LEWIS v. BT INVESTMENT MANAGERS, INC.
Legal provision: Article 1, Section 8, Paragraph 3: Interstate Commerce Clause
Argument of Erwin N. Griswold
Chief Justice Warren E. Burger: The case is submitted.
We'll hear arguments next in Lewis against BT Investment Managers.
Mr. Griswold, you may proceed whenever you are ready.
Mr. Erwin N. Griswold: May it please the Court.
This case is here on appeal from a three-judge District Court in the Northern District of Florida.
It is a constitutional case in the Commerce Clause area relating to banks, involves specifically the validity of two Florida statutes dully enacted by the Florida Legislature, designed to prevent activities in Florida by subsidiaries of out-of-state bank holding companies.
The first of these statutes is Section 659.141 of the Florida statutes as amended effective in December 1972.
This is set out in full in Appendix A at the close of the appellant's brief.
That's the red brief.
The appendices are separately paginated but I think it can be easily found at the beginning of Appendix A.
The part which is relevant in this case is at the beginning of the section, on the first half of page A1, except it's provided in Subsection 3 “No bank, trust company, or holding company, the operations of which are principally conducted outside the State, shall acquire, retain, or own directly all or substantially all the assets of, or control over, any bank or trust company having a place of business in the State where the business of banking or trust business or functions are conducted.”
That's the first part.
“Any bank or trust company, or acquire, retain or own all or substantially all of the assets of or control over any business organization having a place of business in the State, where or from which it furnishes investment advisory services in the State.”
Now, that statute was amended in 1972, the reading in its present form.
Prior to that, it had been applicable only to the rendering of investment services to banks, but the restriction of the banks was taken out in December 1972.
It will be seen that this bars an out-of-state bank holding company from one owning any bank or trust company, having a place of business in the State.
And it also bars an out-of-state bank holding company from owning a subsidiary having a place of business in Florida from which it furnishes investment advisory services.
The second of the Florida statute is Section 660.10.
And that is in Appendix B at the close of the appellant's red covered brief and the essential part of it is that, “No one except a bank and trust company incorporated under the laws of the State and having trust powers, except the National Bank located in the State and having trust powers, can exercise any of the following powers which include acting as executive, guardian, trustee, trustee in various situations, receiver assignee, fiscal agent and so on, debarring anybody but Florida corporations from conducting the trust business in Florida.”
You'll see that fits in with the corresponding provision in the other section.
Justice William H. Rehnquist: Mr. Griswold, do you think that the effect of these statutes would bar an individual who did not wish to limit his liability from going into Florida and rendering this suit?
Mr. Erwin N. Griswold: Not, not at all.
It's only applicable, an individual would have to incorporate in Florida but he -- he could not --
Justice William H. Rehnquist: What if he didn't want to incorporate at all?
Mr. Erwin N. Griswold: He -- he -- well, I have to read the -- the language of the statute to see just how it applies to an individual.
Justice William H. Rehnquist: I -- I was looking at page 82 of your appendix and on Section 2 there it says, “Referring to the business organization control in any manager in any manner of the election of a majority, the directors, or trustees of the bank, trust, or holding company.”
And then Section 1 before that says, “The business organization directly or indirectly acting to one or more person's own controls as part about 25% of all the shares of any class of voting security.”
So those -- now, that language to me connotes a corporation.
Mr. Erwin N. Griswold: And -- and Section 660.10, and I've been looking at it, is plainly applicable only to -- to corporations.
It does not apply to individuals and you could have private individuals acting as trustees in -- in Florida in the trust business.
And the section has no relation to it.
Justice John Paul Stevens: Mr. Griswold, before you leave the statutes, may I -- do I correctly understand that 659.141 would prohibit the formation of a subsidiary to engage in the investment advisory business, whereas 660.11 would permit an out-of-state bank to own a local subsidiary if it's provided.
We got a Florida charter (Voice Overlap) --
Mr. Erwin N. Griswold: As far as the Florida statute is concerned, it -- it would.
Justice John Paul Stevens: Yes.
Mr. Erwin N. Griswold: There are other --
Justice John Paul Stevens: I have some question as to whether we really have to decide anything about 660. -- the second statute because I don't see that they ever tried to do that.
Mr. Erwin N. Griswold: I -- I agree with you entirely, Mr. Justice, however, the court below did grant an injunction against the enforcement of 659.141 and entered a declaration that Section 660.10 was unconstitutional.
If either of those stand, the result is essentially the same with respect to trust companies.
But I think the operative statute is 659.141.
The court below held that, first to the statutes, was unconstitutional as applied to trust and investment advisory services as an interference with interstate commerce.
In the Court's words, “This parochial legislation must be deemed per se unconstitutional.”
It enjoined the enforcement of the statute except as to the ownership of banks.
It also gave a declaratory judgment that Section 660.10 is invalid as violative of the Commerce Clause.
Justice William H. Rehnquist: The District Court had originally abstained, had it not?
And then been reversed by the Fifth Circuit?
Mr. Erwin N. Griswold: And they've been -- been reversed by the Fifth Circuit and they went back and they then decided the case.
It's our contention that neither of these Florida statutory provisions violates the Commerce Clause as understanding of the effect of that clause has been developed in the teachings of this Court.
As this Court recently said in its decision in Hughes against Oklahoma just last April, the case as defining a scope of permissible state regulation in areas of congressional silence, reflect an often controversial evaluation of rules to accommodate federal and state interest.
And that is what we have involved in this case.
The cases show that for the purposes of applying the Commerce Clause as a limitation on state power, the definition of interstate commerce while broad is not without limits.
One of the cases which we discussed in our brief is United States against the Oregon State Medical Society which found that local personal services were not interstate commerce for the purpose of the claim involved in that case.
Similarly, I would point out that this case does not involve movement of goods across state lines as in Philadelphia against New Jersey, the case upon which the court below primarily relied, or in Hughes against Oklahoma, nor does it involve any restrictions on the means of transportation of goods, such as railroads or trucking companies or airlines.
In this case, the subject of commerce is the provision of a personal service on a local basis.
The next is with interstate commerce, is much less obvious and proof of the substantial effect on interstate commerce is required before a straight -- state restriction can be struck down.
But there is no such showing of a substantial adverse effect on interstate commerce here.
No direct evidence of any sort was presented on that matter in the trial court.
The case was tried entirely on a stipulation which is set out in full text on pages 22 to 25 of the appendix.
The court below hypothesized the necessary effect on interstate commerce.
The court expressly acknowledged that there was no direct evidence of that effect in this case.
The appellees were the plaintiffs in the court below, and it is difficult, if not impossible, to conclude that they have met their burden of proof on this element.
We have discussed a number of cases in our brief but the case which is closest to this, I believe, is the decision two years ago in Exxon Corporation against the Governor of Maryland.
It's appropriate, I think, to point out that the court below didn't even discuss the Exxon case.
It didn't even cite it in its opinion, though it is, I think, clearly the closest case.
It involved a Maryland statute which prohibited all producers and refiners of petroleum products from operating retail service stations in Maryland or from discriminating between customers in Maryland.
Now, there are no producers or refiners of petroleum products in Maryland which everyone knew.
It is suggested in the other side of the brief here that this statute is bad because it is discriminatory on its phase whereas the Maryland -- Maryland statute was not.
But this Court said in the Hughes against Oklahoma case last spring, that a statute must be determined as to whether it is discriminatory on its face or in its operation and effect.
And the impact of the statute in the Exxon case was entirely on out-of-state refiners and producers which operated service stations in Maryland.
This Court noted that statute did not totally block interstate marketers of petroleum from -- from entering the Maryland market and this statute does not totally block extra state corporations, individuals, businesses, other than banks and bank holding companies from entering the -- the Florida market.
Justice Byron R. White: How do you enter the Florida market into these statutes?
How would a New York bank enter the Florida market?
Mr. Erwin N. Griswold: A New York bank can't enter the market under the -- under the Paine, Webber, Jackson & Curtis can open an office and give investment advice in New York.
Standard & Poor's which puts out much investment service can open an office and give investment advice in New York.
Justice Byron R. White: The bank --
Mr. Erwin N. Griswold: Anyone --
Justice Byron R. White: -- the banks and trust companies, especially trust companies who are usually in the business of giving investment advice --
Mr. Erwin N. Griswold: Any --
Justice Byron R. White: -- they can't -- they can't enter the market at all.
Mr. Erwin N. Griswold: So are Paine, Webber --
Justice Byron R. White: In any -- yes, but in any -- in any way, they can't enter the market.
Mr. Erwin N. Griswold: It is quite true.
The effect of this statute --
Justice Byron R. White: Either through a subsidiary or directly.
Mr. Erwin N. Griswold: Either directly or -- or through a subsidiary, they cannot enter this --
Justice Byron R. White: Investment advisory business.
Mr. Erwin N. Griswold: -- this -- this investment advice or --
Justice Byron R. White: Market.
And -- and that -- that also means they can't act as a trustee?
Mr. Erwin N. Griswold: And the other part of the statute means they cannot act as a -- as a trustee.
Justice Byron R. White: That is a -- and that -- that normally includes giving investment advice.
Mr. Erwin N. Griswold: It often includes giving investment advice.
As in Exxon, the statute here does not prohibit the interstate movement of articles or goods.
It doesn't prohibit the flow of fiduciary services into or out of Florida.
It limits in-state outlets when owned by out-of-state banks, trust companies and holding companies just as the Maryland statute in Exxon, barred in-state outlets only to produces and refiners all of which were out of state.
Similarly, Section 660.10 by itself --
Justice John Paul Stevens: Mr. Griswold, could I ask you a question about the Exxon case?
There, the State at least asserted the reason whether one agrees with it or not for discriminating against the refiners and ownership.
What is the reason that Florida asserts for treating out-of-state banks differently than, say Paine Webber or other types of businesses that might want to open investment advisory services, if any?
Is there any reason for it?
Mr. Erwin N. Griswold: The -- it is -- it is -- it wasn't too clear in Exxon.
It was asserted but there were --
Justice John Paul Stevens: Well, they --
Mr. Erwin N. Griswold: -- other --
Justice John Paul Stevens: -- the -- at least the legislature had some hearings and -- and came to a conclusion that ownership of retail stations by refiners gave rise to certain kinds of discrimination that they thought -- that the legislature --
Mr. Erwin N. Griswold: And i think it is the --
Justice John Paul Stevens: -- thought it was bad.
Mr. Erwin N. Griswold: -- I think it is the -- the problem that all of the States have had over the years of trying to find a way to maintain, control over their own banking and economic facilities in such a way that their assets will not be drawn away by out-of-state operations.
The States be led while the money goes elsewhere.
It is -- it is in very large measure a -- a --
Justice John Paul Stevens: Trying to protect local capital, is that right?
Mr. Erwin N. Griswold: No, protect local citizens, protect local people who may want to borrow money to buy houses and find the money as going to be lent on the Euro or Dollar market --
Justice John Paul Stevens: But is there a greater danger --
Mr. Erwin N. Griswold: -- with very high rates of interest.
Justice John Paul Stevens: But is there a greater danger of the outflow of money from Florida if the investment advisory service is owned by Paine Webber rather than some big bank?
I don't see the difference.
I don't see how your explanation justifies that kind of a distinction.
Mr. Erwin N. Griswold: The whole -- the -- the history of this country is filled for 150 years of the struggle between national banking and local banking.
I think the history book show that a Chief Justice of this Court attained prominence because he supported President Jackson in opposition on behalf of the State of Maryland to the operations of the Bank of the United States.
This is part of that same --
Justice Byron R. White: But a bank -- a bank is kept out of Florida but an investment banker isn't.
Mr. Erwin N. Griswold: That is correct.
Justice Byron R. White: And they both give investment advice and --
Mr. Erwin N. Griswold: They both give investment advice but --
Justice Byron R. White: And Mr. -- would this -- you -- would -- would this statute -- under the statute, could a bank, could a Florida bank, acting as a trustee and -- and giving investment services, could it buy some investment advice from a New York bank?
Mr. Erwin N. Griswold: Yes, so far as I can see.
Justice Byron R. White: Well, but I've -- I've -- then there was a New York bank doing business in Florida --
Mr. Erwin N. Griswold: No.
Justice Byron R. White: -- selling investment advice.
Mr. Erwin N. Griswold: No, it's not -- it doesn't have an office in Florida but --
Justice Byron R. White: Well, you mean -- you mean under the statute, New York banks may give investment advice to Florida citizens?
Mr. Erwin N. Griswold: They can do it by mail or telephone, and they can send representatives into the State, as long as they don't open an office and conduct business in the State.
Justice Byron R. White: But they're acting -- they may -- could they act as trustee of assets located in Florida?
Mr. Erwin N. Griswold: Not -- not without complying with Section 660.10 --
Justice Byron R. White: Yes.
Mr. Erwin N. Griswold: -- which means --
Justice Byron R. White: You have to have a corporation.
Mr. Erwin N. Griswold: -- to be -- to be becoming incorporated in Florida.
Justice Byron R. White: All right.
Mr. Erwin N. Griswold: I think it's appropriate now to -- to move on to the other aspect of the case which is the fact that we have two strings to our bow.
I've tried to argue so far that under Exxon, there is not interstate commerce here, which is adversely affected by this statute, sufficiently to require the result reached below.
But there are two federal statutes which are directly relevant.
These federal statutes are important not only because of the text of their provisions but also because they represent important policy determinations made by Congress which are relevant in determining the validity of the Florida statutes here involved.
They show that Congress made clear choices in this area, and this should not be frustrated by opening the doors to miners and sappers, to use in historical phrase, in the form of the devices involved here which, if allowed, and if allowed here soon extended, will enable out-of-state bank holding companies to do much of what they have been specifically forbidden to do by Congress.
Justice William H. Rehnquist: Mr. Griswold, before you move on.
Well, what would the District Court's decision here do to the general provisions in all of the Sunbelt States denying reciprocity of admission to the bar?
Mr. Erwin N. Griswold: I haven't the slightest idea, Mr. Justice.
They -- there isn't any question of reciprocity involved in the decision of the court below.
Justice William H. Rehnquist: But it is a common fact that the Sunbelt States simply refused to admit on -- on reciprocity where the most of the other States don't.
Mr. Erwin N. Griswold: And -- but the fact here is involving control by a State over admission to the bar, it seems to me, are historically and otherwise different factors in those involved in the admission of foreign incorporations to do business in the State, particularly in the light of the federal statutory provision to which I'm about to refer to.
The first to these statutes was the McFadden Act which was passed in 1927, more than 50 years ago.
It relates to national banks, but it says that national banks cannot have branches in a -- a State except to the extent that state banks can have branches in the State.
And it also prevents interstate branching of national banks because branches whereby that statute limited to States within which the national bank was situated.
But pressure to reach out is always found in the banking area.
That indeed is what this case is all about.
In due course, the effect of these limitations on banking including the limitations and the laws of most of the States led to the development of a new expensive device and thus, to a vast growth in the use of bank holding companies.
By creating a corporation to own multiple banks, it was possible to avoid limitations on branching not only in intrastate but across state lines across many state lines.
It was to deal with this problem that Congress passed the Bank Holding Company Act in 1956, and it contains three provisions that are relevant here.
The first of this is Section 3 (d), and that appears in Appendix C as 12 U.S.C. 1842 (d).
And it provides -- it -- it bars any bank holding company or subsidiary from acquiring any additional bank located outside of the State where the holding company's banking subsidiaries are operating unless this is expressly authorized by the outside State.
And here, we have the Florida statute which says, “We don't authorize, just what's invited by that provision.”
And the second provision is Section 4 of the Bank Holding Company Act, now found in 12 U.S.C. 1843.
It's in Appendix D at the close of the appellant's brief.
The basic provision there says, “Except as otherwise provided in this Act, no bank holding company shall acquire direct or indirect ownership or control of any voting shares of any company which is not a bank.”
And if it has said that this investment advisory and trust company services are not banks, Congress has said, “The out-of-state holding company can't own it.”
And then finally, there at Section 7 of the Bank Holding Company Act, which is in Appendix E, which broadly reserved to the States their powers to regulate bank holding companies and their subsidiaries, the last three words are “and subsidiaries thereof” as long as the state regulation is not inconsistent with the acts of Congress.
Now, thus, the basic federal statutory scheme maybe stated very simply.
“No bank holding company may own a bank outside the home state without the outside State's expressed permission.”
It does not seem to me to be too difficult to construe this to apply to bits and pieces of banks, particularly when they are owned by a bank holding company and are so closely related to managing or controlling banks as to be a proper incident thereof as the federal board -- Reserve Board has determined.
Chief Justice Warren E. Burger: We'll resume there at 1 o'clock, Mr. Griswold.
Argument of Erwin N. Griswold
Chief Justice Warren E. Burger: Mr. Griswold, you may resume.
Mr. Erwin N. Griswold: First, I would like to make a brief further answer to what in effect were two questions closely related from Justice Stevens.
This case does not involve a question of who makes a sale or what business is done.
This case involves an aspect of federalism.
The difference between Paine Webber and the appellee here is that the appellee is a bank, a bank holding company.
And the whole history of this country for 200 years shows a constant struggle on the highest political level to maintain the position of the States with respect to the handling of money.
And that's what this case is about.
This is -- both the Congress and the States have passed legislation in this area over many years, and the statutes which are involved here are statutes of that type.
Now, I was referring to the particular provisions in the Bank Holding Company Act.
The first one of which is that a bank holding company cannot own a bank in a State unless the State says it can.
The second one is that no bank holding company may -- may own any company which is not a bank, and these things are not banks, this investment advisory and it's strange to say, the trust business is not a bank.
And then, there comes -- well, through these provisions, Congress has formulated a national policy in this area.
This case would never have arisen were it not for an exception to Section 4 of the Bank Holding Company Act which is in 12 U.S.C. 1843 (c) (8) and is printed on page D2, Appendix D of the appellant's brief, and it says, “Hence, such prohibition shall not, with respect to any other bank holding company, apply to shares of any company the activities of which the Board,” that's the Federal Reserve Board, “after new notice, an opportunity for hearing has determined by order or regulation to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.”
Now, the appellees contend that in substance by this exception, Congress has undone much of which -- what it so clearly did and intended to do in the basic parts of the very same statute.
I do not think that this exception needs to be construed or should be construed to authorize any such result to authorize in effect the introduction of a new cutting edge of expansion from outside the State when the whole tenure of the statute, in its history, shows that the basic policy choice made by Congress was to protect the States from expansion by outside bank holding companies except to the extent that the State chose to authorize such expansion.
The basic policies established by Congress are clear, no bank outside the State, no subsidiary which is not a bank.
This gives color to, and helps to define the scope of the exemption given in (c) (8).
To use the words used by the Court in another text, this basic -- another context, these basic prohibitory provisions provide emanations and a penumbra which helped to determine the intent of Congress which was expressed in (c) (8).
My suggestion is that (c) (8) can be given full scope and effect by construing it to have a territorial limitation, that (c) (8) authorizes the Board to authorize a bank holding company to own a corporation which is not a bank to provide services to the bank holding company in a State where the bank holding company is authorized to own a bank.
But that it should not be construed in a wide open way to authorize the bank holding company to proceed in the other States -- all other States without a limitation.
Justice Byron R. White: Is that the -- is that the basis -- is that the construction the Board put on it?
Mr. Erwin N. Griswold: The Board has not -- the -- the Board considered this case up to the point where Florida passed the statue and then the Board said because Florida says, ”We can't go there.
We will not authorize it.”
Justice Byron R. White: Well, that's -- that's your position.
Isn't that --
Mr. Erwin N. Griswold: I believe that they --
Justice Byron R. White: -- isn't that your position?
Mr. Erwin N. Griswold: I believe that the Board has authorized some bank holding companies to have this type of subsidiary outside the State.
I'm contending the Board was wrong.
I know of no judicial --
Justice Byron R. White: Well, yes.But the Board might have -- might do this in a State that didn't prevent it.
Mr. Erwin N. Griswold: It might do it in the State which didn't prevent it.
That would --
Justice Byron R. White: And you would say that if it didn't in the State that did prevent it, it was right.
You would -- you would --
Mr. Erwin N. Griswold: If it did it in a State which --
Justice Byron R. White: -- you would say the Board was quite right in -- in denying permission here because Florida prevented it.
Mr. Erwin N. Griswold: Yes, I would say that they -- they were, but I would also say that the Board has no power under this statute if properly construed because the statute ought to be construed to authorize the Board to allow the subsidiary assisting factors only in States where the bank holding company needs those factors in order to carry out its banking business --
Justice Byron R. White: So you're --
Mr. Erwin N. Griswold: -- in those States.
Justice Byron R. White: -- so you're disagreeing with the administrative construction of the statute.
Mr. Erwin N. Griswold: Not -- its -- there never has been a clear administrative construction by way of decision --
Justice Byron R. White: But you said you thought the Board was wrong a moment ago.
Mr. Erwin N. Griswold: I -- I think that in those cases where the Board has authorized this outside of the State where there is a bank that properly considered judicial authority, I might hold that the Board was wrong.
As Justice Cardozo said in the Panama Refining case, “The meaning of the statute is to be looked for not in any single section but in all the parts together and then their relation to the end in view.”
And I would call attention to the fact that in the recent case of (Inaudible) against Boyle involving jurisdiction of appeals from the District of Columbia Court of Appeals.
The -- this Court did exactly that, yet applied a -- a territorial limitation to a statute which was otherwise quite clear.
Accordingly, we think that the judgement below was erroneous and should be reversed.
Chief Justice Warren E. Burger: Mr. Warden.
Argument of John L. Warden
Mr. John L. Warden: Mr. Chief Justice and may it please the Court.
I should point out initially that the statutory provision that Dean Griswold was just referring to, which is at D2 of the appendix of the red brief, contains no territorial limitation.
It has never been construed by the Board to contain the limitation that Dean Griswold contends should be read into it.
Indeed, until a few minutes ago, I wasn't aware that that argument was being made in this case.
And if that construction is adopted by the Court with no basis whatsoever, it will result in invalidating literally hundreds of substantial acquisitions made by bank holding companies with the approval of the Federal Reserve Board, not disturbed by any judicial proceeding for many years.
Justice Byron R. White: What do you say -- I -- I suppose you will get to it but what would you say the Board's error was in denying permission here?
Mr. John L. Warden: Well, Mr. Justice White, the Board has construed this Court's decision in Whitney --
Justice Byron R. White: Yes.
Mr. John L. Warden: -- as requiring it to give effect to state law in ruling on applications whether -- whatever the constitutionality of the state law.
In other words, it will not determine the constitutional question.
It remits the parties to the Court for that purpose which is why this case was instituted in a three-judge District Court in Florida and brought up here as it has been.
So the Board's final action was, “We would have approved or we would likely have approved this application but for the recent one, hastily enacted Florida statute --
Justice Byron R. White: But do you think the Board also -- or -- or did it or perhaps it didn't.
You don't think there's any element in the Board's decision that -- to the effect that Congress consented to this Florida's -- the kind of Florida statute?
Mr. John L. Warden: No, I do not.
The Court noted in its opinion in Whitney that the Board had at that point, considered that Section 7 of the Bank Holding Company Act permitted States to preclude the doing of business by bank holding companies entirely to preclude that form of commercial organization.
We don't have to reach that question in this case.
Of course, since Florida permits the doing of business by bank holding companies, it permits that form of commercial organization.
But I don't believe there's any indication that the Board reads Section 7 as permitting an -- and otherwise unconstitutional discrimination against out-of-state firms.
Justice Byron R. White: Well, it is if the Congress permitted it.
Mr. John L. Warden: No, I said and otherwise, and they don't read Section 7 as -- as constituting a congressional validation of otherwise unconstitutional discrimination against out-of-state firms.
I know of no suggestion to that effect in the Board's (Inaudible).
And they made no such allusion in their opinion in this case.
Secondly, I would like to note that with respect to the question of whether interstate commerce is involved in this case at all, which Dean Griswold addressed, I do not notice that contention made in the brief filed on behalf of the appellant.
And the fact that the business that Bankers Trust proposes to engage in would be conducted in interstate commerce was not disputed by Florida before the three-judge District Court and in fact was conceded.
Justice Byron R. White: Let me -- I just want to clear up one more -- one more point.
Do you think the Board has -- has addressed that either way the question of congressional consent in a --
Mr. John L. Warden: To this -- to this sort of statute --
Justice Byron R. White: Yes.
Mr. John L. Warden: -- I did not.
Justice Byron R. White: So -- so, you don't -- you can't relay on Board construction that there is no consent.
Mr. John L. Warden: Well, that is correct.
And I -- I must say I don't think that -- as I shall approach that part of the argument later that there's any need for administrative expertise --
Justice Byron R. White: I understand.
Mr. John L. Warden: -- in determining that question.
Justice Byron R. White: Yes, I know you -- I know you do.
Justice William H. Rehnquist: Well, when you say there's no need for administrative expertise, you mean you don't rely in any preemption doctrine under the Bank Holding Company Act, you simply rely on what -- or what are called reversed commerce clauses from this Court?
Mr. John L. Warden: That is correct, Mr. Justice Rehnquist.
Justice William H. Rehnquist: Because the Commerce Clause itself simply grants Congress the authority to rate late commerce among the several States.
Mr. John L. Warden: Well, that is correct, Your Honor, but the -- though -- the consistent --
Justice William H. Rehnquist: A lot of --
Mr. John L. Warden: -- line of authority in this Court has been that it has negative implications of its own force for state statutes that discriminate against interstate commerce.
There is no federal statute involved, for example, in Philadelphia against New Jersey, at least of which I'm aware.
And I believe that Dean Griswold has conceded in his brief on behalf of the Conference of State Bank Supervisors at page 9, Note 4 that the Commerce Clause has exactly the same scope when relied upon to strike down discriminatory state regulation as when relied upon to justify affirmative congressional regulation.
Now, to continue briefly on the interstate commerce question, the three-judge court addressed directly the question to counsel for the State of Florida below whether “the defendant made any serious contention,” I quote that, that Bankers Trust would not be engaged in interstate commerce in the business it proposes to conduct and counsel replied, and I quote, “The defendant does not.”
I might add that a New York based financial institution operating these businesses in Florida by means of local officers directed from New York and affecting the flow of capital funds into the national capital market is inescapably involved in interstate commerce.
The second point I would like to make is that this case does not involve banking or any issue of competitive equality between state and national banks or any question of the dual regulation of banks.
The distinction between the business of banking and the businesses here involved, trust services and investment advisory services is recognized not only in the Bank Holding Company Act by Congress, which I shall address in a moment, but right on the face of Florida statute, Section 659.141 which expressly discusses as discrete businesses the business of banking, the trust business and investment advisory services.
Justice Byron R. White: There might be lesser included offenses though, wouldn't it?
Mr. John L. Warden: [Laughs] I think not.
As we pointed out in our brief, Your Honor, banks may do trust businesses and investment advisory businesses but so to many other sorts of commercial institutions --
Justice Byron R. White: But -- but they're not --
Mr. John L. Warden: -- and indeed --
Justice Byron R. White: But they're not unrelated to banking.
Mr. John L. Warden: They are not unrelated to banking.
Justice Byron R. White: Otherwise, it may be -- your clients wouldn't be interested.
Mr. John L. Warden: That's quite right.
Justice Byron R. White: Yes.
Mr. John L. Warden: And then otherwise the Federal Reserve Board wouldn't have given --
Justice Byron R. White: (Voice Overlap) --
Mr. John L. Warden: -- the affirmative indication of that but I point out that not only the Paine Webber has engaged in investment advisory services but other forms of non-deposit trust companies such as what we proposed to set up here, engaged in trust services and so do natural persons who have no banking powers whatsoever.
I think we use the illustration in our brief that the manufacturer of aircraft doesn't become the manufacturer of automobiles because it's carried on by General Motors.
Now, I should also point out because I thought it might have been a bit unclear.
Well, I'm talking about 659.141 that that statute itself bars us both from the investment advisory business and from the trust business, irrespective of -- of 660 because 659.141 keeps us out whether we have a local incorporated subsidiary or open an office of an out-of-state subsidiary.
Justice John Paul Stevens: But, Mr. Warden, if --
Mr. John L. Warden: Yes, sir.
Justice John Paul Stevens: -- the District Court was correct in holding 659.141 unconstitutional, why would we have to go ahead and assume -- assume we agreed with them just for purposes of discussion, would -- would we still have to go ahead and consider the other statute, and if so, why?
Mr. John L. Warden: I think you would, Mr. Justice Stevens, because as -- as Dean Griswold suggested in his brief, it appears that the lower court may have read 660.10 as of its own force precluding Bankers Trust New York Corporation and Holding Company from complying with its terms by incorporating a local subsidiary.
Now, the statute doesn't say that on its face.
Justice John Paul Stevens: Well, then, why should the --
Mr. John L. Warden: Yes,
Justice John Paul Stevens: -- the federal court assume -- you know, you certainly don't strain to give the statute --
Mr. John L. Warden: Well --
Justice John Paul Stevens: -- unconstitutional reading.
Mr. John L. Warden: Absolutely not, Your Honor, but Florida has not yet represented or conceded in this proceeding that the statute will not be so construed and enforced if Florida does so or if this Court rules that that is not what the statute means, then Section 660.10 insofar as that was the basis for the lower court's decision does not have to be reached by this Court.
Justice William H. Rehnquist: Well, the Florida courts have never had an opportunity to interpret the law.
The District Court originally abstained and you appealed saying they shouldn't have abstained.
Mr. John L. Warden: Well, at that point, Bankers Trust took the position that there was nothing unclear about the statute.
Justice William H. Rehnquist: But to -- to say that Florida hasn't yet conceded, very, very likely the executive branch in Florida or the people representing the state banking authorities aren't in a position to make a final determination.
That's for the Florida courts, I would think if its -- Florida's (Voice Overlap) --
Mr. John L. Warden: Well, if I may, Your Honor, I think that if the lower court did construe the statute the way Dean Griswold suggest it may have, the lower court clearly erred in that question of state law, is so clear that it should be disposed of by this Court.
Justice Potter Stewart: You're talking about --
Mr. John L. Warden: But --
Justice Potter Stewart: -- Section 660.10?
Mr. John L. Warden: -- that is -- yes, I am, Mr. Justice Stewart.
But that will be a necessary part of this Court's decision if it is going to set aside the declaration below that 660.10 is unconstitutional on the ground that it prevents of its own force, Bankers Trust from complying with it.
But let me -- let me --
Justice Byron R. White: That's a suggestion that -- that we wouldn't know more about the Florida law than the District Court.
Mr. John L. Warden: Well, it's a suggestion, if you please, Mr. Justice White, that you can read statutes.
Justice Byron R. White: Yes, well, better than -- better than the District Court.
Chief Justice Warren E. Burger: I hope so.
Mr. John L. Warden: In this case, yes, Mr. Justice White.
Justice Byron R. White: As a matter of state law, as a matter of state law.
Mr. John L. Warden: In this particular instance, yes, Your Honor.
Justice Byron R. White: So you --
Mr. John L. Warden: But I might -- but I might add, Mr. Justice White, that --
Justice Byron R. White: You're suggesting you should lose on that part of the case?
Mr. John L. Warden: No, I'm not suggesting we should lose on that part of the case.
I'm going to get to another aspect of that statute in just a moment, but the decision below need not be affirmed on that basis if this Court construes the statute not to operate as it may have been thought to operate by the District Court.
There will, nonetheless, remain, the effect of 660.10 on Bankers Trust's New York subsidiaries which conduct a large trust business and are precluded by that statute from themselves acting as an executor or testamentary trustee even without a local office.
Other Florida resident, even when named in his will as such.
Now, this result, I don't think, can be justified --
Justice Byron R. White: Well, I'd -- I'd -- perhaps I understood Dean Griswold that -- didn't he suggest that this statute didn't prevent an outside executive from himself doing business across the state line?
Mr. John L. Warden: I didn't hear --
Justice Byron R. White: Well, I --
Mr. John L. Warden: -- Dean Griswold suggest that.
The statue contains --
Justice Byron R. White: I'll -- I'll --
Mr. John L. Warden: -- some exceptions --
Justice Byron R. White: He speaks for himself or rely on the transcript.
Mr. John L. Warden: But it says in the first paragraph [Laughs] that only local incorporated banks and trust companies and national banking --
Justice Byron R. White: Right.
Mr. John L. Warden: -- associations having trust powers may do the following within this State --
Justice Byron R. White: I suppose --
Mr. John L. Warden: -- and that includes acting as a trust of (Voice Overlap) --
Justice Byron R. White: I suppose if 660.10 --
Mr. John L. Warden: -- trustee.
Justice Byron R. White: -- if that -- if that provision had been construed to permit out-of-state corporations directly to give investment advice in a State either through a local office or -- or without a local office on the telephone or by mail, the District Court might have had a different idea about an -- the -- about the other statute because there might be a way where -- that this wouldn't -- if they could be business this way, it wouldn't be so burdensome under state commerce.
Mr. John L. Warden: I don't think that 660.10 can be read as dealing with anything other than a requirement of local incorporation.
I don't think it can possibly be read to permit out-of-state corporations from doing the very businesses it says they can't do.
Justice Byron R. White: Yes.
Mr. John L. Warden: And even if it were so read, as I mentioned a minute ago, 659.141 of its own force by its plain language, prevents the doing of these businesses in Florida by out-of-state holding companies either directly or through local subsidiaries.
Justice Potter Stewart: As you read 660.10 simply as requiring that an executor or administrator or these other named officers be local, that is an incorporation -- incorporated or qualified in -- in Florida, is not too unusual a provision, is it?
Don't -- don't many States in their probate law or decedent's estates laws require that the guardian or the administrator of a decedent's estate be a local corporation or a local resident?
Mr. John L. Warden: Mr. Justice Stewart, there are approximately 10 or so such statutes still in existence as --
Justice Potter Stewart: Yes, you mean 10 or more States.
Mr. John L. Warden: -- as point -- yes.
Justice Potter Stewart: Yes.
Mr. John L. Warden: As pointed out in the Conference of State Supervisors' brief.
Justice Potter Stewart: Right.
Mr. John L. Warden: There are fewer now than there were in years past.
And I might say that in Fain v. Hall, a District Court decision in Florida last year, 463 F.Supp. 661, the District Court struck down the Florida statute that limited to close relatives out-of-state individuals who could act as fiduciaries in Florida basing its decision not on the privileges and immunities rights of the fiduciaries but on the basic and fundamental right of the testator to name his own fiduciaries.
Justice Potter Stewart: And there you say that was a -- one of the District Court?
Mr. John L. Warden: Yes, and that was not appealed by the State.
Justice Potter Stewart: But --
Justice William H. Rehnquist: What -- what can a prior constitutional provision did the --
Justice Potter Stewart: Yes.
Justice William H. Rehnquist: -- District Court rely on in that case?
Mr. John L. Warden: The Due Process Clause, Your Honor.
Justice Potter Stewart: Of what?
Justice William H. Rehnquist: What -- what, life, liberty, property?
Mr. John L. Warden: Yes.
The -- the District Court said that selecting a fiduciary to manage one's property was a fundamental part of human liberty protected by the Due Process Clause.
Justice Potter Stewart: And that this had been taken away without due process of law?
Mr. John L. Warden: Yes.
It also found --
Justice Potter Stewart: (Voice Overlap) versus New York.
Mr. John L. Warden: -- a classification, an arbitrary one --
Justice Potter Stewart: Although it was -- it was legislation enacted by the state legislature.
Mr. John L. Warden: That's correct.
Justice Potter Stewart: And that's a due process of law?
Mr. John L. Warden: That's correct.
That was the holding.
Justice Byron R. White: Would you suggest that -- suppose the -- suppose the District Court had -- had stricken down 660.10 and then said, “We needn't reach the other section,” would you --
Mr. John L. Warden: 659.141, they would have to reach, Mr. Justice White --
Justice Byron R. White: Well, because that caused the --
Mr. John L. Warden: -- because that -- that covers both business, investment advisory and trust and of its own force considered apart from 660.10, keeps Bankers Trust from doing business in Florida (Voice Overlap) --
Justice Byron R. White: In -- in any form?
Mr. John L. Warden: In any form.
Justice Byron R. White: Across state line by telephone, by letter?
Mr. John L. Warden: No, no, no, no.
I beg your pardon.
Prevents their maintaining a local office.
Justice Byron R. White: That is right.
Mr. John L. Warden: That's correct.
Justice Byron R. White: But it could still do business across a state line?
Mr. John L. Warden: Yes.
Justice Byron R. White: As far as that section is concerned.
Mr. John L. Warden: It doesn't -- doesn't preclude their using the telephone or sending people down by airplane.
Justice Byron R. White: Or acting as trustee.
Mr. John L. Warden: No, I do not believe it does, Your Honor, 660.10 does that.
Justice Byron R. White: Yes, exactly.
Justice John Paul Stevens: Mr. Warden, can I still -- I'm still a little puzzled about the two -- the two statutes.
Assuming we hold the first statute from the District Court on the first statute, has the second statute hurt your -- because -- your client, I mean the -- the appellee here in anyway because they haven't tried to form a subsidiary or have they?
In entering --
Mr. John L. Warden: No, it has been stipulated that but for 659.141 and 660.10 if considered of its own force to have that effect.
Bankers Trust would apply to -- or to incorporate a local subsidiary.
Justice John Paul Stevens: And if -- and if we read 660.10 the way you suggest the plain language indicates, there's no harm to the client, no reason to reach the constitutionality of a statute which says you've got to be locally incorporated.
Mr. John L. Warden: That is correct as to the principal issue tried below which was Bankers Trust attempt to open local offices in Florida.
Justice John Paul Stevens: Right.
Mr. John L. Warden: That statute will, however, continue of its own force to prevent Bankers Trust's New York operating subsidiary.
Justice John Paul Stevens: But there's no evidence they've ever tried to do anything themselves, isn't it?
Mr. John L. Warden: There is not, Your Honor.
There is, however, stipulation that the enforcement of the statutes and each of them has caused Bankers Trust New York Corporation economic injury.
Justice John Paul Stevens: You think that's enough to require us to face that the constitutionality of the statute that says in order to engage in trust business, you got to be locally chartered?
I -- well --
Mr. John L. Warden: Well, that's -- that's the state of the record, Mr. Justice Stevens.
Now, if I may -- may proceed with the basic constitutional point.
The statutes that Florida here seeks to sustain, a fact on their face, a simple economic protectionism that the Court held invalid per se two terms ago in Philadelphia v. New Jersey.
Florida has not sought by these statutes to regulate bank holding companies in a way that is evenhanded on its face but in operation discriminates against interstate firms.
The so-called regulation here in issue affects only firms not based in Florida, and it does not regulate them.
It prohibits them absolutely from providing the services in question in Florida.
The Exxon case upon which the opponents place their principal reliance simply does not stand for the proposition that the Commerce Clause allows a State to exclude some but not all out-of-state firms as out-of-state firms.
The barrier in Exxon was not against interstate firms but against vertically integrated firms, Maryland-based or otherwise.
This Court expressly noted, 437 U.S. at 126 that Maryland statutory scheme did not "distinguish between in-state and out-of-state companies in the retail market".
Florida statutory scheme and start contrast does nothing but distinguish between in-state and out-of-state companies in these markets.
Florida has acted not to preclude the doing of certain business by bank holding companies but to preclude out-of-state bank holding companies from doing business in Florida.
Secondly, Hughs against Oklahoma did not overrule or limit Philadelphia against New Jersey.
It cited the case with approval.
And as our brief's note, the first point of the Hughs three point test incorporates the holding of Philadelphia and says that at the very least in the case of a statute discriminating on its face, the State has the burden to justify under strict scrutiny a non-discriminatory local purpose in the absence of non-discriminatory alternatives, Florida has done neither.
As to the supposed need to protect the people of Florida from some undefined menace of large financial companies, it is sufficient just to say that the statutory scheme does not even make a pretense of doing so.
Justice Byron R. White: But doesn't -- doesn't the statutes single out banks at least --
Mr. John L. Warden: It singles out bank holding companies.
Justice Byron R. White: (Voice Overlap) --
Mr. John L. Warden: Yes, out-of-state bank holding companies.
Justice Byron R. White: Yes, exactly but it doesn't single out other kinds of out-of-state companies, holding companies or otherwise.
Mr. John L. Warden: No, no.
Justice Byron R. White: Doesn't --
Mr. John L. Warden: -- as for our argument, Mr. Justice White, is that under the decisions of this Court, Florida is required to treat similarly situated local corporations and out-of-state corporations similarly unless it justifies under strict scrutiny some legitimate non-protectionist reason for doing so.
Justice Byron R. White: Well, what about in Exxon, out-of-state -- out-of-state companies that weren't refiners but who are engaged in the distribution of gasoline, could own local stations?
Mr. John L. Warden: That's correct, Mr. Justice White --
Justice Byron R. White: So the only --
Mr. John L. Warden: -- the statute there in question --
Justice Byron R. White: They didn't pick out refiners.
Mr. John L. Warden: Picked out refiners.
This statute doesn't pick out bank holding companies, it picks out-of-state bank holding companies.
Florida permits the holding company form of commercial organization --
Justice Byron R. White: Well, the matter just so happened that every -- possibly, weren't any local refiners in Maryland.
Mr. John L. Warden: That's entirely correct but the Court --
Justice Byron R. White: So it just picked out out-of-state refiners?
Mr. John L. Warden: That's a lesser included part of the class of --
Justice Byron R. White: That's included in your (Voice Overlap) --
Mr. John L. Warden: -- refiners and you're saying that as a matter of fact, it was the entire class but that needn't remain so in the statute on its face attached no significance to being an interstate form or --
Chief Justice Warren E. Burger: But it wasn't --
Mr. John L. Warden: -- an out-of-state form.
Chief Justice Warren E. Burger: -- it wasn't the entire class of out-of-state, however, there were some out-of-state retailers --
Mr. John L. Warden: Non-refiners.
Chief Justice Warren E. Burger: -- and distributors who did not produce or refine.
Mr. John L. Warden: Yes, who were permitted to continue to operate as -- as the Court said.
As I quoted a minute ago, the statute does not distinguish between in-state and out-of-state dealers in the retail market.
This statute does distinguish between in-state and out-of-state bank holding companies --
Justice Byron R. White: It isn't -- it isn't --
Mr. John L. Warden: -- on that basis.
Justice Byron R. White: It isn't a regulation of banking and the sense -- because it doesn't affect local banks.
Mr. John L. Warden: No.
It's a preclusion of the doing of interstate commerce.
Justice John Paul Stevens: Well, if you --
Mr. John L. Warden: The protection here -- yes, sir.
Justice John Paul Stevens: If your argument is valid, a State which did not permit bank holding company type of operation could do what Florida is trying to do here.
Mr. John L. Warden: That is a much stronger case for the State, Mr. Justice Stevens, but I would submit that is not this case.
Justice John Paul Stevens: If that --
Mr. John L. Warden: But I would submit that in such a situation, if local banks were allowed to engage in the trust and investment advisory businesses, the sole effect of such a statute would be to preclude out-of-state competition in the trust and investment advisory businesses which Congress has recognized are not the business of banking and therefore are not within the consent it's given to the States to exclude multi-state banking.
Justice John Paul Stevens: But under -- if I understood Mr. --
Mr. John L. Warden: That is not this case.
Justice John Paul Stevens: If I understand Mr. Griswold correctly, so what you should look at is not just out-of-state banks or bank holding companies but all out-of-state concerns that want to enter the investment advisory service market.
And as in -- in Exxon, you look at the whole investory side -- advisory service market and say keeping out a few New York banks isn't going to -- its no proof that will affect that market because there's Paine Webber and others who may come in.
If I -- that's what I understood his argument.
Mr. John L. Warden: Well, there's -- there's no evidentiary record to support the contention that this has a de minimis effect and the State had the -- the burden of establishing that, given the discrimination on the face of the statute.
But in any event, I don't think that's the Commerce Clause test under this Court's decisions.
I think that the Commerce Clause requires the -- like in-state firms be treated the same as like out-of-state firms.
Justice Byron R. White: Do you say -- do you say that in Exxon, if Maryland had said local refiners, if there were some, may own stations but out of -- out-of-state refiners may not.
Mr. John L. Warden: That would have been stricken by this Court --
Justice Byron R. White: That's this case.
That's this --
Mr. John L. Warden: -- (Voice Overlap) this case.
Justice Byron R. White: Yes.
Mr. John L. Warden: Now, the kind of rationalizations presented here by Florida support this statute were rejected.
I hope once and for all, when Mr. Justice Cardozo said in Baldwin against G. A. F. Seelig, 294 U.S. at 523 “to give entrance to that excuse would be to invite a speedy end of our national solidarity”.
The Constitution was framed under the dominion of a political philosophy less parochial in range.
Now, I'd like to turn to the contention that Congress has consented to this discrimination.
The meaning of Section 3 (d) is clear on its face.
That's the first of the provisions of the Bank Holding Company Act to which Dean Griswold referred.
It precludes acquisition by holding companies of banks across state lines absent affirmative legislative consent by the affected State.
In Section 2 (c) of the Act, Congress has defined a bank in accordance with common understanding to be an institution that accepts demand deposits and makes commercial loans.
Justice Byron R. White: Where -- where are you reading?
Mr. John L. Warden: At Section 2 (c) of the Public --
Justice Byron R. White: But is -- is that in the --
Mr. John L. Warden: -- Bank Holding Company Act.
Justice Byron R. White: What -- is that Appendix C or D or --
Mr. John L. Warden: That's going to be -- I haven't printed it in there.
Justice Potter Stewart: In your brief.
Justice Byron R. White: The section please.
Mr. John L. Warden: Sorry.
That wasn't printed as one of the statutes involved in the appendix --
Justice Byron R. White: You suggested it in your brief.
Mr. John L. Warden: -- Mr. Justice White.
That is -- is printed at pages 15 and 16 of our brief on the merits of December 19, the yellow --
Justice Byron R. White: Right, I got it.
Mr. John L. Warden: -- brief.
I believe you have --
Justice Byron R. White: Yes.
Mr. John L. Warden: -- the appellees' brief there.
Justice Byron R. White: Oh, that's right.
Mr. John L. Warden: This is at the Clearing House brief at pages --
Justice Byron R. White: Oh, yes.
You're not an appellee.
Mr. John L. Warden: -- 15 and 16.
Justice Byron R. White: You're also a standard --
Mr. John L. Warden: That's correct, Your Honor.
And now, this case, as I said at the outset, doesn't involve the organization or acquisition of a bank by anyone, anywhere.
Indeed, that definition was amended by the Congress in 1966 to read as it -- well not quite as it now reads.
It was amended again in 1970 but it was specifically amended in 1966 to remove non-deposit trust companies, which is what we're concerned with here.
It never included investment advisory organizations.
And the reason it was removed -- and it was amended to remove non-deposit trust companies, as stated in the Senate Report on the 1966 amendments at page 7 as follows, “The purpose of the Act was to restrain undue concentration of control of commercial bank credit and to prevent abuse by holding company of its control over this type of credit.”
Then paraphrasing, the certain institutions which are included now need not be included to achieve that objective, therefore, we are redefining bank to exclude institutions like non-deposit trust companies.
Now, I see that my time's up.
I have two brief additional points, if I may, Mr. Chief Justice.
Chief Justice Warren E. Burger: You can complete it in one minute.
Mr. John L. Warden: Thank you.
Section 4 to which Dean Griswold referred confers no powers on any State.
That is a Section that confers on the Federal Reserve Board, the power to improve transaction such as the one that Bankers Trust wishes to engage in.
Section 7, on which he also relies, is on its face, a negation of affirmative preemption.
It is not a consent to the exercise of otherwise unconstitutional state legislative powers.
It says this Act shall not be construed or preempted.
It doesn't say the Commerce Clause shall not be construed.
Justice Byron R. White: Let me ask you, if this -- if -- if the holding company here, if the New York holding company had wanted to acquire a bank in Florida, you would agree Florida could keep it out?
Mr. John L. Warden: Florida is empowered under this -- under the --
Justice Byron R. White: Even if --
Mr. John L. Warden: -- bank holding --
Justice Byron R. White: -- even if Florida holding companies may own banks?
Mr. John L. Warden: Yes.
In fact --
Justice Byron R. White: Yes.
Mr. John L. Warden: -- a holding company is a bank holding --
Justice Byron R. White: Yes.
Mr. John L. Warden: -- company only because it --
Justice Byron R. White: Exactly.
Mr. John L. Warden: -- owns a bank.
Justice Byron R. White: Yes, exactly.
Mr. John L. Warden: But Congress has in the Bank Holding Company Act given not just to consent to such state legislation, it has itself affirmatively declared.
Justice Byron R. White: That's right.
And so --
Mr. John L. Warden: But it --
Justice Byron R. White: -- so -- so that -- so Florida may -- has a choice of either discriminating against foreign holding companies or not?
Mr. John L. Warden: That's right.
With -- no -- no -- no.
Congress has already affirmatively prohibited multi-state bank acquisitions by bank holding companies --
Justice Byron R. White: If state law permits --
Mr. John L. Warden: -- absent an affirmative state legislative --
Justice Byron R. White: Alright.
Mr. John L. Warden: -- consent to that action.
Justice Byron R. White: Florida -- Florida could permit it or it may prevent it.
Mr. John L. Warden: For -- as far as the business of banking is concerned --
Justice Byron R. White: Exactly.
Mr. John L. Warden: -- Congress has not granted that permission as far as any other business is concerned.
Justice Byron R. White: Yes, I understand.
Mr. John L. Warden: -- Mr. Justice White.
Justice Byron R. White: Thank you, gentlemen.
The case is submitted.
We'll hear arguments next in --