UNITED STATES v. ORLEANS
Legal provision: Federal Tort Claims, or Alien Tort Statute
Argument of Harry R. Sachse
Chief Justice Warren E. Burger: We will hear arguments first this morning in number 75-328, United States against Orleans.
Mr. Sachse, you may proceed whenever you are ready.
Mr. Harry R. Sachse: Mr. Chief Justice and may it please the Court.
This case is here on writ of certiorari to the Court of Appeals for the Sixth Circuit.
The question presented is whether employees of the Warren-Trumbull Council for Economic Opportunity in Warren, Ohio are Federal Employees within the meaning of the Federal Tort Claims Act and that is where the United States may be held liable for an automobile accident that occurred on an outing sponsored by the Westlawn Neighborhood Opportunity Center, a program run by Warren-Trumbull.
The District Court granted the United States' motion for summary judgment.
The Court of Appeals reversed the District Court, in our view, incorrectly, in contrary to this Court’s decision and Logue versus the United States and Maryland versus the United States.
The facts are shown in affidavits, exhibits and depositions that were filed with and against the motion for summary judgment.
They showed the following: Warren-Trumbull is a nonprofit Ohio Corporation organized at the instance of the City of Warren, Ohio in 1965.
The charter of the corporation is reproduced at appendix 32.
Its purpose is to aid in eliminating poverty in Trumbull County, Ohio.
To do so, it may receive funds from any source, but its principle funding has always been through grants from the Office of Economic Opportunity.
Justice Potter Stewart: Has that not been -- in fact it is exclusive funding?
Mr. Harry R. Sachse: It is difficult to say that.
It has not been its exclusive source of support because 20% of its support has come from donations and kind in the community and there may have been some funding, but so far as we know the only dollar grants that came to the organization were from the OEO.
To receive Federal Funds, Warren-Trumbull had to satisfy the statutory requirements, the Economic Opportunity Act.
Primary among these were following; First, it had to have a Board of Directors that was composed one-third of locally elected officials.
One-third of members of the business and professional community that it served and one-third of members of the community of the poor for whose benefit the society was set forth, that is required by 42 U.S.C. 2791 (a).
Secondly, no employee of OEO could serve on the Board of Directors or on any committee or administrative body of Warren-Trumbull.
Thirdly, at least 20% of its support had to come from sources other than federal funds.
To receive federal funds, it also had to obey statutory requirements and regulations concerning the use of those funds.
For instance and primarily, the salary ranges that could be paid to its employees had to be in accordance with comparable salaries in the communities and could not exceed $15,000.00 per annum per employee from federal funds.
Employees of the agency were prohibited from participating in unlawful demonstrations, I think that would go without saying, if they are unlawful demonstrations.
And thirdly, Warren-Trumbull would have to submit to full auditing by the OEO to see that the funds were expended in accordance of the conditions of the grant.
The Act also provided, the OEO Act also provided that the OEO could not set national priorities for the use of its grant funds and that the local Board of Directors must have authority over policy of hiring and firing.
As the deposition of Wendell Verduin, the Chicago Regional Director of OEO made clear and I am quoting from deposition at page 46, “The recruitment selection, the hiring and firing of staff members of the community action agency is done by that Board of Directors under its own policies and procedures.”
And quoting from deposition of Lester Peterman (ph), a former Executive Director of Warren-Trumbull who had been fired by the Board of Directors, it stated, “I received my directions from my Board which is a governing board not an advisory board.”
One of the programs of Warren-Trumbull was the Westlawn Neighborhood Opportunity Center.
I probably interrupt myself here to say that there is some 865 agencies of this sort funded through OEO throughout the country, but one of the programs of these agencies of Warren-Trumbull was Westlawn Neighborhood Opportunity Center.
It was one of a number of Neighborhood Centers that Warren-Trumbull ran, where among other things, teenage children could come after school and play ping-pong or the pool.
It also organized dances and outings and it was on one of these outings that the respondent was hurt.
The outing was to nearby lake whose name I had intended to mention, but I will not because it seems to be too difficult to pronounce.
It is something in the nature of Cognac.
Westlawn in the outing, used one van that was purchased with OEO funds grant the money.
They also used several cars owned by people in the community.
One of the private cars had a wreck on the way --
Justice William H. Rehnquist: (Inaudible) corporate structure; is it just an activity that is conducted by Warren-Trumbull?
Mr. Harry R. Sachse: So far as I know it is just an activity conducted by Warren-Trumbull.
One of the private cars had a wreck on the way back from the lake.
Well, I do not want into --
Unknown Speaker: I am listening.
Mr. Harry R. Sachse: Whether there was negligence or what, there was negligence, it appears there were too many people in the car.
Respondent was seriously injured and lost his right arm as a result of the accident because the accident was driven a licensed driver and was insured.
Chief Justice Warren E. Burger: Any other entity joined as a dependent in the --?
Mr. Harry R. Sachse: No other entity.
The suit was brought purely against the United States.
There is no evidence at all that OEO participated in hiring the personnel involved in this outing or in planning the outing, that it knew of the outing or that it had any control over it at all.
Chief Justice Warren E. Burger: Was the driver was an employed person of the local --?
Mr. Harry R. Sachse: No, Mr. Chief Justice, he was one of the teenage students, a 17-year old boy who was going on the outing and he was using his father’s car with the father’s permission to take some of the students on the outing.
Respondent brought suit against United States for $1 million and the respondent’s father for a $100,000.00 additionally, stating that agents of the United States were in-charge of the outing and were negligent.
Chief Justice Warren E. Burger: That was a separate suit against the father, the owner of the car?
Mr. Harry R. Sachse: No, the suit was brought by the father individually and on behalf of his son against the Untied States.
The owner of the car was not sued.
Chief Justice Warren E. Burger: There was no suit at any courts, so far as we are concerned, against the owner of the car?
Mr. Harry R. Sachse: That is correct, Your Honor.
The United States moved for a summary judgment on the ground that the persons alleged had been negligent were not employees of the United States.
The District Court in a written opinion on the basis of the affidavits and depositions held that Warren-Trumbull was a contractor with the United States and not a corporation acting as an instrumentality or agency of the United States.
Now on rehearing, an answer to arguments that its activities were controlled by the United States, the District Court held that the Warren-Trumbull “still remains independent locally controlled and constituted non-profit corporation, while the OEO has the power to cut-off federal funds, if the counsel fails to meet Federal standards.”
They had no power to cut-off funds from other sources which the council is encouraged to utilize.
On Appeal, and I think this may be the crux of the case, the Court of Appeals held, agreed with this, there were the words of the Court of Appeals, there was no showing that OEO controlled, this is in our petition, an appendix to petition of page 12 (a), there was no showing that OEO controlled or supervised the physical performance of the work of employees of WTCEO, that is Warren-Trumbull, and Westlawn.
Moreover, the requirements imposed upon these local agencies by statute and regulations are not concerned with the details of the day-to-day operation of the agencies or the programs which they carry on in the Warren-Trumbull County area, that is the Court of Appeals.
The District Court of course agreed, but the Court had said the same thing, the Court went on to say that it did not consider the ties that Warren-Trumbull had with the OEO to be characteristic of an independent contractor and that it thought that in reading the humanitarian purpose of the Tort Claims Act, together with the humanitarian purpose of the OEO, that an accident that occurred to one of the persons that OEO was designed to help and one of the people on the outing should be covered by the Tort Claims Act.
The Court noted that if a person who was hurt was a stranger that the situation might be handled by traditional principles of contractor-employee relationship and the government might not be liable.
Chief Justice Warren E. Burger: As your read the Court of Appeals’ opinion Mr. Sachse, would there be a, under the Sixth Circuit view, a Tort Claim against a pedestrian who had been injured by this car, would be (Voice Overlap).
Mr. Harry R. Sachse: The Sixth Circuit specifically declined to rule on that, but said there might not be.
It based its ruling on a position that we find no support for in Tort Claims Act that whether there is a Tort Claim or not would depend on the nature of the plaintiff, on the status of the plaintiff.
Before I leave the statement of the case, I want to add one other thing.
The respondents and the Court of Appeals used as one of their basis for liability, an affidavit by a man named Sidney Roberts, that two years after this accident, in October of 1972, the accident was in September of 1970, that he was asked by OEO to be the new Chairman of the Board of Warren-Trumbull and that he was appointed directly by the Chicago Office of OEO to that position.
This is all there is in the record about it, this statement.
We have not thought it appropriate to go beyond the record and all we can say on this is that if this man was appointed directly by OEO, it was in a violation of statutes and regulations and we do not see how it could have occurred.
What it seems to us obviously did occur if something of this nature occurred.
Justice Thurgood Marshall: But you could dispute it.
You did not file a contrary affidavit in the District Court, did you?
Mr. Harry R. Sachse: No, there is no contrary --
Justice Thurgood Marshall: It stands un-contradicted?
Mr. Harry R. Sachse: It stands as a statement that in 1972, two years after the accident, this man was appointed by the Regional Chairman of OEO to be Director of the Board --
Justice Thurgood Marshall: It is un-contradicted?
Mr. Harry R. Sachse: -- of Warren-Trumbull.
It is un-contradicted except as to the legal conclusion and that this was a direct appointment that it seems clear as a legal matter that OEO could threaten to withhold funds unless a new Director of the Board was appointed and that apparently a new Director of the Board was appointed, all two years after the events at issue here.
Justice Lewis F. Powell: There is an affidavit from Mr. Wendell Verduin on page 9 of the appendix.
He is the Regional Director of the Office of Economic Opportunity in Chicago and does he not say that the Warren-Trumbull and Westlawn make their own decisions as to whom to hire, discipline, and discharge?
Mr. Harry R. Sachse: That is correct.
Justice Lewis F. Powell: You view that as creating a conflict?
Mr. Harry R. Sachse: I think that reflects the same thing that we are saying.
Well, I suppose the answer is yes.
Perhaps that does conflict with the other statement.
I do not think, however, that there is a conflict of fact within these affidavits that requires resolution by this or any other Court because I think that whether or not OEO had an influence, assuming that the Board was not in compliance with the statute of getting a new chairman of the Board appointed before any other grants were made, would not affect the day-by-day control of activities such as this one.
Justice Thurgood Marshall: Let us be straight, the only thing you have is that one affidavit?
Mr. Harry R. Sachse: I am not sure to understand that --
Justice Thurgood Marshall: The record in this case, did the government put in anything other than one affidavit?
Mr. Harry R. Sachse: No, there is a full affidavit by -- there is a full deposition by Wendell Verduin, the head of the Chicago Office of OEO in which he states very firmly that OEO did not interfere in the --
Justice Thurgood Marshall: (Inaudible) is there in the record on behalf of the government?
Mr. Harry R. Sachse: There are series of affidavits.
There is affidavit of Wendell Verduin.
There is the --
Justice Thurgood Marshall: By the government?
Mr. Harry R. Sachse: Yes, it was submitted by the government.
It was the only affidavit submitted by the government as I recall.
The other affidavits and depositions were submitted by --
Justice Thurgood Marshall: Suppose the government stands on whatever they can get on the affidavits, but the government only put in to one?
Mr. Harry R. Sachse: The government put into one that is correct.
Justice William H. Rehnquist: Well, so far as there is any material conflict in the affidavit, the government should have not gotten summary judgment in the District Court, I suppose?
Mr. Harry R. Sachse: So far as there is any material conflict with the emphasis on material and conflict on a point that it would be determinative in this case, but we do not think those points are determinative in this case.
I would like now to turn to the Tort Claims Act.
Tort Claims Act 28 U.S.C. 1346 (b) here and it is quoted of course in our brief, makes the United States liable for wrongful acts of any employee of the government while acting within the scope of his office or employment.
Employee of the government is defined so as to include all true government employees, but not to go beyond that.
An employee of the government, includes employees of any Federal Agency under the Act and a Federal Agency is defined as including the Executive Departments, the Military Departments, independent establishments of the United States and corporations acting primary as instrumentalities or agencies of the United States, but does not include any contractor with the United States.
These terms are not unclear.
Independent establishments of the United States rather clearly refers to the independent regulatory commissions.
It makes clear that this was not limited to the pure executive branch which is the word that precedes it.
It covers Federal Trade Commission, Interstate Commerce Commission of that sort.
It is not strictly part of the Executive Department.
Corporations primarily acting as instrumentalities of the Untied States, and remember this was an Act passed in 1946.
The Instrumentalities of the United States was defined in an earlier Bill that led to this Act as Corporations whose primary function is to act as agencies of the United States whether or not authorized to sue or be sued and whether authorized to sue or be sued gives a pretty good clue to what Congress had in mind.
It had in mind Federal Corporations where they were so close that they could not sue or whether they were far enough removed so they had the authority to sue or be sued.
I want to give you source for this.
It is not in our brief.
This is from House Report Number 2245, 77th Congress, Second Session.
Justice William H. Rehnquist: Where the Federal Deposit Insurance Corporation with reconstruction Finance Corporation as --
Mr. Harry R. Sachse: Commodities Credit Corporation, Federal Deposit Insurance Corporation, there is a whole list.
Justice Potter Stewart: What about the OEO itself?
Mr. Harry R. Sachse: Sir?
Justice Potter Stewart: What about the OEO itself?
Mr. Harry R. Sachse: Well, the OEO itself I think would just be an Executive Agency.
An OEO employee would be covered as federal agency.
The Senate Report Number 1399, 79th Congress, Second Session, Page 31 makes this equally clear.
Chief Justice Warren E. Burger: Give me that first number again?
Mr. Harry R. Sachse: It is Report 1399, 79th Congress, Second Session, page 31.
This Section as referring to the definition of Section, “This Section defines the terms used in the Title and makes it clear that its provisions cover all Federal Agencies, including government corporations.”
It goes along with what we have said and it is pretty obvious what Congress had in mind when it passed the Federal Tort Claims Act.
The exclusion of contractor with the United States also shows that Congress only intended to make the United States liable for the torts of its employees or most those within its direct control.
There is no reason to assume that under this statutory scheme that Congress intended to make United States responsible for the torts of employees of its grantees who typically would be universities, hospitals, or in later times, community activities that the government chooses to support with grant funding.
Their employees are even further removed from federal employment than are the employees of a contractor because a contractor does something specific for the Untied States in accordance with detailed plans and specifications.
Whereas a grantee is aided by federal money in performing a general program that the government wishes to encourage without being in control of it, even to the extent, that it is in control of the performance of a contractor.
In determining, whether employees of a body receiving federal funds be a contractor or some other body, whether those employees are Federal Employees under the Tort Claims Act, the Court has looked at two primary sources and both make great deal of sense, if I may say so.
First, the statute that establishes the relationship between the United States and the body at issue, that is in Maryland versus -- they did this both in Maryland and in Logue, but in Maryland versus United States, the Court held that Maryland National Guard was not a federal instrumentality, even though it received its funding from the United States and even though its employees to advance and to perform their duties appropriately, you had to follow detailed federal regulations and held this both as to the military employees and to caretaker employees who are in fact taking care of property admitted to the federal property, but the statute did not set this up as a Federal Agency in time of peace.
It set up as a state agency.
The second test the court has looked to is the degree day-by-day control over the activities of the employee.
This is appropriate too because the person who controls the day-by-day activities of employees is the person who can keep accidents from happening and is the person that ought to be responsible if an accident does happen.
In either test, this Warren-Trumbull community program is not a federal instrumentality and its employees are not federal employees.
Justice William H. Rehnquist: Is it considered that the driver of this car was an employee of the Warren-Trumbull Organization?
Mr. Harry R. Sachse: No, he was not paid for driving the car.
He was one of the citizens who is going on this outing and who as a favor to Warren-Trumbull, drove the car.
Justice William H. Rehnquist: Even if Warren-Trumbull were a federal agency, how could he qualify as an employee?
Mr. Harry R. Sachse: Well, I think he could not.
The argument of course is that he would have been acting in that capacity at that moment and could be considered a federal employee.
Justice John Paul Stevens: I do not read the complaint as predicating negligence on the part of the driver, but rather on the supervision of the outing?
Mr. Harry R. Sachse: I agree.
I think the complaint basically says that the activity should have been more tightly supervised.
The economic --
Justice Potter Stewart: So it is not the respondeat superior theory, is that it?
Mr. Harry R. Sachse: As I understand it, the complaint does not make that argument as to the driver of the car, but in some of the briefs and so forth, the argument is made by the respondents that the driver of the car was acting for Warren-Trumbull and that Warren-Trumbull was a federal agency and that therefore --
Justice Potter Stewart: But if your answer to my brother Stevens is correct, the theory of the complaint was not the negligence of the driver as such, but the negligence of Warren-Trumbull in allowing this young man to drive the car and not more closely structuring and supervising the outing?
Mr. Harry R. Sachse: That is correct.
That is a theory of the complaint.
Chief Justice Warren E. Burger: Is there anything in the record about whether some of the people came in their own automobiles, totally --
Mr. Harry R. Sachse: Oh! One of the depositions of the driver shows pretty well what happened.
The number of the kids came in cars that their parents owned, driven by licensed drivers, but then some of them wanted to stay late and two cars stayed later than the rest and then to get the boys and girls together in the same car, eight of them got into one care and just a few in the other and it was the car with eight that had the wreck.
Now, turning to the statute, the Economic Opportunities Act makes it clear that as I pointed out, I want to move quickly, because I want to save a minute or so for rebuttal if I can, that Federal Government can only lend money to a community agency, if it has Board of Directors on which no federal person can sit.
If the charter is the state charter not a federal charter and if it has local support and so forth, but one of the points that is most persuasive to me is that in the same Act, in setting up the job core, the Congress specially said that the Tort Claims Act would apply to members of the job core.
Now, it is incredible to me that Congress would have been tended the Tort Claims Act to apply to the job core and felt that it had to say so, but would have felt that the community action program where it sent such pains to make this -- to only allow money to be given to local programs, that there people would be employees of the government without saying a word about it.
And also as to the job core, you will notice that there is a tick of which federal employment benefits will apply as to the CAA programs, there is nothing like that.
Congress obviously did not intend these people to be federal employees.
Chief Justice Warren E. Burger: If you want to save time, you better begin saving Mr. Sachse.
Mr. Harry R. Sachse: Well, I will say one more thing and then I will sit down and that is that the Court of Appeals found as a fact that there was not the day-by-day control that would make for a useful federal responsibility and the Board of Directors of these programs are Blue Ribbon Boards in the sense that it is local elected officials, local business people and the members of the poor and that is where the liability ought to be.
They should be responsible for having proper insurance.
They should be responsible for making sure the activity is carried out right and if they do not that they should be personally liable for it and that way you can keep these accidents from happening, but by putting responsibility on Uncle Sugar in Washington, it will mean locally there is no responsibility.
Chief Justice Warren E. Burger: Thank you Mr. Sachse.
Argument of William E. Pfau, Jr.
Mr. William E. Pfau, Jr.: Mr. Chief Justice and may it please the Court.
In 1964, the administration in Congress declared war on poverty in the United Sates.
The Economic Opportunity Act was at that time enacted.
The Economic Opportunity Act was an ambitious program which included, among other programs, the community action program.
This was a particularly unique approach that Congress was taking in its war on poverty to try to get to the impoverish people on a local level.
They set up guidelines in the statute for the setting up of such a community action program.
They set up also the Office of Economic Opportunity of Government, a federal agency.
This an exhibit in the case, shows some of the suggestions necessary for organizing a community action agency.
A Community Action Agency which uniquely, must be uniquely constituted and by the creation of this definition, Congress caused this community action agencies to be set up through out the country.
The major basic difference with Community Action Agency and the ordinary charitable agency in its constitution was that it was required to be governed by a board made up of one-third local public officials, one-third representatives of the poor to be served, democratically elected and one-third representatives of the community.
Justice Lewis F. Powell: (Inaudible) the Board Members elected?
Mr. William E. Pfau, Jr.: The public officials were either the chief public official in the community are his appointee and then certain other public officials selected by him.
A complex process that --
Justice Lewis F. Powell: Would this be the mayor for example?
Mr. William E. Pfau, Jr.: The Mayor of the City of Warren in this instance and the County Commissioner, yes, Your Honor.
Justice Lewis F. Powell: The Corporation authorizes the Chief Executive Office of the City to appoint the said members of the Board?
Mr. William E. Pfau, Jr.: This Corporation, as the affidavits filed by the respondent show and especially that of Mr. Brekcenwich (ph) who was at the outset, one of the founders and was an attorney who helped in the setting up of the corporation.
This corporation was created and set up for the sole and special purpose of qualifying as a community action agency.
The charter specifically provided and followed the numerous guidelines for setting up community action agency, as to the Board the by-laws and so forth and it was set up in just that fashion, yes, Your Honor.
Justice Lewis F. Powell: I am still curious, perhaps it in the record, but I did not observe it.
Well, how many members of the board are they and how were they chosen?
Mr. William E. Pfau, Jr.: Well, that I do not know other than to say that --
Justice Lewis F. Powell: Is there a copy of the charter in the record?
Mr. William E. Pfau, Jr.: A copy of the charter is filed.
Justice Lewis F. Powell: It is not in the appendix, is it?
Mr. William E. Pfau, Jr.: Yes, Your Honor.
It is attached to the affidavit which we filed of Mr. William McClain who was then City Solicitor for the City of Warren.
Justice Lewis F. Powell: Would that be an answer to my question?
Mr. William E. Pfau, Jr.: I am not sure that it would.
I am not sure that it is enough much detail.
Justice Potter Stewart: The articles of incorporation in page 32.
Justice Lewis F. Powell: (Inaudible) I will.
Mr. William E. Pfau, Jr.: Now, it is of the utmost importance that it be recognized that this was not a local agency in any ordinary sense of the word.
This was a local agency set up to act as an agency of Congress, of the Office of Economic Opportunity to carry out the purposes of the Act.
Now, it has been suggested by petitioner that instead of being a corporation acting primarily as an instrumentality of the United States, this agency was a contractor with the United States.
The Solicitor General indicates that you should look to the Act to interpret this situation.
Section 2795 of the Economic Opportunity Act, clearly makes a distinction between grantees and contractors.
The affidavit of Wendell Verduin does not say that this organization was a contractor, but rather that it was a grantee.
There are federal regulations, provisions about 80 some pages of them applying to these community action agencies and Code of Federal Regulation Number 1026 distinguishes between contractors and grantees.
Contractors must bid for the contracts and so forth.
This clearly is not under the definitions in the Act and in the Code of Federal Regulations, a contractor with the government as has been the major contention of the government.
Furthermore, contract --
Justice William H. Rehnquist: That does not necessarily make it in an instrumentality or agency of the United States though, does it or a corporation primarily acting as such?
Mr. William E. Pfau, Jr.: Not necessarily, but there has not been any real contention that it was not prior to this and all of the facts and circumstances would indicate that this was a corporation acting primarily as an instrumentality of the Untied States.
Justice William H. Rehnquist: But that is really what you have to prove, is it not, not simply negative effect that it was a contractor?
Mr. William E. Pfau, Jr.: Yes, Your Honor.
The contractor is an exception and as Your Honor pointed out, in the Logue case, at the very outset of the case, there was in that case a contract.
There is no contract in any ordinary sense here under the common law.
A contract under the common law is most simply defined in American Jurisprudence 2d is a legally enforceable promise.
This promise was not legally enforceable.
The Code of Federal Regulations provides that the Office of Economic Opportunity could unilaterally and peremptorily terminate assistance.
They do not save reach the contractor in the contract, terminate assistance to any community action and agency and from that termination, the ultimate appeal was to the director of the agency itself.
So that in the ordinary sense of the term there was no contract.
Now, the question is, was this a corporation acting primarily as an instrumentality of the Untied States.
The Congress in the Federal Tort Claims Act had various considerations, various language which the considered which would have limited that portion of the Act, corporations acting primarily as instrumentalities of the United States to federal corporations and that sort of thing as suggested by Mr. Sachse.
They decided not to so limit it and left the language unlimited.
Now, in this case, you have a corporation which was enacted for the -- was created for the sole purpose of getting federal funds, and never received a dollar from anyone else.
The only other contributions it received were in-kind services and it might be noted at this point, the deposition of Mrs. Ellen Stanton who was the person employed by the Westlawn Neighborhood Center in-charge of this outing.
In that deposition she said that the driver of the car filed what they call an in-kind slip, in other words, he was acting as an employee of the particular agency at the time of this accident.
That really is not an issue here, but the questions of the Court have put it to some extent an issue and Mr. Sachse’s comment that he was not an employee is I believe not correct.
Chief Justice Warren E. Burger: Do you suggest that this young driving the car was in essentially the same standing and position as the driver of the bus that would be furnished by the local bus company as a contribution to the program?
Mr. William E. Pfau, Jr.: Yes, Your Honor, This --
Justice Thurgood Marshall: The man who came down the street and got into the line of cause would be in the same position?
Mr. William E. Pfau, Jr.: No, Your Honor, in this instance --
Justice Thurgood Marshall: Why not?
Mr. William E. Pfau, Jr.: Perhaps I do not understand.
Justice Thurgood Marshall: You say that this man is an employee.
What does he have to show that he is an employee?
Mr. William E. Pfau, Jr.: What he has is this, Your Honor.
He signed a slip which was filed with the agency, indicating that he was acting as an employee and rendering an in-kind service to the Warren-Trumbull Council.
Justice Thurgood Marshall: Would that apply too for the car?
Mr. William E. Pfau, Jr.: I do not know.
That does not appear in the record.
Justice Thurgood Marshall: He will say, he could deduct it from his income tax?
Mr. William E. Pfau, Jr.: [Laughter] Well, I do not -- That might well be.
The record is silent on that Your Honor.
Justice William H. Rehnquist: But that turns it upside down, does it not?
Ordinarily an employee gets paid something.
Here you are saying that he contributed something?
Mr. William E. Pfau, Jr.: Correct.
There is an 80/20 set up on these corporations, 80% of the funding is to be in cash from the United States.
The other 20% is supposed to be locally furnished.
I think it is in part a fiction, but they do keep track of any employment activity that any one does on behalf of the agency and file in-kind service slips, in other words and then they put on those in-kind service slips, they attached a value and in the report to the Office of Economic Opportunity, those are given a dollar value to make up this 20%.
Justice William H. Rehnquist: But what you are saying is not that this fellow got paid something and was therefore an employee, but that he paid something and was therefore an employee?
Mr. William E. Pfau, Jr.: Well, in this instance there were two buses which would be used.
One of the buses was not available.
Two buses owned by the agency.
One of the buses was not available so two cars were used in this fashion and the man in effect made a donation of his services to the agency, in other words, he volunteered to act as an employee of the agency --
Justice William H. Rehnquist: Now, to say you donate your services does not make you a volunteer to act as an employee?
Ordinarily an employee is somebody who gets some benefit from his work?
Mr. William E. Pfau, Jr.: That is true, but I do not believe that that excludes the possibility of this man being an employee.
At any rate that is not the question now before the Court.
That is a question that might require factual determination ultimately by the trial court.
Justice Harry A. Blackmun: Has there been an action against the driver of the automobile?
Mr. William E. Pfau, Jr.: The record is silent on that, Your Honor.
For Your Honor’s information, the driver of the automobile had $12,500.00 in insurance coverage and the covenant not to sue was taken in that respect.
That hardly being adequate compensation for the loss of a young man’s right arm at the shoulder.
Chief Justice Warren E. Burger: Under the Sixth Circuit holding in your view of the case, if on this outing, one of the boys or girls had been drowned while swimming in the lake, assuming they went swimming on the picnic, would there be in you view a cause of action against the United States for not furnishing adequate supervision to see that no one drowned?
Mr. William E. Pfau, Jr.: If there were such factual basis, yes.
Yes, assuming that, surely, it would --
Chief Justice Warren E. Burger: Or if they started a little league baseball team and one of the boys with the bat got hit in the eye by the pitcher’s throw, cause of action against the United States?
Mr. William E. Pfau, Jr.: Under the Ohio Law, of course there is a substantive risk of that sort thing, but absent that, the agency, it is our position that the activities of the Warren-Trumbull Council are just as much activities of the United States as activities of the Office of the Economic Opportunity or any other Federal agency that it is within the definition a Federal Agency.
Chief Justice Warren E. Burger: These two buses that you described which are owned by the local council, suppose there had been a serious accident on one of those, same result, the United States is responsible?
Mr. William E. Pfau, Jr.: Yes.
Of course, the agency might hire independent buses, Greyhound or something like that, charter them and there would be no such responsibility, but as long as they are being operated by employees of the agency yes, Your Honor.
That is our position and --
Justice Thurgood Marshall: If we find that this young man was an employee rather than independent contractor, he just donates his services?
Mr. William E. Pfau, Jr.: It is our position, Your Honor that the agency --
Justice Thurgood Marshall: What hold did the Federal Government have over him?
Mr. William E. Pfau, Jr.: They told him when to leave, what route to follow.
They had the same control as any other Federal Agency sponsoring an outing.
Justice Thurgood Marshall: I submit that in other agency, if they tell you to do something, you do not do it, you get fired.
What control do they have over him, not to take his services?
Mr. William E. Pfau, Jr.: Correct, not to take his services to have some else --
Justice Thurgood Marshall: Would it break his heart, would it not?
Mr. William E. Pfau, Jr.: [Laughter]
Justice Thurgood Marshall: I just do not see this man volunteered the services and in this later date, you find that he is an employee?
Mr. William E. Pfau, Jr.: Well, that I respectfully submit is not an issue before this Court.
Justice Thurgood Marshall: Does the Tort Act say employee?
Mr. William E. Pfau, Jr.: The Tort Act says --
Justice Thurgood Marshall: That word?
Mr. William E. Pfau, Jr.: The Tort Act says that employees of a Federal Agency are employees of the United States and the issue --
Justice Thurgood Marshall: Well, all the children that were in that bus, would they have any action against the government?
Mr. William E. Pfau, Jr.: Yes.
Justice Thurgood Marshall: Have they sued?
Mr. William E. Pfau, Jr.: To my knowledge none of the others were hurt.
Justice Thurgood Marshall: Well, if they had been hurt, they would have a right of action too?
Mr. William E. Pfau, Jr.: Yes, Your Honor.
Justice Thurgood Marshall: And that would go to everybody in that caravan?
Mr. William E. Pfau, Jr.: Yes, Your Honor.
If they do not have that protection -- these agencies were set up in such a way that they were immensely controlled by federal guidelines.
Justice Thurgood Marshall: You say, they are immensely controlled, what are you going to do with the Court of Appeals finding that they were not?
Mr. William E. Pfau, Jr.: Day-to-day the Court of Appeals --
Justice Thurgood Marshall: Yes, day-to-day is a magic word in this Act.
Mr. William E. Pfau, Jr.: Alright.
Justice Thurgood Marshall: Magic series of words, did not the Court hold that?
Mr. William E. Pfau, Jr.: The Court of Appeals, if I may read from its opinion, the portion that was not read by Mr. Sachse, he did not read this portion, “On the underhand by withholding --
Justice Potter Stewart: What page?
Mr. William E. Pfau, Jr.: Oh! I am sorry.
Justice Potter Stewart: Thank you.
Justice Thurgood Marshall: What did the (Inaudible)
Mr. William E. Pfau, Jr.: Moreover, the requirements imposed on his local agencies by statute and regulations are not concerned with the details of the day-to-day operations of the agencies or the programs which they carry on in the Warren-Trumbull County area.
They are more in the nature general instructions to be followed in order to assure that certain policies which Congress have adapted in establishing OEO are respected and adhered to.
On the other hand, by withholding approval of its operations, OEO had for all intents and purposes, put WTCEO out of business for a period of time and had in October, 1972 selected a new chairman of its board who completely reorganized the agency.
These are not powers usually possessed by a principal in dealing with an independent contractor.
Justice Thurgood Marshall: Well, I think that the principal usually if he says, “I will give you money providing you do thus and so and you agree to do thus and so and you stop doing thus and so, you stop getting the money?”
Mr. William E. Pfau, Jr.: Correct and if there is a contract, you have a right of action to claim that you did do thus and so in substance.
Now, Mr. Justice --
Justice Lewis F. Powell: Supposing the Mayor of Warren had been driving the car, would the young man injured have the same cause of action that you are depending here?
The Mayor was one of their directors, as the community action agency.
Mr. William E. Pfau, Jr.: That was a point made by the District Court.
Justice Lewis F. Powell: The District Court, that is right.
Mr. William E. Pfau, Jr.: And the Mayor of Warren or John Jones or anyone else, if he were acting on behalf of the Warren-Trumbull Council was in our contention a temporary perhaps employee of the Untied States Government and the Federal Tort Claims Act specifically provides that though the employee be only temporary, if he is on an activity of the Untied States Government, he is an employee of the United States and covered by the Federal Tort Claims Act.
Yes, Your Honor.
The Mayor could very readily wear two hats as Corporate President and many people that work for more than one person on different occasions.
Chief Justice Warren E. Burger: Is there some provision in fact that members of the Board cannot be employees?
Mr. William E. Pfau, Jr.: Yes, Your Honor.
That members of the Office of Economic Opportunity cannot be employees to prevent political interference and that sort of thing.
The employees, we believe that this activity, the Warren-Trumbull Council of the OEO was an instrumentality or agency of the United States and if so, that makes this difference.
If it is a corporation, acting primarily as an instrumentality or agency of the United States, it would be assumed that that corporation would control largely the day-to-day activities of its employees.
Justice William H. Rehnquist: Mr. Pfau, is there not a certain incongruity of Mr. Sachse's right, that Congress' basic intend and I am talking about instrumentality of the United States' Corporation, he says with the Reconstruction Finance Corporation, The Commodities Credit Corporation, all kinds of national operations based in Washington and then you say this too is that and it is one of apparently 800 similar entities, each localize in a small part of one of the states?
Mr. William E. Pfau, Jr.: There is no limitation in the Act to corporations of the nature pointed out by Mr. Sachse and the Congress specifically considered limiting the Act to such corporations and thought not to do so.
Now, if the effects of this case are looked at, you will see this corporation is acting on a local basis as an agency of the United States.
It is acting primarily for the United States.
It is in effect one of the platoons that is enlisted by Congress to carry on the war on poverty.
They chose to set it up in this fashion.
It was the Congressional Act that established this.
In addition to this, they have all encompassing regulations that make this appear to be a Federal Agency.
For instance, their books and records must at all times be available and open to the public.
All of their meetings must not only be open to the public, but any member of the public must recognized and heard.
Justice John Paul Stevens: Is there anything in the regulations that require these organizations to carry liability insurance?
Mr. William E. Pfau, Jr.: No, there is not, Your Honor.
There is not and it has been suggested that the job core members were specifically recognized by Congress to be covered by the Federal Tort Claims Act and it is significant that job core was set up in the same Economic Opportunity Act and that its members were to be recognized as covered by the Federal Tort Claims Act because the job core members of course are not corporations.
They are individuals and furthermore it was contemplated that the members of the job core might be working in all sorts of different activities, notwithstanding that.
That activity, the Congress specifically said, those persons who would not be covered with the corporation provision were to be members of the Untied States for Federal Tort Claims purposes.
Chief Justice Warren E. Burger: In rules of construction of statutes, what inferences do you suggest are to be drawn from that?
Mr. William E. Pfau, Jr.: From the construction of the statute, it would appear that organizations not contractors with the Untied States were to be covered in the intent of Congress by that provision.
Chief Justice Warren E. Burger: On the other hand it shows that when Congress wanted to create liability that it did so explicitly?
Mr. William E. Pfau, Jr.: It did so explicitly with job core members because it might otherwise, they would be considered loaned servants or that sort of thing on loan to various industries that they might be working at and --
Justice Potter Stewart: The job core itself is not a corporation, is it?
Mr. William E. Pfau, Jr.: The job core, I think that is correct, Your Honor.
It is --
Justice Potter Stewart: It would be covered with by the general language of the federal Tort Claims Act in the absence of a specific provision making it --
Mr. William E. Pfau, Jr.: The job --
Justice Potter Stewart: -- or as your claim is that your client is a corporation and under the general language of the Tort Claims Act, a corporation primarily acting as an instrumentality or agency of the United States?
Mr. William E. Pfau, Jr.: Yes, Your Honor and rather remarkably --
Justice Potter Stewart: The job core simply could not and would not fit into that?
Mr. William E. Pfau, Jr.: Well, the job core members were appointed directly by the Office of Economic Opportunity.
The rather remarkable thing is this phrase “primarily acting as an instrumentality of the United Sates” has never come for consideration by this Court before.
It would appear that that is a language that should be given its plain meaning.
Instrumentality is defined by Webster as a quality of state of serving as a means or intermediary determining or leading to a particular result, something by which an end is achieved, something that serves as an intermediary or agent through which one or more functions of a controlling force are carried out.
Chief Justice Warren E. Burger: There been a good many decisions defining instrumentality of the United States?
Mr. William E. Pfau, Jr.: Astonishingly, there have not been.
Chief Justice Warren E. Burger: Well, not in this Court (Inaudible)
Mr. William E. Pfau, Jr.: Astonishingly, Your Honor there have not been.
There have been a few cases where that phrase has been used, but the cases have not come to grips with saying what is -- how is this to be defined.
The Court says it is an instrumentality.
It is not, but we have cited in our brief the Law Edition 3rd annotation covering this entire subject and the cases are unbelievably absent in any real coming to grips with that term.
No Court is said what an instrumentality should be for instance, that it should not be, have its plain, be given its plain meaning.
Given that plain meaning, it seems clear that this corporation was an instrumentality and these corporations which were raised were instrumentalities.
Even if they were not, a significant case was decided.
In Cannon against the United States, Mr. Justice Blackmun wrote the opinion and outlined independent contractor relationship.
In that case, the Federal Cartridge Corporation had a contract to maintain an arsenal and there was not any question in that case, but there was a contract.
Nevertheless, notwithstanding the presence of the contract, the Court considered the amount of control that was exercised.
In that case, respondent respectfully submits, had there been the same control over the Federal Cartridge Corporation as there was over this community action agency, had there been as there is here some 10 or 15 page (Inaudible) of guideline and instructions which are on file with the Court, a yellow stack this high, had there been 80 or 90 pages of Federal Regulations and 30 or 40 pages of statute controlling just how everything should be controlling not only from the governing board.
Suppose in Logue, the federal statute for qualifying non-federal prisoners -- to house federal prisoners required that the county or the state have on its governing board one-third representatives of the prisoners to be in Logue that they required the records to be public that anyone to be allowed to hear.
Is that not in essence a public sounding corporation when you have to have all of those elements to qualify?
Now here --
Justice William H. Rehnquist: But you can have public corporation, can you not, without it being an instrumentality of the United States or acting on behalf of the United States?
There are many, I presume, public local corporations in the State of Ohio?
Mr. William E. Pfau, Jr.: That is perhaps true.
I do not know.
In addition, the actual control that was exercised here has even broader, the counsel suggested the Board of Directors, the governing board discharged Mr. Peterman, not so.
Mr. Peterman’s deposition -- the Board in question, the Board was dissolved?
When was it?
The Board was dissolved on August 14 and the communication we have received from the regional office which notified us as of that date, that Board was no longer considered a functional board.
And who dissolved it?
The regional office.
The question; in Chicago?
So the Board was discharged and dissolved and subsequently Dr. Sidney Roberts, a Young’s Town University professor --
Justice Thurgood Marshall: The United States government official dissolved a state corporation?
Mr. William E. Pfau, Jr.: They simply did it.
They wrote to them and they said --
Justice Thurgood Marshall: You know what they said was no more money?
Mr. William E. Pfau, Jr.: They wrote and said your Board of governing -- this what they did.
Maybe they did not have the power to do it, but they did it and that was the power they took upon themselves.
Chief Justice Warren E. Burger: They did not -- if the regional director did not have the power, is that not quite significant, is that not something the Court must inquire into?
Mr. William E. Pfau, Jr.: Perhaps the Court must inquire, but it is the fact as to how this agency, this particular agency was run and governed that is controlling in this particular case on the motion for summary judgment and we respectfully submit that we have established here by these affidavits and depositions that this was a corporation, acting primarily, actually exclusively as an instrumentality of the United states.
Chief Justice Warren E. Burger: Thank you Mr. Pfau.
Mr. Sachse you have two minutes left.
Rebuttal of Harry R. Sachse
Mr. Harry R. Sachse: I have nothing else unless the Court has questions.
Justice John Paul Stevens: There is a question I would like to ask you if I may.
If I understand your theory correctly, this organization would not have sovereign immunity, the WCTEO?
It could be sued directly?
Mr. Harry R. Sachse: It would not through the United States, whether it is so much as State Corporation I suppose would be a question of local Ohio Law.
Justice John Paul Stevens: I am just thinking of the impact of a judgment against this organization if it is entirely funded by the United States, I suppose ultimately the judgment will be paid by the Untied States, if it were to be paid at all, is that right?
Mr. Harry R. Sachse: I think it would depend on whether the corporation has funds in its accounts and also whether the suit was brought against the corporation as a corporation or against the individual directors who failed to do what they --
Justice John Paul Stevens: In theory of this complaint, the suit would go against the corporation, would it not?
Assuming they have named a different defendant, to the Untied States.
If your theory is correct, what you are saying is, what the point they should have done is sued the corporation as a corporate entity, is that not what your position is?
Mr. Harry R. Sachse: I do not want to put myself in the position of telling the plaintiff what he should do other than (Voice Overlap) United States.
Justice John Paul Stevens: Assuming that (Voice Overlap) was committed, that no one is responsible?
Mr. Harry R. Sachse: No, it is my position that --
Justice John Paul Stevens: (Voice Overlap) was committed by the corporate entity?
Mr. Harry R. Sachse: That these vehicles should be ensured and that the corporate entity should be insured and that if the Board of Director--
Justice John Paul Stevens: (Voice Overlap) corporation?
Mr. Harry R. Sachse: I think that will be correct and if the Board of Directors had failed to provide adequate insurance then the proper defendant may be the Board of Directors.
Justice Potter Stewart: If the corporate entity were ensured, the defendant in this lawsuit would not be the insurance company, it would be the corporate entity?
Mr. Harry R. Sachse: That is correct.
Justice Potter Stewart: And in fact that the --
Mr. Harry R. Sachse: I get a little confused on --
Justice Potter Stewart: The fact he was not insured, but that does not detract from the appropriateness of the Corporate Entity being the defendant in this lawsuit and the further fact is that it is only funds are funds that came from the federal government?
Mr. Harry R. Sachse: We actually do not know whether the corporate entity was insured.
Justice Potter Stewart: Well, you told us earlier that it was not, I thought or implied?
Mr. Harry R. Sachse: I do not think so.
The vehicles were not.
Justice Potter Stewart: Well, whether or not insured, has nothing to do with the appropriateness of the defendant in that lawsuit?
Mr. Harry R. Sachse: That is correct.
Chief Justice Warren E. Burger: It was your friend who suggested the inadequacy of the insurance carried on the particular vehicle is what entered in the decisions, tactical decisions about the lawsuit?
Mr. Harry R. Sachse: Yes, sir.
Justice Potter Stewart: May I ask you one other question before you sit down.
There is no issue in this case at all, is there as to whether the driver of the car was an employee?
The question is whether this community action was a corporation primarily acting as an instrumentality or agency of the United States, is it not?
Mr. Harry R. Sachse: I think that is correct.
Justice Potter Stewart: Thank you.
Chief Justice Warren E. Burger: Thank you gentlemen.
The case is submitted.