RUSSELL v. UNITED STATES

Transcript: 

ORAL ARGUMENT OF JULIUS LUCIUS ECHELES, ESQ. ON BEHALF OF THE PETITIONER

Chief Justice Burger: Mr. Echeles, I think you may proceed whenever you are ready.

Mr. Echeles: Mr. Chief Justice, and may it please the Court:

The issue in this case is a simple issue, but the resolution is a little more complex.

The issue is whether or not under Section 844, Subparagraph (i) of Title 18, United States Code, a building which was a two-flat residential building which the defendant, Petitioner here, attempted to commit arson, is covered by the language of the statute that states that anyone who attempts to destroy a building... I'm sorry, anybody who attempts to destroy any building used in interstate or foreign commerce or in an activity affecting interstate or foreign commerce commits the crime.

To determine legislative intent, this Court frequently does look at the congressional hearings to determine what the proponents of the bill or the law stated.

Briefly, the acts are that in February of 1983, the petitioner here owned a two-flat residential building, one of which was occupied.

The flat was rented by a family paying $235 a month.

It was a two-flat building not used for any commercial activity or business enterprise.

The language of the Representatives in passing the legislation stated that they are passing this legislation to prevent generally organized crime because it was legislation during the organized crime legislation of a general nature, and they prohibited the destruction of any property used for business purposes.

That is not in the statute, but that is in the congressional discussion by the Representatives.

And so the question here is whether this two-flat building, which is not used for a business purpose, was covered under the statute.

The government has pointed out in its brief that there were further hearings in which the language was deleted when they said only business purposes, and then they said only any building because they wanted to include churches, schools and police stations within the protection from being bombed or... from being bombed.

Well, when the Congress, then, when the legislators stated that we will just say any building and that should cover churches, schools and police stations, it did not cover, it did not state, they did not state that it also covers residential buildings.

Unidentified Justice: Counsel, you stated that the building was not used for any commercial or business purpose.

Is it a fact that business insurance was carried on the building?

Mr. Echeles: The petitioner had insurance covering a fire loss.

It wasn't identified as... it wasn't stated in the policy business fire loss, it was just fire loss to a building.

Unidentified Justice: But the same type of insurance you would have on your own, own residence?

Mr. Echeles: Yes.

Unidentified Justice: What about the deduction of expenses for tax purpose?

Mr. Echeles: This defendant owned three other two-flat buildings separate and distinct, not conjoined, at separate places in Chicago, Illinois.

He received rents from them.

He put it on his... he put the income on his income tax, he deducted depreciation, he deducted interest, he did that.

Unidentified Justice: On this building.

Mr. Echeles: On this building also.

And it is still not a property for business purposes, it is our contention.

The government suggests to Your Honor that later, in 1982, the act was amended to include the word "fire".

That is, the initial act passed in 1970 merely precluded a building from being destroyed by means of explosive.

Three Courts of Appeals held that the commission of an ordinary fire on a building was not included within the concept of the term "explosive".

So they had further hearings to get around or to overrule the three separate circuit courts that had ruled that committing a fire, putting gasoline, putting a torch to the gasoline and burning a building, was not included in the concept of explosive.

So they wanted to make more certain that the law would encompass a fire.

So in 1982, they held hearings, and as the Solicitor General so helpfully... helpful to the petitioner, sets out in his brief on page 18, Footnote 20, it calls to the attention of this Court that the Congress included the only... the only amendment to the Section 844 subparagraph (i) is the inclusion of the word "fire", which was not in the previous statute, and they held hearings about the inclusion, and its purpose, as the government points out to Your Honors, is to overcome the three Circuit Court holdings that fire was not an explosive.

So they put in the word "fire".

So there is no question that fire is included in the concept of the criminal statutes.

Well, they knew, that is, the Congress knew at that time that the case of United States v. Mennuti, on which we largely or in large part rely, was decided in 1981 by the Second Circuit, Judge Friendly writing the opinion, and Judge Friendly writing for the Second Circuit held, under circumstances analogous to this one, that the burning of a building, or the explosion of a building, on a building, owned by Mr. Mennuti, which was used for residential purposes where he received rents from it, where he presumably reported that on income tax, deducted depreciation, if he paid interest, that that would be a deduction, was not included in the concept of building because, said Mr. Justice Friendly, Judge Friendly, that the Congress intended in 1970 to include only buildings used for business purposes.

Unidentified Justice: But his opinion was based on the plain language of the statute, wasn't it?

Mr. Echeles: I'm sorry, sir?

Unidentified Justice: Wasn't his opinion based on the plain language of the statute?

Mr. Echeles: No, Your Honor, Mr. Justice Marshall, it was based because the legislators had stated in their discussions about passing the law that the buildings were considered to be only for business purposes.

The government points out that really, there was more discussion, and the legislators in 1970 discussed including churches--

Unidentified Justice: I thought he used "used in commerce", in quotes, from the statute.

Mr. Echeles: --Well, Mr.... Judge Friendly stated that the fact that the government intended to use as a nexus for federal jurisdiction the fact that the building in Mennuti used electricity or gas was an insufficient, improper and impermissible nexus upon which to apply federal jurisdiction.

He said that the word "building" means only business property.

It does not mean rental or residential property.

That's how he interpreted the word building, because of the legislative hearings stating that the building here considered in 1970 was to be only business purposes.

And that is why, Mr. Justice Marshall and Justices, when they... when the Congress amended the statute to include the word "fire" where it was not in the statute before, and when they specifically passed that law to overcome three separate Circuit Court opinions that fire was not included within the concept of explosive, knowing what the law was then... I assume the staff of the Congressmen advise them what the law is... they knew that Mennuti existed.

They knew that the Second Circuit, at least, had decided that--

Unidentified Justice: When did this revision that you are talking about take place, Mr. Echeles?

Mr. Echeles: --1982.

I don't know the specific month.

Unidentified Justice: But the year after Mennuti was decided.

Mr. Echeles: Yes, sir.

Mennuti was decided in 1981.

Again, I don't have the specific month.

I would assume that the researchers advising the legislators with respect to the three circuits about fire, fire not being included in explosive, would have advised the Congress about the Mennuti decision.

So they had that knowledge, and, says the government in its helpful Footnote 20, the House report provided that, I quote, 844(i), "shall otherwise remain unchanged".

That is, it is my respectful presentation to Your Honors that with the legislators knowing... they had to know of the Mennuti decision... they didn't change any circumstance of 844(i) except to add the word "fire".

Well, the government argues that even if residential property is excluded... they don't say that it is excluded, but even if it is excluded, that this is not residential property, it is business property because of the fact that he received income, reported it on his income tax, made deductions for depreciation and deductions for interest, that therefore this is a business property.

But that doesn't end the question.

There has to be a federal nexus.

There has to be federal, interstate activity because the statute--

Unidentified Justice: So would you say that a 40-unit apartment building would give jurisdiction under this statute?

Mr. Echeles: --Yes.

As a matter of fact, there is a case discussed in both of our briefs, the Zabic case, out of my home circuit, the Seventh Circuit.

Unidentified Justice: Well, what number of leased apartments do you think essential before there is jurisdiction, that there be?

Mr. Echeles: Don't know and can't answer, but at least a two-flat building is a residential building, and even though he gets income from it, it is a residential building and not a commercial property of 44 apartments where the Seventh Circuit said that there were other characteristics of interstate character, the supplies contributed to the building had to come from out of state, and there is a 13 or 14-apartment building in the very recently decided cases coming out of Nebraska.

Unidentified Justice: Well, I guess it is hard for me to see why not a two-unit building.

Mr. Echeles: Well, Your Honor has to decide it eventually, and if you cannot see it, then I cannot give you the vision with which to see, but a two, a two-flat residential building is not generally considered, I don't consider it commercial business property even though he derived--

Unidentified Justice: Both of the flats... both of the flats were rented?

Mr. Echeles: --No, well--

Unidentified Justice: Did he live in one?

Mr. Echeles: --He did not live in that one.

He lived someplace else with his family in a home in another part of the city.

The second floor flat was rented at $235 a month.

The first floor flat was unrented at the time.

Whether both were rented at the time or both were empty at the time I don't think changes the legal posture.

Unidentified Justice: Well, you would have the argument to make in response to the government's claim that the use of natural gas from interstate commerce fulfills the... that no natural gas heating was perhaps being used while they were unoccupied.

Mr. Echeles: Well, I thank Your Honor for that question because that gives me an added argument for Your Honors.

I am glad for the help.

Does it make any difference, then, whether the two-flat is vacant temporarily or whether both flats are occupied?

Does that take it out of or into the federal concept?

Unidentified Justice: It is not difficult to make a conundrum out of this case.

I don't know how far that gets us along to the road to deciding.

Mr. Echeles: In any event, every circuit that has had this question, that is, the question whether or not the use of gas or the use of electricity takes it into the federal jurisdiction, has ruled against it.

In the very recent case decided just two months ago, United States v. Hansen and Terlecky, two separate defendants, I think the apartments, there were 14 apartments.

The apartments were in North Dakota on the border of Nebraska.

But that building, said the Court, the Eighth Circuit, had transients.

The building was used clearly for interstate purposes.

It had interstate transients going to and from the building from Nebraska.

They were day... they were day tenants, and the Eighth Circuit said, we will not go as far as the Seventh Circuit in using the concept that the 14-apartment building had electricity that was generated from out of North Dakota as a basis for federal jurisdiction.

They said specifically, we will not go as far as Russell.

Russell by that time had been decided.

Russell was decided last July, 1984.

Hansen and Terlecky was decided last... decided in February, about ten days or two weeks before I submitted the brief to this Court.

They said we are not going to buy that concept that the use of electricity takes it into the federal concept, and other cases have similarly held.

The Mennuti case held in the face of the government argument that even though it is a residential property, and even though there is income derived from it, a benefit derived from this, it is not business property.

And we won't permit, said Mennuti, that the use of electricity to that building... it had to get electricity, generated by... power generated by gas coming in from out of state as, in this case, they proved that the gas used on the second floor started in Oklahoma or Texas, met its terminus in Joliet, Illinois, mixed with other gas, and finally got into the building through the pipeline.

Mennuti said we are not going to use that concept.

That is not a proper federal nexus.

Barton case from the Second Circuit, which held the defendant guilty of torching a gambling establishment, said that that gambling establishment... it discussed Mennuti.

It said we don't hold that because the gambling establishment which is a business related building, a business purpose related building, we don't hold that because that got electricity, that that takes it in.

In that aspect, Barton in the second circuit agreed with Mennuti in the Second Circuit.

It said that supplies were delivered to the gambling establishment for the benefit of the gambling customers such as orange juice or drinks, and that had as its genesis an out of New York beginning, so that the courts have rejected it.

There is another interesting case, interesting to judges, of course, because there, in United States v. Monholland, Eighth Circuit, a truck being driven by a sitting circuit judge, a state judge, was being driver, and there was an attempt to bomb the truck.

The fellow was convicted because the 844(i) statute has within it not only the protection of buildings, but also vehicles.

Well, the pick-up truck that was driven by a person, judge or no judge, is a vehicle.

The bomb was attempting to destroy it.

The gas used in the car had its genesis, its origin, out of state.

Monholland, Eighth Circuit, said no, no, we are not going to permit you to expand federal jurisdiction here even though they acknowledge that the gas used in the truck had as its origin an out-of-state place.

So Monholland, Barton, Mennuti, and the latest of the cases, Hansen and Terlecky from the Eighth Circuit, decided two months ago, in February, rejected the concept that the use of electricity or gas in a building is sufficient for the federal nexus.

Well, what else do I have?

In the two cases that I cite, the Lewis Casek and the Bass case where we state that where a statute is confusing, and it is certainly not clear if Monholland rejected the government's concept that the statute covers the acts in Monholland, if Mennuti rejected the concept of the government that the use of interstate... that the use of gas coming from interstate brings it into the federal concept, and if Hansen and Terlecky by, I suppose, obiter dicta because it wasn't an issue then, but it simply stated it wouldn't go so far as the Seventh Circuit in Bussell in holding an interstate nexus, if those courts said that, then there is certainly an ambiguity in the statute, and two cases from this Court, Rewis and Bass, suggest that under those circumstances, the concept of validity should be applicable, and Your Honors should hold that because the statute isn't clear with respect to applying to the facts in this case, there should then be a reversal in this case.

Another factor.

In its reply brief, in its excellent reply brief... I say excellent because I respectfully submit that it is helpful to the petitioner in this case... the government points out that in the second set of hearings, in the 1982 hearings where the Congress was putting in the word "fire" where it was not in the statute before, that agents of the Alcohol, Tobacco and... Alcohol, Tobacco--

Unidentified Justice: Firearms.

Mr. Echeles: --And Firearms unit... I am happy to get them straight... Firearms unit, testified.

They testified that they need the word "fire" in there because it permits them to go against organized crime units, people with organized crime want to torch places for whatever reasons, whatever multiple reasons people do that kind of thing, and they said we want this legislation, and we are not preempting the states.

The states still have the power to prosecute.

Well, that may be true, that the state has the power to prosecute, and in Illinois we have arson statutes, effective, used all the time, and in a case such as this, the punishment, if guilt were to be found, would be a minimum mandatory punishment of six to a maximum of 30 years, even more severe than the fellow has got now.

So I don't know if I may be doing him any good, if I am able to persuade Your Honors to reverse, because here he has a ten year sentence, since he was convicted by the District Judge in Chicago.

So it is not true that they are only interested in organized crime roots in having the legislation passed, but that is what they said.

This is an individual having no organization, having no connection with anybody, who simply decided to torch a building that he owned.

I suppose it is the proper inference to say for profit because he did have insurance on it, although that was not shown by any evidence in the record.

The government said that one of the motives, one of the motives he had in burning it was to get the proceeds from an insurance policy, and that therefore, because he had the motive, that takes it into the federal nexus because that is fraud against an insurance company.

So far as the facts of this case... so far as the facts of this case are concerned, so what?

There is not a word of evidence that a claim was put in because the building was not burned.

There was an attempted burning, that fact is not in dispute at this level.

He would have had to use the mails.

Well, sometimes in mail fraud cases where insurance companies are the victims, the claimant goes to the insurance company... that has happened many times in Chicago... I have participated in cases where that has occurred... where the claim is physically presented to the insurance company, and the person benefitted goes to pick up the check, the mails are not even used, it is fraud, but it is not mail fraud.

And so there is a guess, a future guess about future contemplation that the government argues that Your Honors should consider in accepting the federal nexus that the statute is complied with when the statute states that it must not only be a building, but it must be in an activity affecting interstate or foreign commerce.

At trial level, this was a bench trial, much of the evidence was not in dispute, most of the evidence was not in dispute.

It was a law question.

There were insurance policies put into the evidence, over my objections, and nonetheless, the judge accepted a stipulation that was not stipulated to, but I make no argument before this Court.

I was the trial lawyer, though I was the losing trial lawyer, I was the losing lawyer in the Seventh Circuit, and I hope not in this case, but there was no presentation in those policies that he did anything yet except that there was a contemplation that he would do something.

I have asked the marshal to flash me so that I can keep some time for rebuttal.

Thank you very much.

Chief Justice Burger: Mr. Wright?

ORAL ARGUMENT OF CHRISTOPHER J. WRIGHT, ESQ. PRO HAC VICE

Mr. Wright: Mr. Chief Justice, and may it please the Court:

The essential difference between the government and petitioner concerns Congress's intent.

Petitioner contends that Congress, in adopting Section 844(i), intended to prohibit the destruction of business property only.

Further, petitioner defines business property narrowly.

The government, in contrast, contends that Congress intended to prohibit the destruction of any building, including business property, as long as a minimal connection is established between the use of the building and commerce.

The language, structure and legislative history all support the government's reading.

Section 844(i) states that it prohibits the destruction of any building used in any activity affecting commerce.

If Congress had intended to limit the section's coverage in the manner petitioner suggests, it could have prohibited the destruction of any business property, but it did not.

Unidentified Justice: Mr. Wright, is it the government's contention here that it is the second part of that descriptive language,

"or in any activity affecting interstate or foreign commerce."

that covers the property here in question?

Mr. Wright: Excuse me, Justice Rehnquist?

Unidentified Justice: Well, as I read the statute, it says whoever burns real or personal property used in interstate or foreign commerce or in any activity affecting interstate or foreign commerce.

Does the government claim it comes under the second of those two?

Mr. Wright: Yes.

We rely on the affecting commerce phrase--

Unidentified Justice: Yes, and what does the government say is the activity that this building was used in which affected commerce?

Mr. Wright: --Well, we suggest three activities that the building was used in that affect commerce: the gas that was used to heat the building, the building was used for rental purposes, and it was insured.

Unidentified Justice: Well what... would you say that... what activity does the building become used in by reason of the fact that it heats with gas that comes from out of state?

Does that put it in a separate activity?

Mr. Wright: The activity is simply the use of heat, and it affects commerce in that if the building is destroyed, the shipment of gas interstate would be reduced.

That, of course, is our broadest argument, and it is clear that in this case, had the one two-unit apartment been destroyed, the effect on commerce would have been slight in this case.

But arson is not uncommon, as the evidence before Congress in 1982 clearly shows, so that the effect on commerce would be substantial in the aggregate over the class of cases of arsons.

Unidentified Justice: There's certainly a lot of traditional law that says a piece of real property that is simply sitting in Chicago or somewhere else is not in interstate commerce.

Mr. Wright: The building is not in commerce, and that is why we are under the second phrase, as you noted, the affecting commerce phrase.

We believe it was used not in commerce but in an... in three activities affecting commerce.

Unidentified Justice: Why... it was a piece of rental property, wasn't it?

Mr. Wright: Yes, it was.

Unidentified Justice: Used for a business purpose.

Mr. Wright: That is one of our three contentions.

that is why we believe that petitioner--

Unidentified Justice: Why isn't that the activity, and then the activity affects commerce because the activity needs to be... the building that is being used in this activity needs to be heated?

Mr. Wright: --You do not need to go to our gas ground.

You could simply decide this case on the fact that the building was rented and hold that that is enough to bring the building into an activity affecting commerce, and if that is enough, you do not need to go farther, Justice White.

Unidentified Justice: How much do you rely, Mr. Wright, on the fact that it was insured by an insurer in another state, and that the whole transaction of making the claim, the false claim, had an impact on interstate commerce?

Mr. Wright: Well, that of course does make the interstate nexus more clear.

However, we would contend that especially with an insurance company like Allstate, that even if he had... even if Allstate didn't have multiple offices in many states, that its activities affect commerce.

Unidentified Justice: This just buttresses your case, then.

Mr. Wright: Yes.

And I might note in that connection, Justice Powell asked whether the building was insured with a homeowner's policy or a business policy.

As examination of Footnote 3 in our brief indicates, the Court of Appeals found as to the District Court that it was a business insurance policy, not a homeowner's policy.

Unidentified Justice: Mr. Wright, it would be hard to imagine any building that would not fall under the coverage of this section under the government's test.

Mr. Wright: Certainly under our broadest reading.

Let me suggest that that fits Congress' intent.

When Congress deleted the business purposes phrase from the statute, it did so in response to testimony from a number of Congressmen that churches, schools and private dwellings, I might add, as we note in our brief... Congressman Wiley and I believe Congressman Goldwater, as well, mentioned private dwellings... would not necessarily be considered business property, and Congress wanted to cover those.

It is... imagine a case that involved a band of terrorists who were burning churches and perhaps the homes of church officials and schools run by the church.

Evidence gathered by the FBI or the Bureau of Alcohol, Tobacco and Firearms might only link the terrorists to a particular Building, evidence might only be firm in the one case, and if that building did not happen to be rented or did not happen to be used for rental purposes, we maintain it would still be used in an activity affecting commerce if gas or electricity is used in the building because we believe Congress deleted the business purposes phrase in order to cover such a case.

We don't expect such a case would arise with great frequency, but it is possible, and that's why we think Congress broadened the phrase to cover other kinds of buildings.

Congress knew that by using the "affecting commerce" language, that it was sweeping broadly.

This Court recognized that in Scarborough where it said that Congress knows that when it uses that language, it is exerting its power to the full extent of its commerce power.

In fact, Congress made quite clear that it was exerting its power to the full extent of the commerce power.

It said that in 1970 House report, it said we intend to exercise

"the fullest jurisdictional breadth constitutionally permissible under the Commerce Clause."

The Representative who introduced the bill containing Section 844(i) stated that it was broadened

"to extend to the full extent of our constitutional power."

"Petitioners conceded that under the commerce power, Congress may prohibit the destruction of a building like this."

"Congress rarely states its intention so clearly to go to the full extent of a power like the commerce power."

Section 844(e) also supports the government's contention here.

Examination of that statute, which covers threats to destroy property, makes it illegal to threaten

"through the use of the mail, telephone, telegraph or other instrument of commerce."

to threaten to destroy any building.

It is clear there is no use in an activity affecting commerce language in that section.

Unidentified Justice: Is that set forth somewhere in your brief, Mr. Wright, 844(e)?

Mr. Wright: Yes.

I am not sure whether the entire section is set forth in our brief.

It is very similar to the language.

It prohibits the destruction of any building, vehicle or other real or personal property, and it uses the nexus to commerce phrase that I just quoted.

United States v. Fears is the only case that I know of decided under that statute which held that it covered threats to destroy a private residence, not even one used for rental purpose, as far as the case indicates.

The logical conclusion to be drawn from examination of the structure of the statute is that as in the firearms statute at issue in Scarborough, Congress intended that any minimal nexus between a building and commerce should satisfy the jurisdictional requirement.

It used the instrument of commerce requirement--

Unidentified Justice: Mr. Wright, I just read Section, Subsection (e) which I hadn't read before, and I notice it doesn't qualify the word "building" by the building being used in commerce or in an activity.

It just says any building.

Mr. Wright: --That is correct.

Unidentified Justice: It is perfectly clear that that would be covered.

Mr. Wright: That's correct, and the--

Unidentified Justice: Doesn't that sort of out against you when you contrast that language with the qualifying language that describes the kind of building in Subsection (i)?

Mr. Wright: --No.

We believe that that language, as the Court recognized in Scarborough, is really a jurisdictional statement, a statement that a nexus to commerce is required, and a very minimal nexus, and that the instrument of commerce language is used in 844(e) simply to indicate that, and that an affecting commerce language is used in 844(i).

To the contrary, it seems to us that it would make no sense to hold that Congress is more interested in threats than it was in actual destruction, and since a threat to build down this building, if made from the telephone, would have been covered by 844(e), we think an actual attempt to destroy it should be covered by 844(i).

Unidentified Justice: Of course, the threats they are talking about in (e) involve the threat of killing, injuring and intimidating individuals whereas this one just deals with the property offense.

So the threats in (e) are a little more serious.

Mr. Wright: That may--

Unidentified Justice: Well, anyway, (e), I guess we don't decide on the... may I just ask you this question?

Which of your three theories that you have do you think would apply to the Mennuti case?

Would you apply them all to acquire a different result in Mennuti?

Mr. Wright: --Certainly application of the gas.

Unidentified Justice: That clearly would.

Mr. Wright: I would.

The rental property is frankly much less clear.

There was some indication in Mennuti that there was an intention to rent that residence at some time in the future.

Frankly, a fair reading of the case indicates that Justice... or Judge Friendly would not have found the requisite tie, I think, but he wasn't really faced with that case there.

Unidentified Justice: I suppose what I may be asking is whether, at the cert stage very properly you suggested there was really no conflict with Mennuti, the cases were distinguishable.

Are you now asking us in effect to disapprove of Mennuti?

Mr. Wright: Yes, we are.

We presume that in granting certiorari, you decided that the cases are not fairly indistinguishable, a broad reading of that case--

Unidentified Justice: And four justices so decided, yes.

Mr. Wright: --At least four Justices.

Unidentified Justice: Mr. Wright, you don't contend that this particular conviction is sustainable under 844(e), do you?

Mr. Wright: No, we do not.

And petitioner relies heavily on a phrase in the House report that describes Section 844(i) in arguing that Congress intended to reach business property only.

The report, right after the statement that Section 844(i) represents Congress' full exercise of its commerce power, describes the provision as

"a very broad provision covering substantially all business property."

The government, of course, does not quarrel with that, the accuracy of that statement.

And the section is a very broad provision, and substantially all business property is covered by it But the government does not believe that the phrase was intended to limit Section 844(i)'s coverage.

Of course, a phrase in a committee report cannot rewrite the statute.

That is especially true where here Congress specifically considered the exact limitation proposed by petitioner and rejected it in order to broaden the statute's coverage, and stated that it so intended by doing that.

Unidentified Justice: Are you saying that having rental property with four or five tenants is, for purposes of this statute, essentially the same as the operation of the Drake Hotel, for example, or the Palmer House in Chicago?

Mr. Wright: We contend that both, the destruction of both would be covered by the statute.

In the case of a large hotel, the effect on interstate commerce from such a destruction would be greater, although I might add that the destruction of any one building has to have a slight effect on commerce, given the magnitude of interstate commerce.

But arson is common.

Petitioner concedes that a 43-unit apartment building affects commerce.

Twenty two-unit apartment buildings, the destruction of 20 two-unit apartment buildings would logically also affect commerce.

Our argument is an aggregation argument that in the aggregate, destruction of rental property, of buildings, affects commerce.

Of the three ties we suggested between this building an interstate commerce, the evidence considered by Congress most clearly shows the impact that insurance fraud arson has on interstate commerce.

At the 1982 hearings leading to the amendment of Section 844, Congress heard testimony of insurance industry officials who estimated that fires caused $1.3 billion in damage in 1979 alone, and that a substantial portion of all fires are set to defraud insurance companies.

Congress noted that the Bureau of Alcohol, Tobacco and firearms had saved over $54 million in false claims in 1980 by detecting arson schemes.

In this case, petitioner would have obtained $40,000 in insurance proceeds by destroying his building.

That by itself is not trivial.

In the aggregate, it is clear that this sort of arson, insurance fraud arson, has a major impact on interstate commerce.

Unidentified Justice: May I just ask on your insurance, is it your position that the statute, just confining myself to that theory, covers every insured building or only every insured building in which the arson is committed by the holder of the insurance, the owner of the insurance policy?

Mr. Wright: We would favor the broader theory.

You could confine yourself to a narrower motivation theory which would cover, then, of course not--

Unidentified Justice: So your position, basically your view is every insured building is covered by the statute.

Mr. Wright: --That the building is used in an activity affecting commerce both when it is insured--

Unidentified Justice: Well, practically every building--

Mr. Wright: --and when it is burned.

The other uses--

Unidentified Justice: --Well, what activity is it being used in when it is insured that distinguishes it from activities that uninsured buildings are used in?

Mr. Wright: --Simply the activity of going out and purchasing the insurance policy on the building.

That we believe is an activity--

Unidentified Justice: So you would import an extremely flexible meaning to the word "activity" to say the least.

Mr. Wright: --Yes, we do.

We believe that Congress meant that phrase

"used in any activity affecting commerce."

to signify that it was going to the full extent of its commerce power, and we believe that Scarborough and other decisions of this case... of this Court, rather, including the Reliance Fuel Company case, which was cited in the House report right after it stated that Congress intended to exercise its full jurisdictional reach, showed that that phrase has the broadest reach.

Unidentified Justice: So you don't go to the extent of the third theory that Judge Friendly talked about of a class of activities.

If a member of the... a specific example might not affect interstate commerce, but the entire class does, it is also covered under the Perrera case, is it?

You don't say they went that far.

They didn't use the full extent that time.

Mr. Wright: Well, Congress could have drafted this statute, I believe you are suggesting, in another way.

Unidentified Justice: Right.

Mr. Wright: It could have left off what I call the jurisdictional nexus phrase and probably, perhaps under Perez would have had to beef up the findings required to show the nexus.

But we believe that that phrase was added simply to require the showing of a slight effect on Congress so that--

Chief Justice Burger: But all I am suggesting is you do not really contend that Congress went as far as it could have gone had it redrafted the statute to make it clear it intended to cover classes of activities that might have... every member of every class of activity that might have an impact on commerce as in Perez.

Mr. Wright: --I suppose that even under our broadest reading of the statute, there are buildings that would not be covered, and I suppose that if Congress really sat down and wanted to cover every one under Perez, it may well be able to draft such a statute, but I believe that in this case it intended to go to its full extent.

Whether it only went 99 percent that far may be correct.

Many of this court's decisions have established that an activity having a slight effect on commerce may still be reached under the commerce power if the aggregate effect is substantial.

Unidentified Justice: Mr. Wright, are you always saying that merely collecting income and deducting expenses constitutes an activity affecting commerce?

Mr. Wright: Yes, yes, we maintain that under our theory that the building is--

Unidentified Justice: You said that in your brief, the statute.

That sweeps very broadly, doesn't it?

Mr. Wright: --We certainly admit that we are giving a broad reading to this statute.

We maintain that that is what Congress intended, and that is why it used the phrase "affecting commerce".

Unidentified Justice: If you rented out one room in your residence, you would be engaged in an activity affecting commerce?

Mr. Wright: The activity would be slight.

In the aggregate, would renting out one room, in apartments, it would be substantial, probably.

If you viewed it as the activity of renting, it certainly would be.

The wheat fed to Mr. Filburn's livestock never left the farm on which it was grown, the meat at Iley's Barbecue had moved in commerce, but by itself, racial discrimination at the restaurant hardly affected commerce in a substantial way.

The--

Unidentified Justice: I suppose that would cover installing a telephone or a television set, too.

That would be enough.

Mr. Wright: --The destruction of a building that used electricity, to use those sorts of instruments, would affect commerce, at least under our gas theory.

Unidentified Justice: You haven't mentioned now, although you have in your brief, that when it is commercial or rental property, depreciation is taken on it in a way that you couldn't on your own residence if you were occupying it.

Mr. Wright: That's right, and again, with a two-unit building, if that is slight--

Unidentified Justice: Well, I have never heard the IRS express the view that it covers only people who are affecting commerce.

I don't see what the taxation consequences have to do with interstate commerce since the Internal Revenue Code affects people regardless of their connection with commerce.

Mr. Wright: --Well, we believe that renting property contributes to the flow of money in commerce the way selling candy and gum does.

Unidentified Justice: Well, that may be an argument, albeit some might say a rather thin one, but I don't see that even that the Internal Revenue involvement is even a thin argument in support of the case.

Mr. Wright: We... adopting petitioner's view that this statute is limited to business purposes, we think that renting property is a business purpose, and we believe that it is an activity affecting commerce.

We certainly don't think that by deleting business purposes from the statute and broadening its coverage, Congress would have meant to decrease its coverage.

Unidentified Justice: No, but surely the petitioner ought to be in no better shade in this case if he had failed to file an income tax return deducting it, showing it.

Mr. Wright: No.

Unidentified Justice: But is it not, by taking a depreciation, he is labeling his enterprise as a business enterprise, which is a first step, a threshold step to having an answer to whether it affects commerce.

Mr. Wright: Yes, and the flow of money in commerce is affected by depreciation, by deductions, by reporting to the IRS.

Unidentified Justice: Commerce may not be affected if you just have a summer cottage where you go fishing unless other factors come in.

But this is the threshold that starts the connection with commerce, does it not?

Mr. Wright: Under our... the theory we have put forward second in our brief, the rental tie connection to interstate commerce, that's right.

It is clear that the rule must be that Congress may regulate activities that individually have slight effects on interstate commerce.

If Congress couldn't regulate activities if in the aggregate there was a substantial effect on commerce, its power would be limited severely under the commerce clause, and as has been suggested today, line drawing problems would abound, not only in this case, but in criminal and all sorts of other cases.

I would like to note that this Court has applied a broad reading of the affecting commerce language in criminal cases.

The loan shark in Perez was shown to have no connection to interstate commerce other than those connections presumed typical of loan sharks.

The gun possessed by the felon in Scarborough had once moved in interstate commerce, but it moved in interstate commerce before the felon was convicted of a felony.

Petitioner admits that activities having slight effects on commerce but nevertheless substantial effects in the aggregate affect commerce.

Petitioner does not quarrel with the numerous Courts of Appeals decisions holding, for example, that buildings are used in commerce if any sort of sales activity goes on in the building or if in the case from the Eighth Circuit, transient beekeepers happen to stay in the rental property.

The effect on commerce resulting from the destruction of any one building, even a large hotel, is bound to be slight, looked at individually, but substantial in the aggregate, and therefore Congress has the power to regulate.

Concerning the amendment of Section 844 in 1982, I would like to note briefly first that it was only one circuit, the Ninth Circuit in Gere, that had actually held that gasoline was not an explosive, which was the motivation for deciding... for adding "fire or" to the statute.

Congress did not mention Mennuti.

There is nothing in the hearings to indicate that Congress knew about Mennuti.

To the extent that Congress did know about Mennuti, it would have also known about the Second Circuit's almost simultaneous decision in Barton which approved a jury instruction that gas flowing in interstate commerce tied a building to commerce.

While it is true that that building was used for gambling purposes, we do not see how the effect on gas would have varied depending on whether the building was use for gambling or for rental purposes.

Petitioner also suggests that under United States v. Bass, this section should be construed narrowly.

In the first place, as we have shown, it is not reasonable to construe the statute as petitioner proposes because Congress specifically rejected that result in 1970 by deleting the business purposes phrase.

In addition, neither of the reasons petitioner cites in support of his argument that Section 844(i) ought to be construed narrowly actually applies.

This Court is reluctant to conclude that Congress does not federalize criminal law in the absence of clear congressional intent to do so.

Here there is that sort of intent.

When Congress enacted Section 844 in 1970, it simultaneously enacted Section 844(8)... 848, rather, which states that Congress did not preempt the states.

the discussions clearly show that Congress wanted the FBI, the Bureau of Alcohol, Tobacco and Firearms, and the Justice Department, to prosecute bombings and arsons and to investigate them where appropriate, and counted on the judgment of federal officials and cooperation among state and local officials.

We have quoted the National Association of Attorneys General in our brief which supported the amendment of the Section in 1982 to cover arson cases.

In short, the states have welcomed federal involvement.

Congress has recognized that it was changing the federal-state balance somewhat so that this case is different than Bass.

Nor is there any reason to construe Section 844(i) narrowly under the rule.

There is no grievous ambiguity here.

Two courts out of dozens that have construed the statute may have erred.

As we have shown in the Mennuti case, the judge was unaware of the full legislative history that the business purposes phrase had been deleted, and of course, was unaware of the interest and insurance fraud that Congress showed in 1982 after the decision had come down.

And there was no need to give petitioner fair warning here.

He surely knew that burning down an apartment building was unlawful.

Unidentified Justice: Was it unlawful under Illinois State law also?

Mr. Wright: Petitioner has told us that arson has a six to thirty year statute penalty.

I would be very surprised if attempted arson did not as well.

Unidentified Justice: Do you think attempted arson is not a crime under state law?

Mr. Wright: No, I believe attempted arson most certainly... I would expect that to be the case.

The Seventh Circuit's decision upholding petitioner's conviction should be affirmed.

Thank you.

ORAL ARGUMENT OF JULIUS LUCIUS ECHELES, ESQ. ON BEHALF OF PETITIONER -- REBUTTAL

Mr. Echeles: I will be brief, as much because it is five minutes of 12:00 as anything else.

Mr. Wright was wrong when he suggested to Your Honors that there are three standards by which this court can affirm the case.

There are three concepts: one, that gas was used to heat the house; two, it was a rental building; and three, it had insurance.

Well, supposing gas were not used to heat the house?

And there are many houses in Chicago.

There are probably a number that don't have gas or electricity and they are using kerosene.

So that knocks out number one.

Supposing it were not rented at the time, in this two-unit apartment, two-unit flat, one was not rented, one was rented.

Supposing there was an interim nonrental.

So two would be knocked out.

And what would they be left with?

Insurance.

But that is a false argument, Your Honor.

There was insurance.

No indication in the government's brief, as it states on page 3 of its brief, in the footnote that the building had property insurance.

In their brief it states, there was a stipulation which was not a stipulation.

I will show it before 12:00 o'clock.

Thus government's brief says that the building on South Union was insured by Allstate.

That's all.

It doesn't say it was insured in a business manner.

It was a fire insurance policy on the building.

And Allstate, I may advise Your Honors, although it is outside the record, has its headquarters in a Chicago suburb.

It is an Allstate subsidiary that has its headquarters.

But even if Allstate had its headquarters in another state, Indiana or Michigan or someplace, in order for them to come under the insurance concept, something had to be done.

They had to use the mails in order to come under the federal jurisdiction.

Merely defrauding an insurance company doesn't make it a federal offense.

There are many cases where insurance companies are defrauded and the person is charged with mail fraud.

So the element that must be proved by the government is use of the mails.

Failure to do that takes it out of federal jurisdiction.

Well, two more minutes, this Court should not expand Congress' legislative concepts to encompass every activity, every potential criminal act into the federal maw.

As a matter of fact, there is a problem with the federal courts.

Some of Your Honors have expressed it.

And there should be a limitation on the federal jurisdiction and not expanding the federal jurisdiction.

And where Your Honors have a case, as this one is, where the... there is ambiguity in the passage of the enactment, where the congressional discussions leave room for doubt whether this kind of building was encompassed, Your Honors should the more readily deny the government its expansive concept and hold that there was no federal jurisdiction in this case.

Thank you very much.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.