Transcript

CHIEF JUSTICE WILLIAM H. REHNQUIST: We'll hear argument first this morning in No. 91-594, American National Red Cross, Petitioner, v. S. G. and A. E. Mr. Englert.

MR. ROY T. ENGLERT: Mr. Chief Justice, and may it please the Court: The question presented in this case is whether the sue and be sued clause in the Red Cross charter gives jurisdiction to the Federal courts or, instead, merely confers on the Red Cross the capacity to sue and be sued.

The clause gives the Red Cross, quote, the power to sue and be sued in courts of law and equity, State or Federal, within the jurisdiction of the United States, end quote. The phrase State or Federal, on which we rely, was added to the charter in 1947.

>From 1905 to 1947, the Red Cross had the same power to sue and be sued in courts of law and equity, but the Federal courts were neither excluded from nor specified in that grant of capacity. There is no possible basis to doubt that the Red Cross had the capacity to sue and be sued in Federal court between 1905 and 1947. Nevertheless, the First Circuit construed the 1947 amendment as merely conferring that very same capacity. That, we submit, was the court's first error. But the case for giving a jurisdictional reading to the sue and be sued clause rests on much more than the fact that the First Circuit construed the 1947 amendment to be meaningless. It rests on two venerable decisions of this Court: Osborn v. Bank of the United States, and D'Oench, Duhme & Co. v. FDIC. The Osborn decision, written by Chief Justice Marshall, has been regarded as a landmark decision of this Court for 168 years. The D'Oench decision, now 50 years old, is famous in its own right in the banking field.

And it's especially important because it was decided just before the amendments to the Red Cross charter were drafted. The Court in Osborn construed the sue and be sued clause in the charter of the Second Bank of the United States as a grant of jurisdiction.

In fact, the Court thought the point so clear that it said that the words could not be made plainer by explanation. The Court recognized that some sue and be sued clauses will merely confer the capacity to sue and not jurisdiction.

JUSTICE ANTHONY KENNEDY: And I suppose we could explain the result in Osborn by saying that that was an instrumentality of the United States. I think there is no question that the bank was an instrumentality. Wouldn't you agree with that?

MR. ENGLERT: I agree with that; and there is no question that the Red Cross is an instrumentality of the United States. This Court has so held.

JUSTICE KENNEDY: Well, but was the Bank of the United States not an instrumentality in another sense? In other words, it was an arm, an instrument, an instrumentality in the United States, an agency of the United States?

MR. ENGLERT: I believe not, Justice Kennedy. The Bank of the United States was 80 -- the second Bank of the United States was 80 percent privately owned.

JUSTICE KENNEDY: Well, then McCulloch v. Maryland was wrong.

MR. ENGLERT: No, Your Honor, McCulloch v. Maryland was right, and McCulloch v. Maryland was applied to the Red Cross in the Department of Employment v. United States, and has been applied to Army post exchanges -- to other similar entities, that while not agencies of the United States are tax-immune instrumentalities of the United States.

JUSTICE KENNEDY: Does the Red Cross have a special tax exemption?

MR. ENGLERT: It has been held by this Court to have a special tax exemption, by virtue of its status as an instrumentality of the United States.

JUSTICE KENNEDY: But as a matter of our jurisprudence and not just some statutory -- expressed statutory provision?

MR. ENGLERT: That's correct. It receives special tax treatment under a variety of statutes. But its immunity from State taxation is -- was held by this Court to exist in Department of Employment v. United States, by a line of cases directly descending from McCulloch v. Maryland.

JUSTICE KENNEDY: Well, I thought the international charter of the Red Cross made it rather clear that a national organization should not be any part of governmental entity. And it seems to me that that's quite inconsistent with what you're saying now.

MR. ENGLERT: No, Your Honor, that argument, too, was made to this Court in the Department of Employment v. United States case, and rejected -- and has been rejected by the Ninth Circuit in subsequent cases. It is certainly true that the charter of the international -- not the charter, the statutes of the International Committee of the Red Cross do require that the national organizations be autonomous from their Federal governments. And the Red Cross does have sufficient autonomy to comply with that statute. It has been certified as being in compliance with that statute.

At the same time, however, it partakes sufficiently of governmental status that it is, under this Court's decisions, a tax-immune instrumentality. It was referred to by the Court in the Department of Employment as virtually an arm of the United States Government.

CHIEF JUSTICE REHNQUIST: Did you cite Department of Employment to the Court of Appeals for the First Circuit?

MR. ENGLERT: Yes, Your Honor.

JUSTICE ANTONIN SCALIA: Mr. Englert, don't you think language in Osborn is really quite different? I mean, there it refers to jurisdiction. The grant was the right -- the power to sue and be sued in all State courts having competent jurisdiction, and in any circuit court of the United States. It's clear that the Congress that wrote that had jurisdiction in mind.

MR. ENGLERT: Well, we think it's equally clear that the Congress that wrote the Red Cross charter had jurisdiction in mind.

JUSTICE SCALIA: Well, what's the first half of it in this one?

MR. ENGLERT: State and Federal courts are referred to in parallel fashion in the Red Cross charter. It says any court of law or equity, State or Federal.

JUSTICE SCALIA: State or Federal. Is it conferring jurisdiction over State courts that don't have jurisdiction?

MR. ENGLERT: No, Your Honor. I don't think that Congress has the power to do that.

JUSTICE SCALIA: Of course not. So it's possible to think in this grant, that jurisdiction is not referred to. It is impossible in Osborn to think that jurisdiction is not referred to.

MR. ENGLERT: Well, Professor Wright certainly disagrees with that proposition. He has been known to --

JUSTICE SCALIA: Well, maybe he is wrong.

MR. ENGLERT: -- question the Osborn ruling. Well, maybe he is wrong. (Laughter.) In any event, Your Honor, that is the First Circuit's reasoning. And the court might have read the charter in Osborn as a grant of jurisdiction for that reason. But it didn't.

It read the charter in Osborn as a grant of jurisdiction for a quite different reason. It said the difference between this charter, and the charter of the First Bank of the United States is that the charter of the First Bank did not mention the courts of the Union. And because this charter mentions the courts of the Union, it must be construed as a grant of jurisdiction.

JUSTICE SCALIA: Did the First Bank -- the First Bank of the United States provision say in all State courts having competent jurisdiction, as well?

MR. ENGLERT: No, it referred to courts of record. It didn't --

JUSTICE SCALIA: Courts of record. It didn't refer to jurisdiction at all.

MR. ENGLERT: It did not refer to jurisdiction at all. But again, whatever validity that argument might have had as an initial matter, that that's the reason why the charter in Osborn grants jurisdiction, is not the reason that was advanced by counsel, or by Chief Justice Marshall for the Court.

The only justice who cited that provision in Osborn was Justice Johnson in his dissent. It played no role in this Court's reasoning in Osborn. Osborn aside, the charter in D'Oench, Duhme & Co. v. FDIC is exactly like the Red Cross charter. It refers to any court of competent -- a court of law or equity, State or Federal, in exactly parallel fashion. And this Court observed in D'Oench, Duhme that that clause was a grant of jurisdiction. Now, that was just 5 years before the Red Cross charter was amended. And the Congress was entitled to accept this Court's representation in D'Oench that amending a charter so that it said that an entity may sue and be sued in any court, State or Federal, is a grant of jurisdiction.

JUSTICE SANDRA DAY O'CONNOR: Mr. Englert, do you plan to address the constitutional concerns that were raised in the respondents' brief, and tell us in what way cases arise under Federal law within the meaning of article 3, simply because the Red Cross is a litigant

MR. ENGLERT: Well, that question was addressed and answered for the first time in Osborn. And the holding of Osborn in that respect has been reiterated through the years, up to as recently as the Verlinden case in 1983.

JUSTICE O'CONNOR: Well, don't you think in Verlinden and more recent cases this Court has been wary of that kind of a -- an approach?

MR. ENGLERT: This Court has been wary of extending that kind of approach. There's no question. But we're not asking for an extension of that kind of approach, by any means. What the Court said in Osborn, what it reiterated in Bankers Trust, what it reiterated in Puerto Rico v. Russell & Co., what it reiterated in Gully, was that a lawsuit against a federally chartered entity, necessarily has an ingredient of Federal law because that entity has no powers, save those granted by its charter.

JUSTICE O'CONNOR: Well, what law is going to apply in the tort suit, do you suppose?

MR. ENGLERT: State law. That does no prevent the case from arising under Federal law for purposes of --

CHIEF JUSTICE REHNQUIST: Well, it does, as in the -- it certainly does, as a matter of plausible, logical argument, even if not precedent.

MR. ENGLERT: Well, Your Honor, as was pointed out in Verlinden, the Court has taken two divergent paths in interpreting arising under, under the statute and under the Constitution. The Court has construed arising under very narrowly, under section 1331.

It has construed arising under very broadly under the Constitution. And again, it has been established, since 1824, that if the suit is against a federally chartered entity, that entity's capacity to sue and be sued is an ingredient of the action that gives it the necessary

Federal element to satisfy article 3. And again, I would say that has -- that aspect of Osborn has, to my knowledge, never been questioned. It is not the aspect that Justice Frankfurter questioned in his Lincoln Mills dissent. It is not the aspect that is questioned in Hart and Wechsler; it is something that, to the contrary, this Court has reaffirmed. In Gully, the Court said that the doctrine of the charter cases -- although to be treated as exceptional -- is not being questioned within its own realm.

We do not think, ultimately, the constitutional question -- in light of this Court's decisions -- is a serious one. I put it that way because obviously the Court shies away from serious constitutional questions in construing statutes, but --

CHIEF JUSTICE REHNQUIST: Do you have any further justification for the doctrine on its merits, rather than on the basis of state decisis?

MR. ENGLERT: Yes, Your Honor. The Red Cross, as I was saying in response to some of Justice Kennedy's questions, is an important Federal instrumentality. It exists for the purpose of fulfilling treaty obligations of the United States.

It was chartered in 1905 for the explicit purpose of putting it under Government supervision. It was re-chartered in 1947 for the explicit purpose of recognizing its national stature. This is exactly the kind of very special entity that logically fits within the jurisdiction of the Federal courts, if Congress wishes to place it there -- which is, of course, what we submit Congress has done. This is not a corner grocery store, or -- to take an example from this Court's cases -- a railroad that the Congress has chartered.

This is the American National Red Cross, a very important national and international entity. And we think that there is no question that article 3 is broad enough to allow the Federal courts to give party-base jurisdiction.

If I might return to this Court's precedent -- notwithstanding the Chief Justice's question -- in FSLIC against Ticktin, decided 3 years ago, the Court explained at some length that there was party -- party-based jurisdiction -- that was the Court's phrase -- over the -- over cases brought by or against the Federal Savings and Loan Insurance Corporation. Again, the Court was not troubled by the idea that jurisdiction could depend on who the party is and not what the questions raised are -- which is, again, what we submit is true in this case. Now, FSLIC, like the --

JUSTICE SCALIA: Well, maybe the Court wasn't, but the Constitution was. I mean, it really does -- it speaks about certain categories of party-based jurisdiction -- cases affecting ambassadors, controversies to which the United States shall be a party. It lists a bunch of party-based bases of jurisdiction, but not among them cases to which any instrumentality of the United States shall be a party.

MR. ENGLERT: No, and that's exactly why in Bank of the United -- in Osborn v. Bank of the United States, Chief Justice Marshall examined for the Court the meaning of the grant of arising under jurisdiction in the Constitution and not one of those other grants of jurisdiction in article 3, section 2, and held that it was within the jurisdiction, within the constitutionally granted jurisdiction that Congress could confer, to have that kind of party-based jurisdiction in suits by and against an instrumentality of the United States.

If the Court thinks it necessary to look to the legislative history of the Red Cross charter, it will find further support for our position on the statutory question. The reports to the Foreign Relations and Foreign Affairs Committees refer the reader to the Harriman Committee Report.

The Harriman Committee Report, in turn, explains the reference to State and Federal courts as one that was being added, quote, in view of the limited nature of the jurisdiction of the Federal courts. There is just no way that the limited nature of the jurisdiction of the Federal courts can have anything to do with the grant of capacity to sue. The language of the Harriman Committee Report makes sense only if one construes the charter as a grant of jurisdiction. No decision of this Court --

JUSTICE DAVID H SOUTER: What -- may I -- excuse me. What do you say to the argument that it may have been intended to answer a question about the possibility of diversity jurisdiction?

MR. ENGLERT: Your Honor, I don't think there was any serious question about the possibility of diversity jurisdiction at any time since 1905. The difficulty that federally chartered entities sometimes encounter in invoking diversity jurisdiction is that, because they are not citizens of any State, they lack a basis for diversity jurisdiction. That's no true of the Red Cross. In the 1905 charter, the section now codified at 36 U.S.C. section 1, and again in the 1947 charter, the section codified at 36 U.S.C. section 1A, the Red Cross is stated to be a citizen of the District of Columbia.

In light of that, the cases that say Federal corporations can't sue in diversity have no bearing on the Red Cross, and never had any bearing on the Red Cross. Even if one were to suppose that something in the charter had res diversity jurisdiction, it would surely be sections 1 and 1A, no the sue and be sued clause in section 2. The First Circuit relied heavily on this Court's 1916 decision in the Bankers Trust case. But in our view, it simply got that decision wrong. The sue and be sued clause at issue in that case made no reference to the Federal courts.

And it was not a serious candidate to be construed as a grant of jurisdiction. The court, quite naturally, said that Congres would have used altogether different words had it wished to confer jurisdiction.

Congress did use altogether different words in the Red Cross charter. And the Bankers Trust case doesn't stand for anything more sweeping than that. I'd like, if I may, to reserve the balance of my time for rebuttal.

CHIEF JUSTICE REHNQUIST: Very well, Mr. Englert. Mr. Mann, we'll hear from you now.

MR. RONALD J. MANN: Thank you, Mr. Chief Justice, and may it please the Court: If I may, I'd like to start by addressing the constitutional question which seems to have troubled some of the justices. We agree entirely with the Red Cross, that article 3 of the Constitution permits Congress to extend jurisdiction to cases of which the Red Cross is a party. In article 3 section 2 there are two clauses of the Constitution that are relevant to cases of this sort.

One clause that says that the judicial power shall extend to all cases arising under this Constitution, the laws of the United States, and treaties made under their authority; the second clause says that the jurisdiction -- the judicial power shall extent to controversies to which the United States shall be a party. In our view, this case involves a sufficient Federal issue that -- it arises under Federal law, not just because this Court has said clearly in the past that it does, but as a matter of logic and sound constitutional interpretation.

First, as a matter of fact in this particular case, the Red Cross is likely to raise issues of Federal law in defense to the lawsuit. We understand the Red Cross will contend that it is not subject to punitive damages because of its relation to the Federal Government, and also that it, in some cases, has resisted demands for jury trials because of its relation to the Federal Government.

CHIEF JUSTICE REHNQUIST: Is that established law, Mr. Mann, that if someone -- if in a corporation is, quote, related, close quote, to the Federal Government it's not subject to punitive damages?

MR. MANN: No, it is not established Federal law, but it is an issue of Federal law that the Red Cross plans to raise in this particular case. We express no view on the merits of it. But I'm pointing out that --

CHIEF JUSTICE REHNQUIST: Well, that sounds like bootstrapping, though, to say we're going to raise an issue of Federal law; we have no cases to support it. And then you say because they're going to raise an issue of Federal law that tends to support Federal jurisdiction?

MR. MANN: I must have misunderstood your question. There are cases to support that argument. There do not appear to be any cases squarely on point applying those types of immunities to the Red Cross.The Red Cross -- the second reason why this case falls --

JUSTICE O'CONNOR: Well, I thought Mr. Englert had indicated a concession that State law would apply to this suit.

MR. MANN: I believe that --

JUSTICE O'CONNOR: And it seems to me you're now arguing that, at least in some areas, Federal law is applicable.

MR. MANN: No, Justice O'Connor. I believe that Mr. Englert's concession was that State law will apply to the substantive determination of whether the Red Cross was liable as a matter of negligence or under some other State tort theory. They do plan to introduce Federal defenses.

But that's not the real, main point. The main point is that this case would arise under Federal law for purposes of article 3, without regard to any particular issue raised in the case. And that's the point that this Court has repeatedly made, and that's what I would like to address.

It's important to realize that the Red Cross is powerfully affected with the Federal interest. The United States has entered into quite a number of treaties requiring it to maintain an institution such as the Red Cross.

The Red Cross is the entity that performs the United States' obligations under various Geneva Conventions. In fact, the charter provides that if the United States subsequently enters into treaties, the Red Cross will do this.

JUSTICE KENNEDY: Well, what's the general principle that you're arguing, that it is then an instrumentality of the United States, unlike, say, a railroad that has a Federal -- charter?

MR. MANN: In our view, it's also well established that a railroad chartered by Congress would -- cases to which a railroad was a party, would arise under Federal law. That was decided in the Pacific Railroad Removal cases, and this Court has repeated --

JUSTICE KENNEDY: So then all of these important international and national attributes of the Red Cross are really quite beside the point so far as your standard is concerned?

MR. MANN: I think they're beside the point under this Court's precedent. But what I'm trying to address is, to the extent that people are concerned that those precedents may go too far, and it is suggested that Congress could extent the judicial power to cases that would be improper, this case does not present a serious problem under that. It does not raise that concern because the Red Cross is so closely related to the United States Government that it's clear that Congress could extend it to the Red Cross.

JUSTICE KENNEDY: So your legal standard is the proximity of relation to the United States Government is controlling?

MR. MANN: I believe that it would -- if this Court wished to cut back on the constitutional rule that it has articulated in the Pacific Railroad Removal cases, it would be unlikely that it would do so to an extent that would deprive entities that are as closely related to the Federal Government as the Red Cross, and perform statutory and treaty-mandated function as important as those that are performed by the Red Cross. And I would suggest that that would be an appropriate lending principle that would allow this Court not to have to face a significant constitutional question in this case. I would also point out that this Court's decision in Osborn v. Bank of the United States specifically acknowledged that -- a number of limits on the rule that are articulated.

It did no say that Congress could merely throw a cloak over a State corporation and thereby bring the corporation into Federal court. It pointed out there, as in this case, that Congress didn't just make this entity a Federal corporation just to get it into Federal court.

Congress created the Bank of the United States to serve important Federal purposes. Congress gave the Bank of the United States all of its powers, capacities, authorities, and imposed obligations under it -- on it -- under Federal law.

Congress has done just the same with the Red Cross. Congress created the Red Cross to perform important Federal purposes. Those purposes are the very reason for the Red Cross' being.

Accordingly, the ability of the Red Cross to incur any obligations necessarily raises some ingredient of Federal law in each and every case to which it's a party. And we believe that that analysis makes the constitutional question much less serious here.

JUSTICE JOHN PAUL STEVENS: Well, of course, to the extent that you're saying there's almost a Federal issue in every case that they're a party to you don't -- you don't have to win this case. You can get in Federal court on Federal question jurisdiction.

MR. MANN: No, that's not entirely accurate, Justice Stevens, because to get in under Federal question jurisdiction you have to come in under section 1331 of title 28. And as you know from the opinion in Merrill Dow there's a variety of rules that this Court has articulated to limit the statutory, arising-under jurisdiction to a much narrower field of play than the constitutional arising-under jurisdiction -- even though both clauses have the same meaning. This case, for example, would no satisfy the well-pleaded complaint rule this Court has articulated as a limitation on section 1331.

On the other hand, it's quite a different thing to say that Congres could not constitutionally extend the jurisdiction to cases involving the Red Cross. And so there are quite a number of cases involving the Red Cross to which section 1331 would not extend. I -- the issue in this case in substance and effect is whether or not those cases can be brought into Federal Court under the separate grant of jurisdiction.

JUSTICE STEVENS: Well, one of the first questions is whether we should adopt a construction of the statute that makes it entirely unnecessary to even consider the constitutional problem.

Maybe you're dead right on it. But generally, we try to avoid -- construe statutes so we don't have to express a judgment on a constitutional question.

MR. MANN: That's entirely accurate. That's my point, as I don't believe that there is a substantial constitutional question --

JUSTICE STEVENS: There's just not a substantial question.

MR. MANN: -- in this case. If the issue in this case were a neighborhood grocery store in the District of Columbia that, for some patronage reason, Congress cloaked with a Federal charter simply to get it into Federal court, and it had no significant relation to the Federal Government, and for which there was no reason for its having a Federal charter except to get into Federal court, I think this Court might step back and say well, we've said that any Federal charter will satisfy but that one does not. And, in fact, the analysis in Osborn suggests such a limitation.

The last thing I would like to point out on this point is the criticisms to which Justice O'Connor refers are, for the most part, directed at this Court's interpretation of the statutory jurisdiction. It is true that this Court repeatedly has criticized the notion that Congress would have wanted to extend with the general Federal question statute all of the permissible jurisdiction permitted by article 3 to the courts. And Justice Frankfurter, in the Lincoln Mills case, and the Court in the Romero case, rightly, suggested that it would be unwise to believe that Congress, in a general statute, intended to commit every single piece of jurisdiction that the arising-under clause permits. But that criticism is not directed at the notion that Congress constitutionally could take an entity that is an arm of the United States -- to use this Court's phrase -- and create Federal jurisdiction over cases to which it is a party. If I could just, in brief, in closing -- the real gist of our argument on the merits is that the 1947 statute was enacted in an historical context. Congress created the Red Cross in 1905. They clearly, at that time, gave jurisdiction over cases to which it was a party.

They also clearly gave it capacity. When Congress, in 1925, passed the general statute that is now section 1349, it took away jurisdiction over cases to which the Red Cross was a party.

It did nothing to alter capacity. There is not a suggestion in the materials that the Red Cross did not have the capacity to sue in Federal courts in the period just before the 1947 charter amendment statute.

JUSTICE STEVENS: How do you explain the statement of Mr. Spofford that the only amendment of section 2 is to make it clear that suits can be maintained in Federal as well as States' courts, which has not been clear?

MR. MANN: The --

JUSTICE STEVENS: You can answer that question, I think.

MR. MANN: My understanding of the context of the discussion in the hearings is that the discussion in that case -- the discussion in the hearings was focused on the question as to why the charter did not also include a right to sue in foreign courts. And there is --

JUSTICE STEVENS: No, that came up later. But this came -- this came before all that colloquy.

MR. MANN: At the very beginning, his explanation of it?

JUSTICE STEVENS: Yeah.

MR. MANN: We believe that that is a precursor, and substantially means the same thing as the explanation and the discussion after recommendation 22, which states that what they meant by that was that there was a doubt regarding the jurisdiction because of the limited nature of the jurisdiction of the Federal courts. It doesn't use the word capacity. It refers to right to sue.

CHIEF JUSTICE REHNQUIST: Thank you, Mr. Mann. Mr. Upton, we'll hear from you.

MR. J. GILBERT UPTON: Mr. Chief Justice, and may it please the Court: We would state the issue in this case a little differently from the petitioner. We believe the real issue here is whether Federal jurisdiction over ordinary tort actions with no Federal issue and no limit on the amount in controversy should be implied from doubtful and ambiguous language in the Red Cross charter. Now, Red Cross claims that the sue and be sued clause in its charter is a grant of Federal jurisdiction. Sue and be sued clauses are generally construed as simply a grant of capacity to litigate. They ordinarily appear in corporate charters, whether they be Federal or not. They're not usually construed to be anything other than the capacity to litigate, unless there is some very clear and specific language.

We would say that they -- the courts have construed sue and be sued clauses as grants of Federal -- of court jurisdiction, but usually it's only when there's very specific and clear language, and usually there's a reference to particular courts.

There's got to be some way that you distinguish the language which relates to capacity to litigate to the language which is a conferral of jurisdiction, especially if it's all mingled into one sentence, as this is. And that's why the courts have ordinarily required some very specific language referring to particular courts. There are a couple cases this Court has considered. The first one was the Deveaux case in 1809, and later the Bankers Trust case in 1916. The language is very general in those two cases, and this Court ruled in each of them the language was not specific enough to be a grant of jurisdiction. In the case of Osborn v. the Bank of the United States, which was handed down in 1824, there was -- this Court did rule that there was a grant of Federal jurisdiction there.

And this is the case that the Red Cross relies primarily on. But we would suggest that the language in the Osborn case, especially the bank charter, is quite distinguishable from the Red Cross charter. The Bank of the United States, the second --

JUSTICE KENNEDY: In other words, you're not asking us to overrule the Osborn case?

MR. UPTON: I don't think it's necessary in this case, Your Honor. I think the charters -- the language in the two charters are quite different. The Red Cross is seeking to extend the holding in Osborn. And I certainly don't think that should be done.

JUSTICE KENNEDY: We seldom overrule Chief Justice Marshall, I suppose.

MR. UPTON: I'm not suggesting that. I think that if it's limited to the language that's there, it's a good decision -- at least on that point. What was provided in that second bank charter was to sue and be sued in all State courts of competent jurisdiction, and in any circuit court of the United States. As I suggested -- as I've said, we think those charters are markedly different. The Red Cross charter simply provides sue and be sued in courts of law and equity, State or Federal, within the jurisdiction of the United States.

The Red Cross charter is general and unspecific. The bank charter is quite specific, and uses the language of jurisdiction. The bank charter, in our view, is carefully drafted. It allows each State to determine the jurisdiction of its own courts.

And there is a recognition and there's deference paid to the State court system of each State -- State courts of competent jurisdiction. However, as to Federal jurisdiction, it designates the circuit courts of the United States which, at that time, were the Federal courts of original jurisdiction. So this is quite a specific and carefully drafted charter. And as I've said, I think if it's confined to the language in that charter, it's a good decision. It shouldn't be expanded, as the Red Cross suggests, because

I think it will make that decision almost meaningless. The Red Cross charter uses the words State or Federal. And I would suggest that those two words are so general, they encompass the entire judicial system of the United States.

JUSTICE STEVENS: Yes, but let me ask you this question, if I may --

MR. UPTON: Sure.

JUSTICE STEVENS: -- why did they have to add the word Federal? Because there can't have been -- and wasn't it true that before the amendment the American Red Cross was a -- specifically designated as a citizen of the District, so there couldn't be any question about its diversity jurisdiction?

MR. UPTON: I don't think that's true, Your Honor, because -- I don't think that --

JUSTICE STEVENS: Your opponent told us it was true. I guess one of you has to be --

MR. UPTON: Yes, I think that -- that part of it is true. What I am saying is that I think that there still was a question on diversity jurisdiction, because although this corporation was a citizen of the District of Columbia, the Tidewater decision didn't come down until 1949. And that was when it was ruled that a grant of jurisdiction -- or put it this way -- that if a corporation is domiciled in the District of Columbia, then it was a citizen of a particular State, even though it wasn't a State. That's what they ruled in Tidewater. But that wasn't handed down --

JUSTICE STEVENS: And before that -- what you're saying is that --

MR. UPTON: -- until after --

JUSTICE STEVENS: -- time it was not clear that a corp -- a corporation domiciled in the District was a citizen of the State for diversity purposes.

MR. UPTON: That's correct, Your Honor. As I understand it, that statute was enacted in 1940, the District of Columbia statute, and it wasn't approved by this Court until 1949. So I think there was still was a question there to be clarified. And I think Red Cross is playing it safe.

Going on, I would say that in the Red Cross charter, there's no concern there as to which States have -- State courts have jurisdiction over the Red Cross. And as to Federal courts, the language is so general, it opens up the entire Federal system to the Red Cross, at any level. I would suggest that the word Federal has no special or technical meaning which would give the Red Cross access to the United States District Courts. There --

JUSTICE SOUTER: Well, wasn't that true in D'Oench?

MR. UPTON: D'Oench is a case which can be distinguished. Because in D'Oench, there is language very similar to the Red Cross charter, but further on in the same charter is language that says all cases against the corporation shall be deemed to arise under the laws of the United States. So it's quite a different situation there.

JUSTICE SOUTER: This Court didn't rely on that language, did it?

MR. UPTON: It's not clear what -- the case was not even litigated on the jurisdictional issue, as far as I can tell. And I don't think that the Court relied on the language in the footnote or the language in the decision as far as Federal jurisdiction because that really wasn't litigated in the case. The real point at issue in that case was which law governed and whether it was -- and there was a suit on the enforcement of a note -- suit for the enforcement of a note. And as I recall it, the State law of Illinois or Missouri or the Federal law was to control. And the Court finally determined the Federal law was controlling.

And the jurisdictional issue as to whether Federal court was -- this Court and lower courts had jurisdiction over the D'Oench case was never actually litigated. The parties all conceded that this Court had jurisdiction. And that's what the circuit court observed, too.

*JUSTICE: I suppose it's of no legal consequence, but what is the comparative condition of the court calendars in Federal court and State court in New Hampshire?

MR. UPTON: Well, I understand from my limited conversations with the Federal judges, that they're just as busy as they can be. We keep adding another judge, from time to time.

*JUSTICE: Well, if you stayed on the State side, would this case come on sooner than if you were on the Federal side?

MR. UPTON: I would say yes, Your Honor.

*JUSTICE: By very much?

MR. UPTON: Pardon me?

*JUSTICE: By very much?

MR. UPTON: I can't honestly say that's true. I think the usual timeframe is a year and a half to 2 years in Merrimack County Superior Court. And in Federal court -- I'm sorry -- in Federal court, Brother Richardson advises me, it's usually 3 to 4 years. So there is a difference.

*JUSTICE: I might say that's not true everywhere.

MR. UPTON: I'm sure that's true. Well, I was saying, the word Federal to me has no special or technical meaning that should open up the Federal courts to the Red Cross. It's too general. I'd also observe that State and Federal courts are treated with equal generality, and there's no concern in the drafting of that Red Cross charter for the peculiarities of the State system and the Federal system. One is a State of general -- has courts of general jurisdiction; the other has courts of limited jurisdiction. And I think we have a right to ask, when Federal jurisdiction is going to be conferred, that it be done in a specific way, and done clearly.

JUSTICE STEVENS: Mr. Upton, can I ask you another question about your reliance --

MR. UPTON: Yes, sir.

JUSTICE STEVENS: -- on Tidewater. As I understand what you're saying is that although the statute had given -- had made a citizen of the District, a citizen of the State, there was some doubt about the constitutionality of that statute.

MR. UPTON: That's correct.

JUSTICE STEVENS: Well, why wouldn't the same constitutional doubt apply to the amendment to the Red Cross charter, if it related only to diversity jurisdiction? If that was the doubt, and if they're trying to be sure about the question, wouldn't they have -- doesn't it mean that they must have been intending to confer Federal question jurisdiction? Because it seems to me if the constitutional doubt applied to the existing Federal statute, it would equally apply to the amendment to the Red Cross charter.

MR. UPTON: Well, let me say this. I find the discussion in the legislative history concerning this matter extremely ambiguous and confusing. I'm not sure what Congress was talking about. And the only way I can unravel any meaning out of it is to say I think they're talking about diversity jurisdiction here. Of course, one thing -- there've been some developments over the years which pertain to this situation. And that is, the Red Cross is a Federal corporation. And in 1916, in the Bankers Trust case, this Court ruled that a Federal corporation -- in this case the railroad -- was doing business in no particular State, but many States. So it had no base. And that may have had some pertinence to the situation. And in 1925, as has been observed, the predecessor statute to 1349 was passed, which precluded Federal corporations from invoking Federal jurisdiction, unless they were owned or controlled by the United States. Now, those developments may have had something to do with the passage of this amendment in 1947.

JUSTICE STEVENS: Of course a simpler way, if they wanted just to be sure, and avoid any question on diversity jurisdiction was to make the corporation a citizen of Maryland rather than the District.

MR. UPTON: That would have been --

JUSTICE STEVENS: Which would -- that would have made it perfectly clear --

MR. UPTON: -- much better.

JUSTICE STEVENS: -- that that's all they wanted to do was to give diversity jurisdiction.

MR. UPTON: That could well have been done. My feeling is that the -- and the First Circuit, too -- is that this amendment was very poorly drafted. It should have been more specific as to exactly what they were driving at.

*JUSTICE: Mr. Upton, do you think the Bankers Trust case, which involved a railroad, and applied to all railroads in the country, really, is any different from this case which applies to one corporation, the American Red Cross?

MR. UPTON: I don't think there's any difference in the principle --

*JUSTICE: From a pragmatic point of view, I suppose the Court, as it was constructed back -- looked with alarm on every railroad case coming into Federal court.

MR. UPTON: Well, there could be some alarm with whether or not other Federal corporations with similar charters may attempt to invoke Federal jurisdiction, if this case is -- if we construe this charter as a grant of Federal jurisdiction.

*JUSTICE: So you think there are cases that hang on this one then?

MR. UPTON: I think there are other Federal corporations -- I can cite three -- which have very similar charters. Neighborhood -- excuse me -- Neighborhood Reinvestment Corporation has a very similar charter; Pension Benefit Guaranty Corporation has a very similar charter; and Securities Investor Protection Corporation has almost an identical charter -- and all three of these corporations, sooner or later, will be seeking Federal jurisdiction if this case is decided in the favor of Red Cross.

As I stated, the way this is drafted, there's no concern for the peculiarities of each -- court system, the State and the Federal, one being -- one having courts of general jurisdiction, the others having -- the other having courts of limited jurisdiction.

And therefore, I think it's sound to construe this statute not as a grant of jurisdiction, but as a grant of capacity to litigate. There's not enough specificity in it. And it resembles strongly the charter in the Bankers Trust case, which this Court ruled was a -- simply a grant of capacity to litigate. Now in 1925, Congress, at the urging of three justices of this Court, legislatively overruled the Osborn case, insofar as it pertained to Federal corporations. At that time, it precluded Federal corporations from access to Federal courts unless they were owned or controlled by the United States. Now, that was a very strong, and definite policy, which has been followed by this Court over the last 50 years.

And I would suggest that if Congress wants to make an exception, as it has with certain Federal corporations, it would have done so by very clear and specific language -- such as the FDIC charter, and the Federal Savings and Loan Insurance Corporation. Those charters are very specific, and I suggest if they were going to do so in this case, they would have used very specific language to create an exception to that general policy.

CHIEF JUSTICE REHNQUIST: How does the 1925 statute, Mr. Upton, fit into the analytic way you approach the case?

MR. UPTON: I think that that statute requires clear and specific language, in the same way that if you're going to create the exception to the usual rule in construing sue and be sued clauses, you'd want clear and specific language.

If you're going to create an exception to that 1925 policy, you would do so by clear and specific language, in my view. And that has been done in many of the cases -- in many of the Federal corporations.

JUSTICE SCALIA: Of course, if they use the language that they used in D'Oench, Duhme, they might have created the consequence that ensued in D'Oench, Duhme, which would -- there would have been a Federal common law governing the Red Cross, which perhaps they did not want.

MR. UPTON: Well, that's true, Your Honor. I -- however, I -- I'm getting to the D'Oench case, and I would like to discuss that for a moment. And I think the D'Oench case is quite distinguishable from the Red Cross case, and, in fact, supports our position more than it does the Red Cross position. To be sure, there's a sue and be sued clause which is very similar -- to sue and be sued in courts of law and equity, State or Federal -- very similar. But just below that, in the same charter, it says that all civil actions against the corporation shall be deemed to arise under the laws of the United States. That's a grant of Federal jurisdiction. And Congress so stated in 1935, when it amended the charter. In its report, it indicated, in 1935, when it adopted the deemed to arise language, that the purpose was to grant Federal jurisdiction. Now, why was that later amendment required, if the earlier sue and be sued clause was a grant of Federal jurisdiction? Finally, I would suggest that the legislative history of the 1947 amendment, the addition of the language State or Federal, is both ambiguous and confused. Courts have read that recommendation 22 -- number 22. Some have said oh, all they're trying to do is clarify capacity to litigate in Federal court where it otherwise exist. Other courts -- half of the courts below -- have said no, that's a grant of Federal jurisdiction.

Now, I think that's an indication right there that this is a very ambiguous piece of work. I would also point out for the Court there is language in recommendation number 22 which seems more consistent with a grant of capacity to sue.

They say we should clarify the capacity to litigate in Federal court. They use the word clarify, and then they go on to say make it clear that the Red Cross can sue in Federal court. And then further on they refer to power to sue. These -- this is language of capacity to litigate rather than jurisdiction. And like everything else relating to this ill-starred amendment, it's ambiguous. And I would suggest that the Senate hearing on this amendment was quite confused. Senator George says, at one point, that the purpose of the amendment is to give the jurisdiction to the State and Federal courts. And then a few pages later he says, we're going to give the Red Cross the power to be sued in State courts. That, I think, is the real purpose of this amendment. So, we don't really know what Senator George was driving at.

You can't reconcile those two statements. It's also significant that the House and Senate reports don't even refer to the jurisdictional point at all. In conclusion -- I'm sorry -- I would just make one other point, and that's on the constitutional issue.

That has been discussed here, and we did mention it in our brief. We believe that this case here is very similar to the case of Mesa v. California. In Mesa, you had a Federal officer who was sued in State court and attempted to remove the case to Federal court.

This Court ruled that that was a pure -- that 1441 -- 1442(a)(1) was a pure jurisdictional statute, that the officer tried to remove the case to Federal court under. And -- but they did infer into the statute a requirement that the Federal defense had to be alleged.

Now, what I'm suggesting is that that case, which dealt with a Federal officer, is analogous to this case, where we have a Federal corporation. They're both Federal entities of one kind or another. And why shouldn't the same law apply to one that applies to the other?

JUSTICE O'CONNOR: Well, of course, the closer analogy is Osborn, where the Court held that a similar provision didn't violate article 3. I mean, that's your analogy.

MR. UPTON: In a sense, but I wonder if the law of Osborn is still good law today on that point, since it's been overruled legislatively already. I'm not suggesting that the constitutional interpretation is wrong. But I am suggesting that the -- maybe that law pertaining to Federal corporations is no longer viable law, as Justice Frankfurter said at one point, in one of his opinions -- I think in the Tidewater case. Finally, I would just observe, as one of the members of this Court has said, nothing is so wasteful as litigation over where to litigate.

We have been litigating this case now for the last 2 years, and we've done little else but talk about jurisdiction. And I'm sure that both the Red Cross and the respondents will be happy when this vexing issue is laid to rest. Thank you very much.

CHIEF JUSTICE REHNQUIST: Thank you, Mr. Upton. Mr. Englert, you have 5 minutes remaining.

MR. ENGLERT: Thank you, Mr. Chief Justice. Let me make clear what I meant to say before. State law governs the tort issues in this case. That does not mean that we don't have Federal defenses.

There are Federal issues about jury trial and punitive damages. And it is our position that the Red Cross shares the Federal Government's immunity from jury trial and punitive damages. The one court that has addressed the punitive damages issue has so held.

CHIEF JUSTICE REHNQUIST: What is the closest case in this Court on the jury trial issue?

MR. ENGLERT: Lehman v. Nakshian.

CHIEF JUSTICE REHNQUIST: What?

MR. ENGLERT: Lehman v. Nakshian. The reason I -- one reason I didn't mention those before is that under Osborn, they are not necessary. The Federal chartering of the Red Cross is sufficient. If the Court were inclined to cut back on Osborn -- notwithstanding its authorship -- that the other factors that have been mentioned today would be relevant, perhaps -- the fact that the Red Cross does have Federal defenses, the fact that the Red Cross is a very important instrumentality that carries out treaty obligations in the United States.

But it's only if Osborn is overruled or cut back on that the constitutional question can, in any way, be deemed serious. And it is perfectly clear that respondents are asking this Court to overrule Osborn's constitutional holding. They say, on page 32 of their brief, this Court must reach the issue of whether Osborn's broad interpretation of article 3 remains good law. We submit that it does not. In the D'Oench case, in which the charter language was absolutely indistinguishable from the language put into the Red Cross charter 5 years later --

JUSTICE STEVENS: Yeah, but what about the fact that that's -- that charter said, in so many words, any case to which the Federal entity as a party shall be deemed to arise under Federal law -- you are, in effect, saying that we should treat the sue and be sued clause as though it incorporated a similar sentence implicitly.

MR. ENGLERT: Absolutely not. We are not saying that at all, Justice Stevens. Because the effect of that additional arising-under clause, in D'Oench, the clause cited in the footnote is, as Justice Scalia pointed out, to require the development of a Federal law that will govern all these cases. And we are not asking for that.

JUSTICE STEVENS: Well, you aren't asking for development of Federal law. But you are asking us to hold it is to be deemed to present a Federal question, aren't you?

MR. ENGLERT: I think not, Your Honor. This is party-based jurisdiction, we're talking about. Now, for purposes of article 3, yes. We are saying that the relevant clause of article 3 is the arising-under clause.

But that should not be confused with saying that this is a section 1331 case. It is not. Section 1331 does not apply here. Only in the constitutional sense are we asking this Court to hold -- as it held in Osborn, and has reaffirmed since -- that cases like this arise under Federal law, that it is party-based jurisdiction that depends on the status of the party as a federally chartered entity, and if the Court thinks it relevant, a very important Federal instrumentality that will be raising Federal defenses.

JUSTICE SCALIA: But in D'Oench, Duhme, the fact remains that there was that other provision, and indeed it was -- it was cited by the Court in the same breath in which the Court said that the corporation brings this suit under an act of Congress authorizing it to sue or be sued in any court of law or equity, State or Federal.

MR. ENGLERT: Well, I could quarrel with the same breath, since it's in a footnote.

JUSTICE SCALIA: Well, the best way you could do it in the same breath is to put it in a footnote.(Laughter.)

CHIEF JUSTICE REHNQUIST: The whole statement in D'Oench, Duhme is just a casual observation.

MR. ENGLERT: I don't think so, Your Honor. It's more than a casual observation. I'm not familiar with this Court making many casual observations. The question in that case was what --

CHIEF JUSTICE REHNQUIST: Well, you've read Justice Douglas' opinions before, haven't you?(Laughter.)

MR. ENGLERT: Yes, Your Honor. The question was what law to apply, and one of the factors bearing on what law to apply was what the basis of jurisdiction was, whether it was diversity or something else. The Court said pointedly, the basis for jurisdiction here is not diversity.

It's something else. It's the sue and be sued clause. And in a footnote, whether or not in the same breath, it said the clause -- the statute further provides something else.

That clause actually was omitted from the Solicitor General's brief, curiously enough, in that case. The Solicitor General certainly thought the sue and be sued clause was adequate.

And our whole point is that Congress is entitled to make the same assumption that the Solicitor General of this Court made in 1942, that a sue and be sued clause, with the words State or Federal, is adequate to confer Federal jurisdiction. Thank you.

CHIEF JUSTICE REHNQUIST: Thank you, Mr. Englert. The case is submitted.