not public officials because they are nominated in the petition that’s filed by the property owners and the state court.

The county court has no discretion with respect to designating them as the commissioners.

The county court has only the opportunity to name one of the commissioners, only in the event, if there’s a vacancy and the two commissioners cannot agree.

So the state does not appoint the commissioners other than just simply ratifying here the nominees that have been made by the local property holders in their original --

Justice Potter Stewart: (Inaudible)

Mr. Dominick L. Manoli: Sir?

Justice Potter Stewart: (Inaudible)

Mr. Dominick L. Manoli: Well, I think I don’t want to answer that question categorically because school systems may differ as to --

Justice Potter Stewart: (Inaudible)

Mr. Dominick L. Manoli: Well, I don’t want to say or give any categorical answer because I don’t know just how they operate.

Justice Byron R. White: Mr. Manoli, how important is this case to the board? Do you have a lot of cases such as this, is this just a spare one that happens to come along?

Mr. Dominick L. Manoli: No.

Over the years, I think the board has had at least those which have come -- are now incorporated in these official records.

There have been in the neighborhood of a dozen or so cases.

But the problem however though is much broader than that because in this particular state for example, in Tennessee, we are told that there are 270 of these particular districts.

Now, what the situation maybe in other states, there maybe differences of course.

In some cases, perhaps the district similar to this one here maybe regarded by the board itself as a political subdivision, here is not.

So --

Justice Potter Stewart: I noticed though that so many of these very districts in Tennessee have been held to be exempt by a regional director.

Mr. Dominick L. Manoli: Yes, there is one case Your Honor and I --

Justice Potter Stewart: I might say were weekly in peril in Denton County, is that correct?

Mr. Dominick L. Manoli: We have that case and of course that was only a regional director who made that decision.

Justice Potter Stewart: Now, but the -- isn’t that the holding now?

Mr. Dominick L. Manoli: Well, there was never any appeal from that decision to the board itself.

The board has expressly overruled that decision of the regional director, the holding rather, the holding of regional director in that particular case.

So that particular case has no more presidential value, if I may use somewhat exaggerated example then the decision of a District Court, after this Court had come down with a decision under the same type of issue.

Justice Potter Stewart: So, is it then a fact that weekly in Benton and Carroll counties, they are subject to the jurisdiction of the board?

Mr. Dominick L. Manoli: If the union were to seek representation or if somebody was fired there.

That somebody was fired there because, let’s say he became a union member and the charges were filed with us today or a representation of petitioner was filed today, that regional director would entertain those -- either the representation petition or the unfair labor practice charge on the merits.

He would be bound by the board.

He’s bound by the board decision in this area of course.

Chief Justice Warren E. Burger: Mr. Manoli, your hesitation in answering I think Justice White’s question about school boards makes me put this question to you.

Has the board ever asserted jurisdiction over school teachers employed by the state or a city or municipality or any public school teacher?

Mr. Dominick L. Manoli: I know of no such case.

No such instances.

I know of none.

Chief Justice Warren E. Burger: Well, I have assumed that was the case but --

Mr. Dominick L. Manoli: Yes.

Chief Justice Warren E. Burger: Then I wondered why you hesitate.

Mr. Dominick L. Manoli: Well, I think I was being asked the question of whether they were public officials and it’s been a long time since I was associated with the school and it may vary perhaps how these people are appointed to run the school system of a particular area. That was the reason for my hesitation.

My hesitation if school officials are appointed by the city and the school as a part of the city, obviously the board would not --

Chief Justice Warren E. Burger: Well, then there would be school teachers, fireman, policeman, at least those three categories?

Mr. Dominick L. Manoli: Yes.

Chief Justice Warren E. Burger: Municipal employees generally.

Mr. Dominick L. Manoli: Yes, that the board has never had any such case and I would be surprised if we ever entertained any such case as that.

Justice Potter Stewart: Can I ask Mr. Manoli, what's the crux of the board's position that you reached as outside the exemption for political subdivision, any agency even though it performed as a local governmental function so long as that agency is a creature not run by the state legislature or some executive line with the state, but it comes in to being only if local citizens create it, is that it?

Mr. Dominick L. Manoli: The --

Justice Potter Stewart: Is that the crux of the board’s position?

Mr. Dominick L. Manoli: The crux (Voice Overlap) --

Justice Potter Stewart: Of the distinction you made?

Mr. Dominick L. Manoli: The crux of the board’s position is this.

That it limits the term political subdivisions to those entities that are either directly created by the state so as to constitute either a department or administrative arm of the state or those entities where the individuals administering that particular entity are either responsible directly to publicly elected officials or to the general electorate.

That’s the distinction that the board has drawn.

Justice Potter Stewart: Well I know.

But what's brought within the board’s jurisdiction?

What’s the mark of such an entity that is within the board’s jurisdiction?

Mr. Dominick L. Manoli: If they are not within those --

Justice Potter Stewart: What if they are not?

Mr. Dominick L. Manoli: I’m not sure that I understand your question Your Honor.

Justice Potter Stewart: Well, as I understand it, this kind of entity is created only if a group of local citizens get together and decide to create it.

Mr. Dominick L. Manoli: Yes sir.

Justice Potter Stewart: Isn’t that right?

Mr. Dominick L. Manoli: That’s right.

Justice Potter Stewart: It’s not created whether they like it or not by a legislature or by any other statute?

Mr. Dominick L. Manoli: They just simply in the name of the statute.

Justice Potter Stewart: Well, then my question is, is that the way we’re to distinguish entities within from entities without the board's jurisdiction, whether or not local citizens, it comes into being only if local citizens take some action.

Mr. Dominick L. Manoli: Well --

Justice Potter Stewart: Or is that an over simplification of your position?

Mr. Dominick L. Manoli: Well, I think that it certainly was an important element in the board’s thinking here that underlies the classification, that either the interpretation of the political subdivision here.

But what the board is looking to is to what extent, to what extent if it’s a political subdivision of a state that we’re concerned, to what extent is the state administering that particular entity?

To what extent has the state become involved?

To what extent has the state become involved in the operation, the administration of that particular entity and particularly its labor and employment relationships.

And where you have the case such as we have here where there’s simply an enabling statute which permits private citizens to create this kind of a district with all the various characteristics that I have described there.

The board says “Well, we don’t have that kind of involvement.”

We don’t have that kind of involvement by the state that should bring in to play the congressional purpose and to bar the labor board from intruding into the employment or labor relations of our governmental entity and its employees.

Chief Justice Warren E. Burger: I was a little confused by the distinction you made with Justice White about -- here you have a gas distribution company but you said that a water company would not be within the reach of the board.

Did I understand that correctly, also for water?

Mr. Dominick L. Manoli: No, they can also -- under this local statute, (Voice Overlap) --

Chief Justice Warren E. Burger: Well, I’m speaking of the board’s policy.

Mr. Dominick L. Manoli: Yes, -- Oh, no, the board doesn't draw a distinction between gas and water Your Honor, or electricity.

It depends upon --

Chief Justice Warren E. Burger: Well, in most cities, I am acquainted with, the water supply is controlled by the municipality and municipal employees, do you reach them?

Mr. Dominick L. Manoli: No sir.

There is a board case which is cited in our brief where the board declined to assert jurisdiction over a gas system of that kind that Your Honors is describing.

Chief Justice Warren E. Burger: Well, in the nature of the service, how do you distinguish water and gas or electricity?

Mr. Dominick L. Manoli: Well, it’s not so much a question of distinguishing between what kind of service, what is water or gas or electricity but rather it goes to the question, what is the entity that is performing that service.

Now, in the case that I referred to where the board -- there, the gas district was part of the city, of the city’s operations, it was run by a board of the utility commissioners I recall them under the supervision of the mayor.

And the city had financial responsibility for the operation of that particular gas district as I recall it.

So the distinction is not been made upon whether it's water, gas or electricity, what have you, but what is the nature of the particular corporation or entity that is performing this kind of service and what is its relationship?

What is relationship, whatever the service may be, water, gas, whatever, what is its relationship to the State Government, to the City Government or the general electorate

?Thank you.

Chief Justice Warren E. Burger: Thank you.

Justice John M. Harlan: Could I ask you one question.

Mr. Dominick L. Manoli: Sir?

Justice John M. Harlan: (Inaudible)

Mr. Dominick L. Manoli: The record is silent on that Your Honor and all that I have -- all -- there is no state law as far as I know, but we do have the statement of the manager of this particular district here who testified, that neither the county nor the state has any control all over the labor relations of this particular district.

Chief Justice Warren E. Burger: Thank you Mr. Manoli.

Mr. Greener.

Argument of Eugene Greener, Jr.

Mr. Eugene Greener, Jr.: Mr. Chief Justice and may it please the Court.

It is the position of respondent here that the question presented is not whether the state or federal determination controls whether the utility district is a political subdivision under Section 2.2 of the National Labor Relations Act.

Respondent agrees that state law is not controlling but that state law is a factor along with all the other factors to be considered in reaching this determination.

It is respondent’s position further that there was no conflict between the Hawkins County case in the Sixth Circuit below and the Randolph case which is referred to by the board.

Respondent accepts the rule in the Randolph case which is to the extent that the board has considered the economic realities and the statutory purposes, its determination is entitled to great respect.

It is simply submitted that the board inadequately and improperly considered the economic realities and the statutory purposes and that to the extent, the Court of Appeals below in the last two sentences of the opinion which was several pages long stated that state law is controlling.

Respondent explains this the same way that the board has explained one of its decisions in its brief that state law is controlling.

The board has held state law to be controlling.

But now on page 19 on a footnote to its brief, it states that that language was not necessary for the result reached.

Now that is exactly the position of respondent here.

Because what the Court of Appeals did for several pages is take the rule in the Randolph case and apply by examining the economic realities one at a time and deciding that the board had inadequately and improperly considered that.

We have here basically a jurisdictional matter.

The board bestowed jurisdiction upon itself and has repeatedly thereafter refused to reconsider this.

Justice Thurgood Marshall: Is the utility district a part of what subdivision, it’s not a state agency, right?

Mr. Eugene Greener, Jr.: It is, if Your Honor please, a subdivision of the state, yes sir.

It is created --

Justice Thurgood Marshall: Are the board members officers of the state?

Mr. Eugene Greener, Jr.: They are public officials, if Your Honor please.

Justice Thurgood Marshall: Public officers, do they take oath?

Mr. Eugene Greener, Jr.: Yes sir, they would take an oath of office.

Justice Thurgood Marshall: They'd take an oath, the same oath that the other state officers take?

Mr. Eugene Greener, Jr.: I’m not informed on that Your Honor but I know they take an oath before they serve.

Justice Thurgood Marshall: What is the oath, you don’t know?

Mr. Eugene Greener, Jr.: No sir, I do not know that.

Justice Thurgood Marshall: Well can you be a state officer, and you don’t take an oath?

Mr. Eugene Greener, Jr.: Yes sir, you can be a state official.

Justice Thurgood Marshall: I just said state officer.

Mr. Eugene Greener, Jr.: State officer.

Justice Thurgood Marshall: I think you would settle for the state official, won’t you?

Mr. Eugene Greener, Jr.: Yes sir.

I would settle for that.

I would reply Your Honor that in many county boards which this is analogous to, no official oath of office is taken and the members are state officials.

Now, whether or not they are determined to be state officers, I don’t know the exact distinction between the two.

Justice Byron R. White: How are they compensated?

Mr. Eugene Greener, Jr.: They receive very nominal compensation Your Honor.

They get $25.00 each time the board meets, the utility board meets.

Justice Byron R. White: Paid by?

Mr. Eugene Greener, Jr.: It is paid by the county, by the --

Justice Byron R. White: (Inaudible)

Mr. Eugene Greener, Jr.: No, it’s paid by the district out of its own funds Your Honor.

We consider that to be a part of the county though.

Justice Byron R. White: How often are they selected?

Mr. Eugene Greener, Jr.: They are selected every two, four and six years.

Justice Byron R. White: By the vote of whom?

Mr. Eugene Greener, Jr.: They are selected originally by the county judge and I would like to state --

Justice Byron R. White: (Inaudible)

Mr. Eugene Greener, Jr.: Vacancies are filled by the members of the board unless there they cannot agree and then they are filled by the county judge.

But I would like to add also Your Honor that in certain counties, the members of the board are elected in general elections.

Now, this doesn’t apply in Hawkins County.

But we submit that this clearly shows the political nature of the utility district.

And also, the county judge himself is a constitutional officer and is the highest public elected official in a county. Highest administrative official on the county and is the same to a county as the Governor is to the state or Mayor to a city.

And that frankly if we have had a Mayor make these appointments rather than a county judge, possibly we wouldn’t be here today, it’s the --

Justice Potter Stewart: The county judge then is not primarily a judicial officer?

Mr. Eugene Greener, Jr.: No sir.

Justice Potter Stewart: He is more or like a -- what a county judge is in Missouri, for example?

Mr. Eugene Greener, Jr.: Yes sir.

He is an executive --

Justice Potter Stewart: What is elsewhere called a county commissioner?

Mr. Eugene Greener, Jr.: Yes sir.

He is the top administrative official elected by the public officials, I mean by the voters of the county.

Justice Potter Stewart: How are the personnel of the district employed?

Mr. Eugene Greener, Jr.: Excuse me sir.

Justice Potter Stewart: How are the personnel of the district employed?

Mr. Eugene Greener, Jr.: The district has a manager and the manager hires and fires and sets the wages.

But we might add that this is the logical and reasonable and expected way for such a district to offer.

Justice Potter Stewart: Do you have a civil service system in Tennessee?

Mr. Eugene Greener, Jr.: No sir, we do not.

If Your Honors please, I think it’s --

Justice Potter Stewart: Are these employees treated on the basis comparable to other employees of the county or the cities or are they --

Mr. Eugene Greener, Jr.: Yes sir.

They are as a matter of fact in a late board decision which incidentally involves Tennessee, I’m answering Your Honor’s question.

Coincidentally involves the State of Tennessee, an exemption was granted to the Fayetteville Lincoln County Electric System.

Now this is a June 1970 board decision.

And in that case, we have nearly identical facts to the case here.

We have enabling legislation, the Tennessee Municipal Electric Plant law.

We also have a private act to the state legislature by which a city took over a local electric company.

But once the system was setup, the Mayor nominated a board of directors.

The board of directors then had a manager.

The manager employed all the employees.

Now, there is absolutely, we submit, no distinction between the Fayetteville Lincoln County system which was -- the exemption was granted and the case at bar with the one exception that there, the Mayor appointed the board of public utilities and here the county judge appointed the board of public utilities.

And we submit that that is not a legitimate basis to award or not award coverage under the National Labor Relations Act.

Justice Byron R. White: Mr. Greener, maybe I misunderstood you but I did not understand that the county judge performed that function.

I thought he more or less accepted the nominations as they came to him and secondly that if there was a vacancy, the board was self perpetuating and unless they couldn’t agree.

Mr. Eugene Greener, Jr.: Let me clarify that Your Honor.

As in numerous similar entities, for instance the Fayetteville Lincoln County system that I just referred to, individuals are nominated to the county judge and usually, customarily, he appoints the nominees.

Chief Justice Warren E. Burger: Who does the nominating?

Mr. Eugene Greener, Jr.: The original person seeking to setup the district.

They nominate property owners in the county.

Chief Justice Warren E. Burger: (Voice Overlap)

Mr. Eugene Greener, Jr.: As we pointed out in our brief, the power to appoint and we have referred to some municipal law in McQuillin, includes the power not to appoint.

Now, we are not faced with that particular problem here but we submit that if the county judge felt that a nominee was incompetent or should not be placed in this position that he would not have to make this appointment.

There’s nothing in the statute that says that.

And secondly, as we said of course that in certain counties, the commissioners are elected by the qualified voters.

All the qualified -- this happens to be a smaller county and don’t operate in this fashion.

Now, next addressing to Your Honors question about vacancies.

Vacancies are filled by the remaining commissioners but this is something that many county boards have this administrative procedure.

However, if they cannot agree, it is specifically provided that the county judge will fill these vacancies.

And I might add one of Your Honors asked about the Ouster Law.

The Ouster Law of Tennessee applies specifically to public elected officials, public officials, they don’t have to all be elected.

Let’s take a county road commissioner who’s guilty of dereliction or maltheisms in office, an action would be brought against him by the county attorney.

There would be jury trial.

He would be removed or not removed based on the findings of the jury.

This Ouster statute applicable to public officials, applies to utility district commissioners.

Justice Potter Stewart: How do you know?

Mr. Eugene Greener, Jr.: Your Honor there is an annotation so holding and we have referred to it in the record, in our brief that -- and this is not controverted in this record.

I might add one other thing about responsibility.

The district must file a copy of its annual report with the county judge.

I feel that --

Justice Hugo L. Black: May I ask you of that?

Mr. Eugene Greener, Jr.: Yes sir.

Justice Hugo L. Black: Are their districts like that at every place in the state?

Mr. Eugene Greener, Jr.: Yes sir.

Justice Hugo L. Black: The same kind?

Mr. Eugene Greener, Jr.: No sir.

They are all kinds of districts and that was a point I wanted to make.

Justice Hugo L. Black: I was trying to find out really what's behind this controversy.

Mr. Eugene Greener, Jr.: Your Honor, that I do not know but I will say this that we and also in an answer to the Chief Justice’s remarks earlier, we have districts in Tennessee that provide fire protection, police protection, sewage, natural gas. There are all kinds of services that a district can provide.

And when counsel informed the Court that there are 270 districts.

Right there are but they provide a myriad of services in areas where usually in rural areas and this was setup by the legislature with that in mind to provide governmental services where there was no other entity available to do so.

Justice Hugo L. Black: Is there any difference in the qualities or the kind in East Tennessee and West Tennessee?

Mr. Eugene Greener, Jr.: No sir.

They are identical.

As a matter of fact, they were both natural gas districts.

The Benton, Caroll County district is a natural gas district.

This is a natural gas district.

But a district can perform any one of these other types of services, and often performs more than one type of service.

It can have fire and police and natural gas depending on what is needed in the particular area involved.

I think --

Justice Hugo L. Black: Is it covered by general state law or --

Mr. Eugene Greener, Jr.: Yes sir.

Justice Hugo L. Black: And their election is by general elections, state elections?

Mr. Eugene Greener, Jr.: Where the commissioners are --

Justice Hugo L. Black: Benton County?

Mr. Eugene Greener, Jr.: Yes sir, whether commissioners are elected or whether the county judge is elected, they are elected by the qualified voters in the county at a general election.

Yes sir.

Now, I feel that --

Justice Hugo L. Black: What happens if you win and what happens if the others win?

Mr. Eugene Greener, Jr.: Well if Your Honor please --

Justice Hugo L. Black: I’m trying to find out what it’s about.

Mr. Eugene Greener, Jr.: Well, the board simply cannot order one of these districts to bargain with a labor organization if we prevail and if the board prevails a district would have to bargain with the labor organization.

Depending --- I suppose depending on --

Chief Justice Warren E. Burger: We’ll recess for lunch now counsel.

Mr. Greener you may proceed.

Mr. Eugene Greener, Jr.: Mr. Chief Justice and may it please the Court.

In accordance with the rule of law that we contend is applicable here.

We would like to bring to the Court’s attention several undisputed relevant facts in this record that have not been mentioned here before.

Some of which we submit have not been properly understood by the board.

First place, Section 6-2615 TCA, the same utility district law designates a utility districts records as “public records.”

Secondly, as referred to by counsel, a utility district has the power to issue subpoenas for witnesses and has the power to administer oaths to witnesses.

Now, the reference was made by the board’s counsel to that Section of the Act 6-2613 specifically exempts a utility district from regulation by the Tennessee railroad and public utilities commission.

What the board has done since the outset of this litigation does not understand the significance of that.

This entity is exempt privately owned public utilities and railroads are regulated.

Also, under several federal statutes, acknowledgment has been made that the utility district is a municipality.

For instance, the employees of the district are covered under the social security law on a voluntary rather than on a mandatory basis which is a test of course for a private enterprise.

Chief Justice Warren E. Burger: That’s under the Social Security Act Provisions.

Mr. Eugene Greener, Jr.: Yes sir.

Federal social security has been so acknowledged by the responsible federal officials in the district as so operate.

Justice Potter Stewart: Do you know under what language of that legislation?

Mr. Eugene Greener, Jr.: Yes sir.

The code section allowing voluntary coverage is 42 U.S.C. 418, allowing voluntary coverage for municipal employees.

And a district is operative under this language as a counterpart Section in the Tennessee code allowing a municipality to adopt this.

Justice Potter Stewart: And it says municipal -- excuse me.

Justice Thurgood Marshall: (Voice Overlap) – They also are the non-private corporations in that same division.

Mr. Eugene Greener, Jr.: No sir, I don’t think so.

I’m not positive of that but I believe it’s only for municipalities.

Justice Thurgood Marshall: Well non-profit corporations in Tennessee, are they subjected to the will of the county judge?

Mr. Eugene Greener, Jr.: Non-profit --

Justice Thurgood Marshall: What I’m trying to say is it restricted to Government owned or aren’t they also non-Government owned, non-profit corporations who enjoy the same privilege?

Mr. Eugene Greener, Jr.: I do not know sir but I believe you are probably right that this benefit may extend to non-profit corporations which may or may not be a municipality.

Justice Thurgood Marshall: I just know of several states that have that.

Mr. Eugene Greener, Jr.: Yes sir, I do not know that for sure.

In addition to this, interest on utility districts bonds is tax exempt for federal income tax purposes under the well-known provision exempting income on tax bringing municipal bonds.

A district is required to publish --

Justice Byron R. White: Mr. Greener, why do you say that? Do you have a special ruling to that effect?

Mr. Eugene Greener, Jr.: No sir we do not but we have made this contention from the lowest court and it has not been controverted by the board.

As a matter of fact, this is the way the district operates.

It advertises its bonds in such a fashion and there is no controversy about this in the record.

But as far as the special ruling, we do not have this.

Justice Byron R. White: And so far as you know it’s never been litigated.

Mr. Eugene Greener, Jr.: No sir, we do not, it has not.

Chief Justice Warren E. Burger: Well, was it embraced in some allegation in pleadings of some kind?

Mr. Eugene Greener, Jr.: Yes sir, it was.

Chief Justice Warren E. Burger: No evidence on it, it’s just an undisputed allegation.

Mr. Eugene Greener, Jr.: The record probably can make have this in it.

I am not positive about this but as a matter of law, we have made this contention repeatedly in every pleading and in every list of authorities that has been filed and its never been controverted by the board that when its bonds are advertised for public sale, they are advertised as tax free municipal bonds.

Justice Hugo L. Black: What’s the peculiar relevancy of that to the issue?

Mr. Eugene Greener, Jr.: The only relevance Your Honor is that this is one more of a series of indicia showing this to be a municipality.

In other words, we contend that in all of the board’s decisions granting the exemption and we’ll refer to a few of them.

There is no case that has more factors or stronger individual factors which add up to the result that you have an exempt municipality than you do here.

That --

Justice Hugo L. Black: As you described as a municipality in any law?

Mr. Eugene Greener, Jr.: Yes sir.

The state statute calls it a municipality.

Repeatedly, the State Supreme Court has held it to be a municipality.

The board has taken the position that which we agree with that state law is not controlling.

But it is our contention and our strong contention that state law is definitely a factor and it has been held to be a -- it is called a municipality in the statute in so many words in several places.

Justice Hugo L. Black: What benefit do you get from it if it is a municipality?

Mr. Eugene Greener, Jr.: We get tax exemption.

It’s not subject to state tax at all.

Justice Hugo L. Black: Well, would that be highly relevant in the question before us?

Mr. Eugene Greener, Jr.: Yes sir.

I feel that that is relevant.

It is also exempt from the State Railroad and Public Utilities Commission because it is a municipality.

All of these standing alone -- excuse me sir.

Chief Justice Warren E. Burger: What about federal income taxes?

Mr. Eugene Greener, Jr.: Federal -- no federal income tax either Your Honor.

Any of these factors standing alone may not -- they must be considered together to get the picture.

It’s like a tapestry and we contend that when all of the factors are added up, you have a stronger case for the municipality exemption than has ever been allowed by the board in its other decisions and that the only real difference here is that you got a county judge rather than a mayor making the appointment.

Justice Byron R. White: We can follow through on the federal income tax exemption.

Do you have a certificate of exemption under 501 (c) (3), you must if you make that statement.

Mr. Eugene Greener, Jr.: Your Honor, it’s not in the record but they have such an -- they are exempt and yes they do.

Justice Byron R. White: Do you have an income tax in Tennessee?

Mr. Eugene Greener, Jr.: Yes sir but it’s not applicable to this.

It’s an unearned income tax -- no sir, we do have a corporation income tax and it’s exempt from that.

Justice Byron R. White: They don’t have income, do you?

Your client does have they any income and operates a cost, doesn’t it?

Mr. Eugene Greener, Jr.: Yes sir.

Justice Potter Stewart: Well no wonder he doesn’t pay any income taxes if it has no income.

Mr. Eugene Greener, Jr.: Well, it also exempt specifically from all state taxation Your Honor by the statute itself.

Justice Hugo L. Black: Is it privately owned?

Mr. Eugene Greener, Jr.: It’s owned by the citizens of the district.

In other words --

Justice Hugo L. Black: All of them?

Mr. Eugene Greener, Jr.: Sir?

Justice Hugo L. Black: All of them?

Mr. Eugene Greener, Jr.: Yes sir.

It has an exclusive franchise to provide the service that it’s setup to provide to all inhabitants of the district.

And it can be fire protection, police protection --

Justice Hugo L. Black: You mean it’s fully and completely, publicly owned --

Mr. Eugene Greener, Jr.: Yes sir.

Justice Hugo L. Black: With no private directors or officers.

Mr. Eugene Greener, Jr.: No sir, none.

And as a matter of fact, the utility district commissioners as I have said earlier in certain counties are elected by the general electorate.

Now, in reference to the power of eminent domain, the chief justice asked originally about this district not only has the power of eminent domain but has it against other governmental entities.

We certainly as a stronger form of the power of eminent domain then for instance a telephone company might have.

In addition to these factors that we have referred to, Section 62612 of the Utility District Act grants to the district all the powers necessary and requisite capable of being delegated by the legislature.

So, we contend that when all of these factors are added up and the totality of the picture is before this Court, the conclusion must follow that we have an exempt municipality.

I would like in addition to the Lafayette-Lincoln case which is a electric system under the Tennessee Municipal Electric Plant Law and which is practically identical to the case at bar, the June 8, 1970 decision by the board granting the exemption.

We also have another late board case granting the exemption to the City of Austell Natural Gas system.

This natural gas system and the electric system were both granted the exemptions as being municipalities.

The difference if you can call this a difference is that in these cases the board of trustees was appointed by a Mayor, rather than by a county judge.

And the board's standard which the board states in its brief is controlling, that is how the labor relations are carried on.

It is submitted that the labor relations in the district and the labor relations in the Austell Natural Gas case and LaFayette-Lincoln electric system case carry on exactly the same way.

That is there is a manager who hires the employees and that as far as the commissioners are concerned, they more or less direct the operations of the gas system in the Austell case or the gas system in the utility district of Hawkins County case.

So we submit that considering these two cases, we can find no distinction between them and the case that is before us.

We think we also should refer to the board’s standard which it alleges --- it has been uniform and reasonable in its application.

Justice Potter Stewart: MHas it ever before you proceeded, has it ever been decided whether your client has sovereign immunity as a defendant in a tort action for example.

Mr. Eugene Greener, Jr.: No sir, I don’t believe it has.

If there’s such a case in Tennessee, I’m unaware of it.

Justice Potter Stewart: Well, don’t you have some (Inaudible)

Mr. Eugene Greener, Jr.: They have the right to sue and they sue.

Yes Sir, but as far as --

Justice Potter Stewart: (Inaudible)

Mr. Eugene Greener, Jr.: They do.

Justice Potter Stewart: Do you have the doctrine of sovereign immunity in Tennessee?

Chief Justice Warren E. Burger: For torts?

Mr. Eugene Greener, Jr.: Yes sir, we do.

Justice Potter Stewart: Or does it -- and then is it applicable when a Government is acting in a proprietary capacity, that’s a distinction we used to have in Ohio --

Mr. Eugene Greener, Jr.: Yes sir.

That law has been changed recently and according to my recollection, the sovereign is now required to carry liability insurance.

And to that extent can be sued.

But there has been no such suit against the utility district of which I am aware and I have read the cases on utility districts.

Justice Potter Stewart: I was just curious, thank you.

Mr. Eugene Greener, Jr.: Yes.

Justice Hugo L. Black: Do you challenge the Government's right if it wished to do so to subject employees of an agency like yours to the National Labor Relations Act?

Mr. Eugene Greener, Jr.: Yes sir.

I contend that we are exempt under the specific language of the act.

Justice Hugo L. Black: I say what if you claim any constitutional exemption?

Mr. Eugene Greener, Jr.: No sir, it’s statutory.

We are a political subdivision to the State of Tennessee and specifically under Section 2 (2) of the Act, a state or a political subdivision thereof is specifically exempt.

Justice Hugo L. Black: Does the district have a president?

Mr. Eugene Greener, Jr.: Sir?

Justice Hugo L. Black: Does the district have a president like a corporation?

Mr. Eugene Greener, Jr.: No sir, it does not.

It has three commissioners who served with a nominal compensation who are appointed by the county judge and is much the same as a county utilities board.

If these were a county utilities board or if these were -- as in Lafayette-Lincoln case, a board of trustees to run the electric system, we say it’s exactly the same except that there are so many more factors here than they are in these cases where the board has granted the exemption.

I would like to have just a moment to make a comment on the board’s alleged reasonable and uniform standard.

The board’s standard is actually changed between 1967 when the decision and direction of election here was made and its brief today.

We state that under the original standard of the board and under the revised standard that this district is administered by state appointed officials if we go by the board standard.

The board standard now says that the exemption is applicable if it’s administered by persons responsible to public officials.

Apparently the board feels that we may be able to persuade the Court that the utility district commissioners are state appointed that is appointed by a county judge.

But that they would be held not to be responsible to the publicly -- we say they are responsible to the publicly elected officials too.

And even with the changed standard between 1967 and the brief today, the utility district does exempt.

Justice Hugo L. Black: Who fixes the range?

Mr. Eugene Greener, Jr.: The utility district commissioners but they are limited by statute.

Your Honor only two recover enough, to cover the costs of operating the district.

They cannot operate at a profit and if they get a surplus funds by statute, they must make a rebate to the persons who enjoy the services in the district.

Justice Hugo L. Black: To the customers.

Mr. Eugene Greener, Jr.: Yes sir.

This is by a statute as strictly a non-profit entity.

Chief Justice Warren E. Burger: Since you couldn’t conceivably -- the commissioners couldn’t conceivably anticipate precisely their income and their out go, I suppose we can assume that there is some moderate surplus each year which is rebated.

Mr. Eugene Greener, Jr.: Your Honor that is theoretically the case.

This particular district has been in a deficit position in almost from the beginning but they have increased their rates with the hope that they would have a surplus and would be in a position to make a rebate.

They had to borrow funds in order to build, to extend the lines out into the rural areas which is their purpose for being and they have not have a surplus.

Justice Hugo L. Black: Who paid its deficits?

Mr. Eugene Greener, Jr.: Sir?

Justice Hugo L. Black: Who has paid its deficits?

Mr. Eugene Greener, Jr.: The deficits have remained unpaid.

They will increase their rates in order to do so.

Thank you sir.

Chief Justice Warren E. Burger: Thank you Mr. Greener.

I think your time is consumed Mr. Manoli.

Thank you gentleman.

The case is submitted.