Cases by Issue - Miscellaneous

U.S. Term Limits v. Thornton - Oral Argument

Fri, 09 Jan 2009 14:49:56 +0000

Case:

U.S. Term Limits v. Thornton

Media File:

93-1456_19941129-argument.mp3

Related Transcript:

1994_93_1456_argument.xml

Transcript:

Argument of J. Winston Bryant

Chief Justice Rehnquist: We'll hear argument now in Number 93-1456, U.S. Term Limits, Inc., v. Ray Thornton, 93-1828, Consolidated, Winston Bryant v. Bobbie E. Hill.

General Bryant.

Mr. Bryant: Thank you, Mr. Chief Justice and may it please the Court:

The State of Arkansas is before this Court today defending its constitutional authority to encourage rotation in office of its congressional delegation.

Amendment 73, which would have accomplished that objective was ruled unconstitutional by the Arkansas supreme court.

The court held that Amendment 73 amounted to a qualification and, further, that the State of Arkansas could not add additional qualifications to those listed in Article I, sections 2 and 3.

We disagree with that ruling.

Amendment 73 is not a qualification, but even if it is a qualification, the State of Arkansas has the authority to add additional qualifications to those listed in Article I, sections 2 and 3.

Our Founding Fathers envisioned a Congress of citizen legislators who would serve awhile, return and xx with the people, and not stay in office indefinitely, and during the 18th and 19th Centuries, voluntary rotation was a common practice.

During the 20th Century, we have seen a dramatic increase in the number of long-term, entrenched incumbents.

Entrenched incumbency makes for an electoral system that is less fair, less competitive, and less representative.

Amendment 73 was adopted in 1992 by the people of Arkansas overwhelmingly, by a 60 percent to 40 percen majority.

Twenty-two States now have some form of term limit proposals or ballot access initiatives on their books.

Thirty-seven States have term limits that limit the terms of the executive branch officials of those States or the legislative branch officials of those States.

Justice Kennedy: Is the theory that by this rotation the policy that the legislators adopt will be different one system than in the other system?

That is to say, are there policy implications electing an incumbent as opposed to a nonincumbent?

Mr. Bryant: Yes, Your Honor, that is correct.

That issue is not before this Court, however, but the people of Arkansas, by Amendment 73, have decided to encourage rotation in office to make the election process more fair and more competitive.

Justice Kennedy: Well, but you're explaining the rationale for the limitation, and I'm asking if part of that rationale is that rotated representatives will vote differently than incumbents would have, would shape public policy in a different way.

Mr. Bryant: Your Honor, they would be more beholden to the people under the theory of Amendment 73 because they would not be career politicians.

They would be more responsive to the people.

Justice Kennedy: So there would be a difference in the kind and the shape and the policies of the legislation that they would enact.

Mr. Bryant: There could be, Your Honor.

Justice Kennedy: Well, is that the justification for the rule, or isn't it?

Mr. Bryant: Yes, Your Honor.

Yes, Your Honor.

Amendment 73 provides for strict term limits for certain State elected officials in Arkansas.

It denies ballot access to multiterm congressional incumbents, but does allow those incumbents, after serving a maximum number of terms allowed by Amendment 73, to run as a write-in candidate.

Justice Souter: But once they're denied the ballot access, they're denied it for life, is that right?

Mr. Bryant: That is correct, Your Honor.

Justice Souter: Doesn't the permanency of the denial carry a suggestion of what we would normally refer to as a qualification?

Mr. Bryant: No, Your Honor.

The definition of a ballot access proposal like Amendment 73 as opposed to a qualification is put forth in our brief, and that is, a qualification is something that absolutely prohibits a candidate from serving even if elected.

Justice Souter: Well, I realize that's your position, but in any case, your position would take us beyond Storer, wouldn't it?

Mr. Bryant: No, Your Honor.

Justice Souter: Well, in Storer... maybe my recollection is wrong.

In Storer, I thought there wasn't a lifetime disqualification.

Mr. Bryant: That is correct, Your Honor.

Justice Souter: I mean, if you... you know, had been party-affiliated within a certain period of time, you couldn't be there as an independent, but the next election was coming, and that was a new day.

Isn't that right, in Storer?

Mr. Bryant: That is correct, Your Honor.

Justice Souter: So Storer didn't have that implication of permanence which is in fact a feature of the Arkansas system.

Mr. Bryant: That is correct, Your Honor, but the State's position is that Amendment 73 is consistent with Storer, the difference being that under Amendment 73 a candidate can actually serve a couple of terms in the Senate, or three terms in the House, so it does not absolutely prohibit a candidate from serving.

After that candidate reaches a maximum number of terms, then obviously that candidate is denied access to the ballot.

Justice O'Connor: General--

Justice Ginsburg: --precedent, any case where a group based on past experience, past lawful experience, has been categorically hobbled in this way.

It's not simply a handicap in the race if the only access they have is as a write-in, is it?

Mr. Bryant: Your Honor, to answer your question, the State does not take the position that Amendment 73 is an absolute handicap, because we're dealing with multiterm incumbents who would have great name recognition, resources available to them that ordinary challenges would not have.

Justice Ginsburg: I'm trying to contrast a mere handicap from a hobbling, and it seems to me this falls in the latter category.

Mr. Bryant: No, Your Honor.

The State's position is that Amendment 73 will allow a candidate to serve even if elected, and under that scenario, under that definition that we put forth to this Court, would amount to only a ballot access regulation.

Justice O'Connor: Well, General Bryant, a good many States have passed so-called term limit measures that just disable a candidate from appearing on the ballot for a short period of time, isn't that correct?

Mr. Bryant: That is correct, Your Honor.

Justice O'Connor: And Arkansas has a very different provision in that it extends for the rest of that particular candidate's life.

Mr. Bryant: That is correct, Your Honor.

Justice O'Connor: Do you think that there may well be, even if you are correct that it is seen as a ballot access measure, that there may be First Amendment issues at stake here, the associational rights, for instance, of the political party that might want to have the candidate on the ballot as its candidate?

Mr. Bryant: Yes, Your Honor, there are--

Justice O'Connor: And are those issues issues that were resolved in the courts below?

Mr. Bryant: --No, Your Honor.

Justice O'Connor: So that would be open on remand, I assume, even if we agreed with you it were a ballot access measure?

Mr. Bryant: That is correct, Your Honor.

That is correct.

Chief Justice Rehnquist: Those... you say the First Amendment issue were presented to the supreme court of Arkansas but not decided by it.

Mr. Bryant: That is correct, Your Honor.

Amendment 73 is also consistent with this Court's jurisprudence.

In Burdick v. Takushi, a case from Hawaii, in that particular case, the State of Hawaii had adopted a statutory scheme that allowed write-in voting to be completely banned.

In this--

Justice O'Connor: Yes, and what about a State like Hawaii that has no write-in voting allowed at all?

Mr. Bryant: --Your Honor--

Justice O'Connor: Would it become a qualification then?

Mr. Bryant: --It would become a qualification at that point, if there is no write-in provision, but even assuming--

Justice Scalia: How is that?

I'm not sure how that makes it a qualification.

It seems to me the test for whether it's a qualification is whether, when a person has been supposedly elected and reports to Congress, Congress can sit in judgment and say, this person is not qualified.

Now, if that should happen, what disqualification would there be?

Mr. Bryant: --Your Honor, under that scenario, Congress can consider the... obviously can consider under Article I, section 5, the qualifications, and under the position of the State in this particular case, a pure write-in, a pure term limits proposal--

Justice Scalia: Let's assume in Hawaii the person gets on the ballot by mistake, or in Arkansas.

An incumbent who has no right to be on the ballot is put on the ballot and gets elected, all right.

Mr. Bryant: --If--

Justice Scalia: Reports to Congress.

Now, could Congress sit in judgment and exclude that person?

Mr. Bryant: --Yes, Your Honor.

Under Article I, section 5, if the person were not properly qualified, yes.

Justice Scalia: Well then it is a qualification in Arkansas.

Do you say that if somebody gets on the ballot by mistake in Arkansas and is elected, Congress can exclude that person?

Mr. Bryant: Your Honor, I was considering it under a pure term limits proposal.

Justice Scalia: I'm not talking about--

Mr. Bryant: Under Amendment--

Justice Scalia: --I'm talking about, Hawaii exclusion from the ballot system.

It's not a term limit proposal, it's just exclusion from the ballot, but entirely.

No write-in allowed, either, and the Arkansas system.

Mr. Bryant: --And under the Arkansas system, Your Honor, the Congress could not consider the Amendment 73 proposal as a qualification under that scenario.

Justice Scalia: It seems to me they couldn't with respect to Hawaii, either.

Hawaii doesn't say you shall not serve, it just says you shall not get on the ballot, and people will not be able to vote for you.

Mr. Bryant: That is correct.

Justice Scalia: And if that happens, you're not unqualified.

Mr. Bryant: That is correct, Your Honor.

Justice Scalia: Could I ask you... you say that this is not a qualification.

Is it a time, place or manner restriction?

Mr. Bryant: Yes, it is, Your Honor.

Justice Scalia: It is.

Is there such a thing as something that is neither the one nor the other, it is neither a qualification nor a time, place and manner restriction?

Mr. Bryant: Neither a qualifica... no, Your Honor.

Justice Scalia: It's either one or the other.

Mr. Bryant: It's either one--

Justice Scalia: Everything falls into one or the other category.

Mr. Bryant: --According to our--

Justice Stevens: Which category would a law providing that you only count half the votes of a candidate fall?

Would that be a qualification or a time, place and manner?

[Laughter]

Or maybe something different?

Mr. Bryant: --That would probably fall under time, place, and manner, Your Honor, but--

Justice Stevens: Time, place, and manner?

Which of the three?

Is it time, place, or manner?

[Laughter]

Mr. Bryant: --It would be the manner.

Justice Stevens: The manner, okay.

Mr. Bryant: But, Your Honor, that would have to undergo First and Fourteenth Amendment scrutiny if that proposal were adopted by the State.

Justice Scalia: If it's time, place, and manner, this means, of course, that the current Congress, composed mainly of incumbents, can simply revise the Arkansas law right?

Mr. Bryant: That is correct, Your Honor.

Justice Scalia: And indeed, the current Congress could revise those laws that don't provide for term limitations or don't provide for exclusion from ballot access to incumbents.

Mr. Bryant: Yes, Your Honor,--

Justice Scalia: So in effect you could have the Federal legislature doing something that discourages... that discourages incumbency.

Mr. Bryant: --Yes, Your Honor, under Article 1, section 4.

Chief Justice Rehnquist: What could the Federal legislature do?

Mr. Bryant: The Federal legislature, Your Honor, is given authority under Article I, section 4, to override anything the States do in the area.

Chief Justice Rehnquist: Yes, but are you suggesting that it could do... the Federal legislature could do anything more than simply negate a State regulation?

Mr. Bryant: Yes, Your Honor.

Chief Justice Rehnquist: And what would be the authority for that?

Mr. Bryant: Article I, section 4 would give Congress that authority, Your Honor.

Chief Justice Rehnquist: To do more than just negate a State regulation?

Mr. Bryant: Yes, Your Honor.

Chief Justice Rehnquist: And what part of the language is it of that section that--

Mr. Bryant: The term 4, has a very broad, expansive meaning, and during the ratification debates the States were concerned about the fact that under Article I, section 4, Congress was being given the authority which the States concluded would allow Congress to override anything the States did in the area.

The Article I, section 4 clause was sold on the basis that Congress needed the authority or power to preserve its... the Union, if necessary, and so Article I, section 4 has a... is very broad in its meaning, and would authorize Congress to adopt legislation in the area.

Chief Justice Rehnquist: --So that even though, perhaps, a State hasn't acted, Congress could, by law, make regulations governing the time, place, and manner?

Mr. Bryant: Yes, Your Honor, and in fact Congress could override amendment 73 if Congress so desired.

Chief Justice Rehnquist: But what if Arkansas had made no provision for term limits at all, could Congress step in and make a provision for term limits?

Mr. Bryant: Yes, Your Honor, under Article I, section 4, Congress could do that.

Justice Ginsburg: You've mentioned that there were qualifications that don't come from the Constitution itself.

You started out your argument by saying the States could add qualifications.

Now you've told us that there are only two categories, there's qualifications, and there's time, place, and manner, but you see two categories of qualifications, I gather, because you've told us that some come from the Constitution, and then there are others the States can add.

So what's the category of qualifications, extra-Constitution, that the State can add that are not time, place, and manner regulations?

Mr. Bryant: Your Honor, the qualifications that the States could add would all be time, place, and manner under Article I, section 4.

Also the State could, if there are some enumerated... if Article I, section 4 does not cover some particular areas, Amendment 10 would allow the States to act in that particular area, but the States have always added additional qualifications.

In fact, when the Constitution was adopted by the States, the State of Virginia had a property qualification as well as a residency requirement.

James Madison--

Justice Kennedy: If you call those qualifications, can the State override them?

Mr. Bryant: --No, Your Honor.

Justice Kennedy: So the--

Mr. Bryant: I'm sorry--

Justice Kennedy: --Pardon me, can the Congress override them?

Mr. Bryant: --Yes, Your Honor, the Congress could under Article--

Justice Kennedy: So anything the State adds as either a qualification or a time, place, and manner can be overridden by the Congress?

Mr. Bryant: --Your Honor, the specific provisions that can be overridden by Congress are the Article I, section 4 grants of authority to the States by--

Justice Kennedy: Well, are there some qualifications that the State can add, and I... this was suggested by Justice Ginsburg's question, that cannot be overridden by the Congress?

Mr. Bryant: --None comes to mind, Your Honor.

The States--

Justice Stevens: General Bryant--

--Well, why--

--the Congress can't impose any qualifications, can it?

Mr. Bryant: --Yes, Your Honor.

Justice Stevens: Oh.

Mr. Bryant: Congress can impose additional qualifications.

Justice Stevens: What's the source for that?

Where do you find the authority for that?

Mr. Bryant: Article 1, section 4.

Justice Stevens: That doesn't talk about qualifications.

That talks about time, place, and manner.

Mr. Bryant: Yes, Your Honor, but under our definition the Congress can add additional qualifications based on Article 1, section 4 authority, and Congress has done so since the very first Congress.

In the very first Congress--

Justice Stevens: You think Congress could pass a statute saying every Senator must be at least 50 years old?

Mr. Bryant: --Congress could pass--

Justice Stevens: What's your answer?

Mr. Bryant: --Yes.

Yes, Your Honor, they could pass such a statute sub... of course, it would be subject to First and Fifth Amendment.

Justice Scalia: Now, where do you get that?

You don't get that from the Tenth Amendment.

Where does that come from?

Mr. Bryant: That comes under Article I, section 4 authority, Your Honor.

Justice Scalia: But that's time, place, and manner, not qualifications.

I thought you make a distinction between the two.

You make no distinction between time, place, and manner and qualifications?

Mr. Bryant: Yes, we make a distinction, Your Honor.

The... the narrow--

Justice Scalia: Well, you must be... 50 has nothing to do with time, place, and manner of elections at all.

It has to do purely with qualifications.

Mr. Bryant: --The narrow issue before this Court is whether or not Amendment 73 amounts to a ballot access regulation.

If it amounts to a qualification, the States as well as Congress can add additional qualifications to those listed in Article--

Justice Scalia: Well, I can understand why you argue the States can on the basis of the Tenth Amendment.

I don't know where the Congress gets the power to do that.

Mr. Bryant: --And that is under Article 1, section 4, Your Honor.

Justice Scalia: But that doesn't relate to qualifications, that relates to time, place, and manner.

Is there no qualification that is not a time, place, and manner provision?

Every qualification is a time, place, and manner provision?

Mr. Bryant: Yes, Your Honor, that would be consistent with the State's position.

Justice Scalia: Every qualification--

Mr. Bryant: Under that--

Justice Scalia: --is a time, place, and manner provision.

Mr. Bryant: --Under that theory we advance.

Justice Souter: How is the age qualification a time, place, and manner?

How would a qualification that every elected Senator must have a college degree, how is that a time, place, and manner qualification or condition?

Mr. Bryant: Oh, Your Honor, that is a time, place, and manner because if the State of Arkansas or Congress did that, that would be... that is constitutional, according to our position, under Article I, section 4.

However, it would have to pass constitutional muster, and that is the test.

Under the ballot access--

Justice Souter: That is a manner condition, as it were?

Mr. Bryant: --Yes, Your Honor.

That could be considered a manner condition under Article I, section 4.

Justice O'Connor: Well, General Bryant, this is a very remarkable proposition--

[Laughter]

--and... does your argument depend in any way on this most unusual interpretation?

[Laughter]

Mr. Bryant: Your Honor, the State's argument is that Amendment 73 amounts to a ballot access regulation.

That is the narrow issue that this Court can reach.

If Amendment 73 does in fact amount to a qualification as determined by this Court, then it's the State's position that the State of Arkansas can add additional qualifications under Article I, section 4 to those enumerated in the Constitution.

Justice Kennedy: But what we're interested to know is, does it follow from that that the Congress could not override that qualification?

Where does the Constitution give the Congress authority to override qualifications?

Mr. Bryant: Because, Your Honor, that qualification would be adopted under Article I, section 4.

Justice Kennedy: Well, but then we're right back where we're--

Mr. Bryant: Yes.

Justice Kennedy: --Let's assume that we tell you that under the Constitution we think there are two things, two semantic, two juridical categories, one qualifications and the other time, place, and manner.

Now, if you say, and if you assume that we hold that term limit is a qualification, we are exploring whether or not the Congress could override that, and you say, oh, well, they can go under section 4, but we've just stipulated this is a qualification, and that doesn't apply to section 4.

Mr. Bryant: Under that--

Justice Kennedy: And the gravamen of the argument is it would be very strange to allow Congress to override a time, place, and manner regulation, but not to override a greater restriction, which is a qualification, and you're not answering that argument because you keep resorting to Article I, section 4, but that's a very odd interpretation.

Mr. Bryant: --Your Honor, under that scenario, then the States would have the authority under Amendment 10.

Congress would not have the authority under your scenario to add additional qualifications.

Justice Souter: On that assumption, may we put the question directly that Justice Kennedy alluded to?

Isn't there something very odd in a scheme in which the... we'll say the comparatively less important conditions that fall under time, place, and manner can be overridden by Congress, and yet the presumably more fundamental conditions known as qualifications would be left entirely to the States?

If they couldn't trust the States on time, place, and manner, wouldn't it be odd if they trusted the States on qualifications?

Mr. Bryant: That is correct, Your Honor.

Under the jurisprudence of this Court, ballot access jurisprudence, the States can erect barriers or limitations to limit the field of candidates, and so long as that passes constitutional muster, then the States have the authority to do that.

Justice Scalia: Or you might have responded that perhaps they were willing to trust the Federal Congress with respect to the relatively minor matters of time, place, and manner--

[Laughter]

--but not willing to trust the Federal Congress with respect to the greater matter of qualifications.

That's a possibility, isn't it?

Mr. Bryant: Yes, Your Honor.

[Laughter]

Argument of John G. Kester

Chief Justice Rehnquist: Mr. Kester, we'll hear from you.

Mr. Kester: Thank you, Mr. Chief Justice, and may it please the Court:

I'd like to start out, I think, by introducing--

Justice O'Connor: Mr. Kester, do you adopt the same argument as your predecessor here about everything is either a qualification or a time, place, and manner?

Mr. Kester: --No, not precisely, Justice O'Connor.

I think that the question that several members of the Court have been putting really illuminates the constitutional structure that we're talking about here, and the argument that is being made by the opponents of Amendment 73, first of all skipping over and pretending that it's a legal incapacity when it's nothing of the kind... it's a less restrictive alternative that the State has adopted, but skipping over that and accepting the pretense that this is a limitation on service in the Congress, you're then put to the task of fitting together some provisions of the Constitution.

What does the Constitution say with respect to the power of Congress to adopt, say, a term limits provision and apply it to the States?

I think the answer to that has to begin by looking at the sources of power of Congress and of the States, and they are very different.

Congress has power only insofar as it is granted in the Constitution, and the only grant of power to Congress to legislate in this area has to come from Article I, section 4, or, I quickly amend, the Necessary and Proper Clause, which is also part of Article I, section 4, and nowadays section 5 of the Fifteenth Amendment, which has received a very, very broad interpretation, and I don't think that we need to address that at this time, but we recognize that that's very broad.

The sources of power of the State are very, very different, and particularly when you have legislation, a constitutional amendment that the people of Arkansas adopted and imposed on themselves.

They're not reaching out... this is not a State trying to regulate interstate commerce in other States.

This is a law which, if anything, hurts the people of Arkansas.

Justice O'Connor: Well, Mr. Kester, let me ask you this, do you this Congress has the power under Article I, section 4, to adopt precisely the kind of law that Arkansas has applicable to all States?

Mr. Kester: No.

My answer would be no, it does not, for the following reason.

I would say, in the first instance, if you take the words of Article I, section 4, "make or alter", and say that those are of equal force, and I'm not sure that you have to do that at all, I would say Congress has the power to knock out any State law with respect to elections that Congress doesn't like.

It's very, very clear that that's why Article I, section 4 was put in the Constitution.

But once you have the law passed, once you have the authority of Congress to do that exercise, that's not the end of the exercise, that's just the beginning.

This Court pointed that out in Williams v. Rhodes.

There may be power there, but then, has the power been properly exercised?

First of all, it would obviously be subject to attack under the Fifth... the equal protection aspects of the Fifth Amendment, just like a Fourteenth Amendment case, which is what this really is.

Secondly, you would have to test it under the Tenth Amendment, because this Court recognized in cases like New York v. United States, Gregory and Ashcroft, that there is a certain core of State authority that really is sacrosanct.

And finally--

Justice Scalia: More specifically, gives you the power to override that State authority if it exists under 10.

Section 4 says specifically that Congress can make or alter such regulations.

Mr. Kester: --Right, but we're talking now, as I understood it, Justice Scalia, we're talking about Congress just acting in the first instance, and I'm saying the reason Congress could not do this just by itself in the first instance, say we're going to pass a statute imposing term limits, is furthermore that you have another provision which we haven't talked about yet this morning, and that's Article I, section 2, Clause 1, and that says the people shall choose their representatives in the House of Representatives.

If Congress did that, Congress would be acting diametrically opposed to what the people have done.

Now, this is all hypothetical.

Justice Scalia: Let me ask you about the Tenth Amendment, before we get--

Mr. Kester: Surely.

Justice Scalia: --too far away from that.

Mr. Kester: Surely.

Justice Scalia: If that is the source of the State's power that you assert would justify this piece of legislation, then I assume that the State could also say that the State's electors shall not vote for a President who, in addition to having the qualifications set forth in Article II of the Constitution, has certain other qualifications.

Could the State do that?

Mr. Kester: Now we're talking about a different provision of the Constitution.

That's Article II.

Justice Scalia: Yes, we are--

Mr. Kester: Right.

Justice Scalia: --but the Tenth Amendment hasn't changed.

It's still there.

Mr. Kester: Right, but I--

Justice Scalia: If they can add conditions to whom its citizens may vote for for their representatives, why may it not add conditions to the person for whom its electors may vote for as President?

Mr. Kester: --Justice Scalia, I would say that the Tenth Amendment applies differently in different situations, and you have to--

Justice Scalia: Oh, that's very convenient, but I don't know why.

[Laughter]

Mr. Kester: --Because the question would be, in your case of the presidential electors, it's like the case of Williams v. Rhodes.

Ohio came in there and said, we have very broad authority on how we select presidential electors, don't tell us how we do it, we'll decide that, and this Court said, wait a second, there are other provisions of the Constitution, and the Fourteenth Amendment is generally sufficient.

The important thing is that the State's authority draws on several sources, not just Article I, section 4.

It draws on the Tenth Amendment.

The States started out with the authority to do this.

They didn't have to be granted it at all.

They started it out.

It was reserved.

They also were the people of the State, and remember, it's the people who acted here.

This was--

Justice Ginsburg: But the test of whatever the State does, did I understand you to say that it could be overridden by Congress, but Congress has to come second?

Mr. Kester: --The Congress--

Justice Ginsburg: Whether the State is acting under the Tenth Amendment, or whatever source.

Mr. Kester: --I believe, Justice Ginsburg, that the proper understanding of section 4 is that was the check that the Framers intended to place on the States.

They were very worried about what kind of election laws the States would pass.

Justice Ginsburg: Well then, time, place, and manner is not a limitation, as you see it.

It includes what one might think of as time, place, and manner, plus qualifications, including age 60 is the limit--

Mr. Kester: Any of those things which would be Fourteenth Amendment issues, yes.

Manner was a word that essentially was unlimited, and that was why Article I, section 4 was so controversial.

Justice Ginsburg: --So we should forget all about the way we use time, place, and manner in the context of the First Amendment where it's a limited category of things that don't go to the core of free expression, but here you say it covers everything.

Mr. Kester: Here we're construing specific language in the Constitution, and it's different, and the power given to Congress was broad enough to do whatever was necessary to keep the States from passing inappropriate legislation.

Justice Souter: But I don't see why it isn't also broad enough to authorize Congress to act in the first instance.

Mr. Kester: It is... Justice Souter, in the first instance, it may well be, but then Congress is checked in a number of ways, and in some ways that the State isn't, particularly if you look--

Justice Souter: You mean by other provisions of the--

Mr. Kester: --By other provisions.

Justice Souter: --Yes.

Mr. Kester: And in particular, Article I, section 2, Clause 1, which here is a source of the State's power, an independent source of the State's power, but when Congress acts, it becomes a restriction, if anything, on Congress' power, because there you have Congress going in and saying to the people of the State, you can't do what you want.

Justice Scalia: Well, if that is a restriction, it just negates... it just negates section 4.

Mr. Kester: To that... to that--

Justice Scalia: Whatever the people--

Mr. Kester: --If--

Justice Scalia: --do is okay, so... right?

Mr. Kester: --No.

No, not at all, sir.

Justice Scalia: You can't possibly read it that broadly, or it negates section 4.

Mr. Kester: No.

In that particular case it might, yes.

Justice Scalia: So long as the people of a State vote for this time, place, and manner restriction, Congress can't do anything about it.

Mr. Kester: We're... no, no, no, no.

I'm sorry, I--

Justice Scalia: That's what I thought you were saying.

Mr. Kester: --I did not express myself clearly, then.

Justice Scalia: Or I didn't understand clearly, I guess.

Mr. Kester: Well, whatever--

[Laughter]

Congress has power, I would urge upon the Court, and I think that this is very, very clear when you look at the history of Article I, section 4.

Congress has power granted there, controversial power... a lot of them didn't like it... to go in and say, we don't like your State election law.

They don't even have to say it's unconstitutional.

All they have to say is, we--

Justice Stevens: May I ask this question to be sure I understand your theory?

I understand you're saying, if it's a time, place, and manner regulation adopted by the State, the Congress can modify it.

Now, supposing it's a qualification.

There are two ways we can look at the Arkansas law, and assume they take it to be a qualification rather than a ballot access matter, could Congress amend that?

Mr. Kester: --Well, yes, I think they could, because otherwise you're driven, and this is where some of the argument--

Justice Stevens: But then you're adopting the Attorney General's position that a manner includes a qualification.

Mr. Kester: --What I'm saying is, yes, manner is the broad word... that's the hook--

Justice Stevens: Which includes qualifications?

Mr. Kester: --Surely.

It has to, because otherwise as I believe Justice--

Justice Stevens: Well, it doesn't have to.

One can say qualifications are things like being over 50, and manner things like where you hold your elections and the like.

One doesn't have to say that, but I can understand that.

But that's your view of the word manner.

Mr. Kester: --Otherwise Article IV, the power of Congress in Article IV would make no sense, because then you'd be in a position, and this is where the Solicitor General's argument leaves you, is saying that Congress would have the power to override minor State laws but not huge--

Justice Scalia: It would make no sense unless there is a prohibition upon additional qualifications, in which case it would make perfect sense.

Mr. Kester: --And... and--

Justice Scalia: It only would make no sense under your theory of the Constitution.

[Laughter]

Mr. Kester: --And... but I submit that my theory of the Constitution, Justice Scalia, has historical validity and makes sense when you--

Chief Justice Rehnquist: Under your theory, Mr. Kester, could Congress say that no person shall be a Senator who is not over the age of 25 and have that the controlling qualification?

Mr. Kester: --I... if Congress or the States passed a law that was absolutely flat-out contrary to those provisions in Article I, if they've made it contrary to it, then that would be unconstitutional just on the face of it.

Chief Justice Rehnquist: How about saying no person over 50 under 50, saying... you know, Congress obviously was... the Framers were concerned about age, 35, and you know, we're also concerned about age.

We think it should be 50.

Could that override the 35-year-old provision?

Mr. Kester: I think there you've got legislation going right at the heart of provisions that were put in the Constitution, and it could be that those are minimum qualifications, or it could be that they could be enhanced with respect to age or district residence.

Chief Justice Rehnquist: So what's your answer, under your theory?

Mr. Kester: My answer, sir, is that it would never stand up under the Fifth Amendment, under Article I, section 2.

That--

Chief Justice Rehnquist: But it could stand up under the framework we're talking about now, Article I?

Mr. Kester: --Possibly in the first instance, but it hardly matters because it would so clearly violate those other provisions.

Justice Stevens: Why would it violate those other provisions?

Perfectly reasonable to change the age from 35 to 40, 45.

Why would that violate the Fifth Amendment?

Mr. Kester: Well, I think--

Justice Stevens: I just don't understand that.

Mr. Kester: --Well--

Chief Justice Rehnquist: We've held age is not a suspect classification.

Mr. Kester: --I think in that case it would be, and in looking at it as a suspect--

Justice Stevens: Well, then the constitutional provision is invalid, the 35-year thing is irrational under your approach.

I don't understand why 40 is any more irrational than 35.

Mr. Kester: --Well, it would have to be judged.

It would have to be judged under the Equal Protection part of the Fifth Amendment.

Justice Stevens: And not under the Qualifications Clause?

Mr. Kester: The Qualifications Clauses are there... if a law is enacted that this Court believes contradicts those qualifications, that would be unconstitutional.

Justice Stevens: No, it's just merely what I thought was your basic position, that the State has every right to impose additional qualifications if it wants to.

Mr. Kester: Yes.

Justice Stevens: And I don't know why 40 years is any different than being an incumbent.

Mr. Kester: Oh, but my position is not that the State can come in and impose any qualification it wants to, it's that the State--

Justice Stevens: Well, any reasonable qualification.

Mr. Kester: --Well, any qualification that doesn't violate the other restrictions on the States, the Fourteenth Amendment.

I mean, this--

Justice Stevens: I just have to say, I don't see why the 40-year thing would violate the Fourteenth or Fifth Amendment.

Mr. Kester: --I defer to your judgment on that, but the analysis, Justice Stevens, would be an analysis--

Justice Stevens: Well, if the analysis takes you to the conclusion it does not violate the Fourteenth, then you'd have to face up to the question--

Mr. Kester: --Yes.

Justice Stevens: --whether they can have an additional qualification, which is what I thought this case was all about, but you seem to say they cannot have certain additional qualifications.

Mr. Kester: No, I said... I said if they have one that's absolutely contradictory, but if it's not--

Justice Stevens: Well, why is 40 contradictory to 35?

It just supplements it--

Mr. Kester: --I'll defer to Your Honor on that.

Justice Ginsburg: --Mr. Kester, let's take an age... you can't run after the age of 70, instead of upping the age from 35, a mandatory retirement.

Wouldn't that get you out of your Equal Protection problem?

Mr. Kester: Well, it would be very much like Gregory and Ashcroft, wouldn't it, because that was upheld, a mandatory retirement was held not to violate the Fourteenth Amendment.

Basically--

Justice Ginsburg: So if that was the qualification, nobody can run in this State after the age of 70, the State could do that, and that would be a qualification--

Mr. Kester: --The States have done things like that for 200 years.

That's our point.

The States at the beginning said, not only do you have to be a resident of the State, you have to be a resident of the district.

Now, that's a supplementation, that's a qualification.

Justice Ginsburg: --There are States that have said you can't run after the age of so-and-so for Congress?

Mr. Kester: Mm-hmm, and--

Justice Ginsburg: You said States have done that for years, put--

Mr. Kester: --Oh, not... not that, but States have added qualifications since the very beginning, and incidentally, they called them time, place, and manner regulations.

Chief Justice Rehnquist: --Thank you, Mr. Kester.

Mr. Kester: Thank you, Mr. Chief Justice.

Unknown Speaker: Mr. Cohen, we'll hear from you.

Argument of Louis R. Cohen

Mr. Cohen: Thank you, Mr. Chief Justice, may it please the Court:

My theory of the Constitution, which I think is also Madison's and Hamilton's theory of the Constitution on this point, is that the Constitution deals comprehensively with the filling of the office of the Congress that it created, that it prescribes fixed qualifications that may not be supplemented by either Congress or the States, and that it gives both the States and Congress the power to set time, place, and manner regulations so as to assure fair and orderly elections, but that that is an essentially procedural power, leaving the people at each election to choose whom they please to govern them.

Justice Scalia: Why didn't they put it differently, then, Mr. Cohen?

The briefs here have been referring to this as a qualifications clause.

It's really not a qualifications clause, it's a disqualifications clause.

They could have said, every person shall be eligible to serve in the House of Representatives who shall attain to the age of 25 years, shall have been 7 years a citizen of the United States, and shall not when elected... and shall be when elected an inhabitant of that State in which he shall be chosen, a very easy way to say it.

Mr. Cohen: Well, of course--

Justice Scalia: But they took the circuitous route of saying, no person shall be a representative who shall not have attained the age of 25 years, been 7... in other words, you can't, unless you have these conditions, but that isn't to say that just because you meet these conditions you are eligible.

It does not say that, and John Randolph--

Mr. Cohen: --I agree that the constitutional--

Justice Scalia: --pointed this out in the first congressional debate on the matter.

Mr. Cohen: --I agree that the constitutional text doesn't resolve the issue because it phrases it that way.

One reason why it may phrase it that way is because there are other disqualifications in the Constitution itself, and there was contemplation, of course, of further possible disqualifications, but when Madison and Hamilton came to explain what the Constitution did, when the House Committee on Elections in 1807 studied the meaning of that clause, they concluded that the intention was to make those qualifications exclusive.

Chief Justice Rehnquist: Well, you say the House Committee on Elections, Mr. Cohen.

Was the House committee's view accepted by the full House?

Mr. Cohen: The full House didn't adopt the report, but I think it did accept the House committee's view.

It voted to seat Congressman McCreary, and it voted to seat Congressman McCreary after a point in the debate when it becomes clear that the dissenter, Mr. Randolph of Virginia, recognized that he was about to lose, and diverted the House debate to a more neutral resolution.

Chief Justice Rehnquist: Well, that's very speculative, isn't it?

I mean, couldn't the full House's result have been also because some people thought that he was in fact a resident of Baltimore, that he complied with the State regulation?

Mr. Cohen: We don't know--

Chief Justice Rehnquist: We simply--

Mr. Cohen: --of course, why anyone voted.

We do know that the understanding at the time, the scholarly understanding of what had been resolved in the McCreary episode was that the--

Chief Justice Rehnquist: --Well, what... how does the fact that the scholarly understanding... does that elevate what actually happened into something different?

[Laughter]

Mr. Cohen: --No, of course not.

Of course not this Court reviewed this history in the Powell case starting with the fact that on August 10, 1787, the question that was being voted on on the floor of the convention was whether to give Congress the power to add a property qualification or to add other qualifications.

This Court said on that day the Court faced and rejected the possibility that the legislature... and it was clearly talking about legislation, and not merely about a judging power... the legislature would have the power to usurp the right of the people to return whom they thought proper.

Chief Justice Rehnquist: Well, now you're not talking about the McCreary case.

Mr. Cohen: Well, I'm... I'm leading up to it.

The Court then went on--

Chief Justice Rehnquist: We've only got 40 minutes.

Mr. Cohen: --Okay.

[Laughter]

I will... let me move on.

But the Court reviewed Hamilton's statement in the Federalist Number 60 that the qualifications were unalterable by the legislature, Madison's statement to the same effect in Number 52, where he is clearly talking about State power to add qualifications.

Chief Justice Rehnquist: More clearly than Hamilton, isn't he?

Mr. Cohen: Well, I think Hamilton, when he referred to the legislature, was referring to Congress, but I think Madison is talking about the States.

Justice Souter: What was the... do you remember the phrase in 52?

I can't remember the text that you're referring to.

You said it clearly refers to the States.

Mr. Cohen: Well--

Justice Scalia: If it does, he was making a mistake, wasn't he, because he also was excluding the States' power to change the qualifications of electors--

Mr. Cohen: --No.

Justice Scalia: --which it obviously could.

Mr. Cohen: No.

What he was doing in 52 was explaining how the Constitution had fixed both the qualifications for voters and the qualifications for the elected.

It fixed the qualifications for voters by delegating that to the States subject to the most numerous branch compromise requirement.

Justice Scalia: That's not much of a fixing.

The fact is, the States could change it so long as they were willing to change it for their most numerous branch of the legislature.

Mr. Cohen: Madison uses the word 52--

Justice Scalia: Why say it's a mistake?

Mr. Cohen: --in relation to... in relation to the State constitutional provisions on this point, and he says that... in effect that these are fixed because the States and the people of the States won't allow changes in State provisions for voting for the most numerous branch of the State legislature, so we've dealt with that problem.

I would like to move on to the State's principal contention, which is, we didn't do that.

We just barred these people whom--

Justice Ginsburg: Before you do that--

Mr. Cohen: --we'd like to disqualify--

Justice Ginsburg: --Mr. Cohen, may I ask whether in your view we owe any kind of precedential respect to the interpretation of history in Powell v. McCormack?

We're not dealing here with a new discovery by Professor Warren, we're dealing with what has already gone over.

Mr. Kester has told us that... that perhaps some of the statements there, some of the conclusions weren't quite right, that there was room for other interpretations.

Mr. Cohen: --I think that Powell is a very persuasive opinion, and the Court should find it persuasive.

I also think there is substantial additional evidence on our side of this point that wasn't reviewed or reached in Powell.

I think--

Justice Souter: Did Powell at this point purport to go beyond the decision whether Congress or a House of Congress could act?

It seems to me that it did not--

Mr. Cohen: --It seems to me--

Justice Souter: --and it seems to me that that's the limitation... with the possible exception of your reference to 52, which I'm not sure of, that seems to me the problem with some of the, or at least the limitation on the cites to the debate text and say, Federalist 60.

It's clearly referring, by legislature, to the national legislature, and it seems to me that you're supporting legislative history, as it were, doesn't take you beyond the limitation on Congress.

Mr. Cohen: --The... it seems to me that Powell rests on the proposition that the qualifications were fixed in the Constitution and could not be supplemented legislatively.

Chief Justice Rehnquist: Well, I think you're mistaken on that, Mr. Cohen.

The holding of Powell clearly has to be that a single House of Congress cannot add to the qualifications otherwise legitimately set.

Mr. Cohen: Yes, but as this Court explained in the Judge Nixon case, the basis for that holding was not an aspect of the judging power as such, it was the fact that the... or that Article I, section 2, fixed qualifications that could be applied.

There are two questions here.

One is, vis-a-vis Congress, are we talking only about a judging power, or are we also talking about the power to legislate additional qualifications?

It seems to me every point in argument that was made in Powell goes to the power to legislate, not to the power to judge, although the ultimate question was only whether Congress could judge.

Chief Justice Rehnquist: And so the ultimate holding, wasn't it?

Mr. Cohen: The ultimate holding, I agree, but the logical foundation was that, and it then seems to me that the extension to the States is straightforward.

In the first place, some of the examples that the Court used in Powell were State additions of qualifications, or attempts by States to add qualifications.

Justice Scalia: But it can't possibly be straightforward, because Congress would need to have been given the power to make the alteration.

That power would have had to be found within the Constitution.

With respect to the States, that is not true.

With respect to the States you have the main thing that's relied on here, the Tenth Amendment.

There's nothing in Powell about the Tenth Amendment, is there?

We didn't even consider the Tenth Amendment.

Mr. Cohen: I agree that I need to go on to talk about those points.

I don't think that the Tenth Amendment reserves--

Justice Scalia: We're going to have you do that, but you're trying to not have to do it by saying--

Mr. Cohen: --No--

Justice Scalia: --we've decided it--

Mr. Cohen: --No, no, no.

Justice Scalia: --already in Powell.

Mr. Cohen: No.

I'm only saying that I think Powell did dispose of additional qualifications.

I don't think the... and I think that if you read the admittedly not clear and dispositive constitutional text as a preclusive list, there's simply no logical reason to think that it is preclusive vis-a-vis Congress and not preclusive vis-a-vis the States.

But I think this is not a Tenth Amendment case, because the Constitution doesn't leave the States or Congress the power to bar or to officially and materially prefer some qualified candidates over others.

Justice O'Connor: Well, Mr. Cohen, we have Storer, for example, which certainly prevented a candidate from appearing on a ballot at least for a period of time.

We did not treat that as a qualification, did we?

Mr. Cohen: That's right.

Storer--

Justice O'Connor: And so in theory this provision may not be a qualification at all.

Mr. Cohen: --No.

The fact that Storer said that the States have power to regulate access to the ballot in order to provide for fair and orderly elections, or as in that case, in order to preserve the integrity of the various routes to the ballot so as to give people a choice, doesn't mean that the States may impose ballot access limitations based on place of birth or civil profession or prior service in the State legislature or prior service in Congress, or being under the age of 70.

The Constitution--

Justice Scalia: Those things, if you do it on those bases it converts itself from a time, place, and manner restriction to a qualification?

Mr. Cohen: --Yes.

I think the--

Justice Scalia: If it's a qualification, I assume that the House would sit in judgment of whether that qualification was met.

Mr. Cohen: --I do not think that either the States or Congress may add qualifications.

I'm happy to use the term qualification in the sense in which you suggested earlier, Justice Scalia, which is qualifications is something that--

Justice Scalia: You can't serve if you don't have it.

Mr. Cohen: --that says you can't serve if you don't have it.

Justice Scalia: And that's not the case here.

Mr. Cohen: That is not the case here, but the State also may not keep off the ballot in order to disadvantage somebody who lacks a substantive personal characteristic because the Constitution leaves those questions to the voters every second year.

Justice Scalia: Well, maybe, but certainly not because the State is adding an additional qualification.

I mean, it may be bad, but not for the reason that it's violating the presumably exclusive Qualifications Clause.

Mr. Cohen: I will accept that with this exception.

I think the Arkansas supreme court was justified in saying here this measure is impermissible for essentially the same reason.

That is to say, the lawmakers of Arkansas, the people, were told, and then they said in the measure that they adopted, that the measure limited the terms of public officials, and the Arkansas supreme court simply rejected the argument that something that did that, that tried to impose a qualification, if you will, could be saved on the argument that it just might not achieve its stated purpose because of a loophole, the write-in loophole that has no significant history of working.

Justice Souter: May I just go back to Storer for a moment?

Could you just state for me the criteria, the standard on which you would have us distinguish the Storer disability, we'll say, from this disability?

Mr. Cohen: Yes.

Storer involved a legitimate time, place, and manner regulation designed to produce a fair and orderly election with a manageable ballot so that the people of California could choose by saying people who want to run in a prim... to be in a party in connection with a particular election must run in that party's primary and be the party's candidate.

People who want to run as independents must leave a party early enough to assure the genuineness of their independence and the nonfracturing of the party.

Justice Souter: Orderly elections.

It's orderly elections that's--

Mr. Cohen: It's orderly elections.

Now, it's quite different from... it's... if I can use a metaphor, it's like the difference between saying that someone must run in his assigned, qualifying heat in order to get into the finals of the 100-yard dash, and saying that somebody who won the medal last time must start 50 yards behind the others because we want to pass the medals around.

One involves procedural regulation that the Constitution authorizes the States to do, and the other involves a State substantive preference for one class of candidates over another that I think is not part of the entire scheme that is spelled out in some detail in the Constitution.

Chief Justice Rehnquist: --You justify sore-loser statutes on the basis that they are procedural.

Mr. Cohen: Yes, and there's a good deal of, in addition to text, legislative history that supports this reading.

If you read, particularly the Federalist 59 and 60.

Now, petitioners aren't very clear, to say the least, about whether the State's supposed power here is... is a power granted by the Time, Place, and Manner Clause or by the Tenth Amendment.

I suggest the reason that they're not very clear is that neither argument works.

The Constitution explicitly gives Congress the superior power to make election regulations or to alter those of the States, but it plainly, in doing so, means to limit the power of both the States and Congress to procedural matters.

It seems to me that the argument that a State can impose ballot access restrictions under some power outside the Time, Place, and Manner Clause is answered in the clause itself, which contains the phrase, "make or alter", and incidentally, the primary reason for that phrase was a fear that the States might not set up the machinery for congressional elections at all, and so the "make" part of the "make or alter" phrase is an important part of it.

The convention deliberately gave Congress the power to make or alter State regulations because Hamilton said an exclusive power of regulating elections for the national Government in the hands of the State legislatures would leave the Union entirely at their mercy.

That's the Federalist Number 59.

Justice Scalia: Mr. Cohen, what is your view as to whether something can be neither the one nor the other, neither a qualification nor a time, place, and manner restriction?

Is there some--

Mr. Cohen: I don't... if you mean by that something--

Justice Scalia: --Some restriction that is--

Mr. Cohen: --permissible--

Justice Scalia: --Something... no, not permissible.

Mr. Cohen: --Well--

Justice Scalia: Something that... whether it's permissible or not, is there anything that does not fall within one or the other category?

I gathered from your answer to my earlier question that you thought that there wasn't.

This might, indeed, be it.

Mr. Cohen: --No, I think--

Justice Scalia: You say it's impermissible, but not because it is technically a qualification.

Mr. Cohen: --That's right.

That's right.

I think there can be--

Justice Scalia: But it's also not a time, place, and manner.

Mr. Cohen: --That's right.

That's right.

Justice Scalia: So it is a third something-or-other, but an impermissible third--

Mr. Cohen: That's right.

I think for a State to say, on the whole we don't think people over 70 ought to continue to serve unless their constituents really want them, and so we'll keep them off the ballot, but if they can win by a write-in that's okay.

I think that is not a valid time, place, and manner regulation.

I also would not urge that anyone call it a qualification for the reason you point out, that it is merely keeping someone off the ballot.

I would then carve out an exception for that point for the--

Justice Stevens: --Are you abandoning the position of the Arkansas supreme court that it was a qualification?

Mr. Cohen: --I think what... I'm--

Justice Stevens: Yes or no.

Mr. Cohen: --I'm--

Justice Stevens: Because that was part of the rationale of their decision.

Mr. Cohen: --I am... I am reading... if that's the premise as to what it says, my answer's no.

As to what Arkansas said, my answer is yes, I disagree with that.

Justice Stevens: You're conceding that this is not a qualification in this case?

Mr. Cohen: I am arguing that it was appropriate for the Arkansas supreme court to say is does--

Justice Stevens: I understand that, but are you conceding that it's not a qualification?

Mr. Cohen: --I'm willing to... yes.

Yes.

Justice Stevens: It's a rather major concession.

Justice Kennedy: That's not, as I--

Justice Scalia: --It's a very reasonable one, Mr. Cohen.

[Laughter]

Justice Kennedy: That's not how I understood your brief.

Your first argument is the Constitution bars States and Congress from adding to the qualifications for service in Congress.

Mr. Cohen: I think that's important, and I don't think that I've made a significant concession.

We argue in the second section of the brief that whether something is a qualification is not technically what's at issue here.

The Constitution bars adding qualifications.

It also bars doing essentially the same thing indirectly, and I think that is the essence of what the Arkansas supreme court held, that--

Justice Kennedy: Well, but you begin with the major premise that a qualification cannot be added.

Mr. Cohen: --Yes.

Justice Kennedy: And then you say... and then you say, and this is so like a qualification that it must be invalid.

Is that--

Mr. Cohen: Yes, but I also say... but I also say that even if it is not a qualification, it is something that the States have no power to do, because the States have, as Congress has, only the power that is granted to them under the Time, Place, and Manner Clause, and the Time, Place, and Manner Clause does not... and the Time, Place, and Manner Clause does not authorize States to draw this kind of substantive distinction in the course of setting procedures for elections.

Justice Kennedy: --I take it your position is, is that the State can require, or the State can be forbidden from requiring its officeholders to have the same qualifications as its electors?

Mr. Cohen: Yes.

I think it's clear that the Constitution gave the States power to determine the qualifications of electors that it did not give to determine the qualifications of officeholders, of Federal officeholders.

Justice Kennedy: So that a State could bar a felon from voting but not for running for office?

Mr. Cohen: Yes, because one is a matter of the State's business, and the other is not, not for running from office... not for running from Federal office.

There was a period of time when I was qualified to be President of the United States, but as a resident of the District of Columbia I wasn't qualified to vote for one.

Justice O'Connor: Mr. Cohen, what about a law that just prohibits ballot access for one election, for example?

Mr. Cohen: I think--

Justice O'Connor: Do you make exactly the same argument?

Do you make no distinction between such a law and the one here?

That is, a lifetime inability?

Mr. Cohen: --I make a distinction, but the distinction I would draw is that it seems to me the lifetime inability demonstrates the falsity of the suggestion that this has something to do with incumbents.

I think that a bar for a single election would run afoul of the same principle that I am asserting here, which is, again, that the Constitution gave that choice to the people every second year, and gave the States only a limited and fundamentally procedural role.

Mr. Bryant says that all the examples of--

Justice O'Connor: Well, I don't know what kind of a line you end up with in examining Storer and knowing what is time, place, and manner regulation and what isn't.

It's difficult for me to draw a clear line from what you say.

Mr. Cohen: --Well, there may be some difficult cases in drawing lines.

In the speech area the Court had to wrestle with whether a sound limitation on a rock band was a time, place, and manner limitation or, as a applied to that band, a content limitation.

This is a clear case.

This is an easy case.

The Court has... the State has singled out people based on a personal characteristic, and if they can do this under the Time, Place, and Manner Clause, Congress could under the Time, Place, and Manner Clause, it seems to me, keep off the ballot for the Senate anybody who hasn't served in the House, and so on.

The State has singled out for this burden people based on a substantive qualification that does not relate, a substantive characteristic that does not relate to the election process or their compliance with reasonable procedures established by the State under its power under the Time, Place, and Manner Clause.

Justice Scalia: Mr. Cohen, maybe you think this is a clear case.

Some aspects of it at least I find very close, where you have Thomas Jefferson and Joseph Story on opposite sides of the issue, for example, whether the States have any power to add qualifications.

That's a close case in my mind.

Mr. Cohen: Story only... I mean, Jefferson only in one letter in 1814, but okay.

Justice Scalia: A letter he never retracted.

Story--

[Laughter]

In any case, just posit... posit that I think on that question at least it's very hard and very close, and in situations like that I am inclined to credit the practice that has been engaged in from the time when the Constitution was written, and there have, indeed, been a considerable number of State additional qualifications, I guess the most common being that in order to run for office you have to be qualified as a voter, which brings in all sorts of qualifications.

You can't be a felon, and so forth.

What is your response to that?

In addition to some property qualifications in Virginia, in the early days.

Mr. Cohen: I think actually, if you sort through the lengthy appendices attached to the petitioner's briefs, there's very little there.

The single, most telling episode is that in 1789 Pennsylvania calls a Constitutional Convention to eliminate a difference between its constitution and the Federal Constitution and conflicts, and repeals its term limits for service in Congress while keeping them for State officers.

The only property qualification that I'm aware of is that Virginia had the word "freeholder".

Other States that had property qualifications for State offices didn't impose them on... for Federal officers.

Justice Scalia: District resident qualifications.

Mr. Cohen: District resident qualifications strike me as the kind of thing that somebody might... they certainly were imposed.

They're the sort of thing that a State might fall into in making the arrangements.

Under the Time, Place and Manner Clause they are unconstitutional, as the Committee on Elections determined in 1807 in the McCreary case and as several courts have determined.

Justice Scalia: But there were quite a few of them, and they persist.

They're still out there, aren't they, these horrible things?

Mr. Cohen: It's possible that not every State went back and read the annals to see the McCreary episode and immediately repealed its statute.

I think they are, and would be held, and have been held unconstitutional because the voters of a State can, if they choose, pick candidates who come from another district.

Chief Justice Rehnquist: By what authority?

You say they've been held unconstitutional.

Mr. Cohen: By several State and lower Federal courts.

Chief Justice Rehnquist: Recently, or--

Mr. Cohen: Actually, yes, I think most of the cases are fairly recent.

--The Constitution gave the Federal Government only delegated powers to govern people's lives and activities, but it seems to me, again, that it dealt comprehensively with filling the offices that the Constitution itself created.

There's an overall design to give We, the People, every 2 years the power to select who will represent them in Congress, subject only to fixed qualifications and reasonable, fundamentally procedural regulations that the State has given power to adopt subject to congressional supersession.

If now congressional term limits are not a fad but are considered national judgment, the way to impose them is in Article V.--

Chief Justice Rehnquist: --Thank you, Mr. Cohen.

Mr. Cohen: Thank you.

Argument of Drew S. Days, III

Chief Justice Rehnquist: General Days, we'll hear from you.

Mr. Days, III: Thank you, Mr. Chief Justice, and may it please the Court:

I want to reinforce the extraordinary and anomalous nature of petitioner's argument in terms of the power of Congress.

We think that a fair reading of Powell v. McCormack and the Nixon case are that Congress may not add to the textual qualifications set out in the Constitution with respect to service in Congress.

Chief Justice Rehnquist: You agree that was not the holding of the Powell case.

Mr. Days, III: I do, Mr. Chief Justice, but I also want to underscore the fact that this Court, after an exhaustive review of the preconstitutional... the constitutional convention, the ratification, and the post-ratification history, concluded that those requirements were fixed in the Constitution.

I think that's the reading of Powell and Nixon together.

Chief Justice Rehnquist: That's dicta, is it not?

Mr. Days, III: Yes, Mr. Chief Justice.

Chief Justice Rehnquist: And we don't... we are not bound by dicta.

Mr. Days, III: That is correct, but I think that this case does not necessitate this Court's reviewing the history that it found in Powell v. McCormack, and much of the evidence that's been brought forward was addressed by this Court here.

Chief Justice Rehnquist: Well, how about the McCreary episode, where now it appeared apparently to the Powell court that the committee report had the same validity as another committee report which was adopted by the full... now it appears this report was not adopted by the House.

Doesn't that cast some doubt on the historical abilities of the Powell court?

Mr. Days, III: Well, Mr. Chief Justice, that's one piece, and I think my cocounsel is correct.

Chief Justice Rehnquist: Well, falsus in uno, falsus in omnibus.

[Laughter]

Mr. Days, III: Well, I... Mr. Chief Justice, I would be the last person to suggest that this Court was in error when it reviewed the history in Powell v. McCormack.

Justice Scalia: We're all in big trouble if that maxim is going to be applied, I must say.

[Laughter]

Mr. Days, III: Let's look at the argument that the petitioners have put forward.

They seem to rely principally upon the times, places, and manner provision, Article I, section 4, but we have to remember that the power there is one shared coextensively by Congress.

Where does that lead the petitioners with respect to their arguments?

If it is a qualification, then the States may add, and the Congress may add.

If that's what they're relying upon, this creates an interesting situation that I think Justice Scalia and Justice Souter were alluding to.

That is, if the States can set qualifications, then presumably, under Article I section 5, Congress can judge those qualifications not against the constitutional, textual qualifications, but the potentially myriad qualifications that States could set up along the lines of the ones that have been provided by Amendment 73.

If it is a manner, then the States may bar access to the ballot, but Congress also may bar access to the ballot, and it is not a power in Congress that has to await action by the States.

The term is 73 imposes.

But we would suggest that this is not a manner.

This is not times, places, and manner.

This is a qualification.

With due respect to my cocounsel, I think it's unavoidable that this is a qualification.

Let me suggest why that is so.

First of all, the times, places, and manner requirement, as my cocounsel has set out, was designed to ensure the fairness and the efficiency and the accuracy of the legislative process, the electoral process.

Justice Ginsburg, you pointed out that in our First Amendment jurisprudence it is a procedural cast that the Court has given to the concept of time, place, and manner.

Justice Ginsburg: And I believe listed the language from section 4.

Mr. Days, III: Yes.

I always wondered where that came from, and now, with further study, I understand that.

But how do we know that it's a qualification as opposed to a manner?

Justice Souter, you asked that question.

I think Justice O'Connor also asked the question, and I think the answer lies in the fact that Storer v. Brown was focused on one election cycle.

That is, the burdens that were imposed upon the would-be candidates in Storer v. Brown were based upon their failure during the election cycle to do the types of things that California law required.

Our view is that any burden placed on a candidate for Congress based upon conduct that has not occurred during the election cycle in question is a qualification.

Justice Scalia: If it's a qualification, Congress has to be able to judge it.

Now, let's assume that somebody gets elected without complying with the qualification.

Somehow his name gets on the Arkansas ballot accidentally, by a mistake or by some corrupt act, and he gets elected, and he appears before the House, and the committee is to judge his qualifications.

Can they exclude him?

Mr. Days, III: If Congress can rely only upon the textual qualifications, then they cannot exclude him.

Justice Scalia: No, no, no, no, no.

I mean, assuming that this is a qualification, and a valid qualification.

Mr. Days, III: Yes.

Justice Scalia: Assuming it's a qualification, and a valid qualification, I don't see how any congressional committee could possibly exclude him.

He's entitled to serve.

He's been elected.

Mr. Days, III: I agree with you, Justice, Souter--

Justice Scalia: He is not--

Mr. Days, III: --that there would be no--

Justice Scalia: --disabled from serving.

Mr. Days, III: --There would be no point of reference.

Congress, a House of Congress, could not, under Article I, section 5, do very much at all.

It certainly could try, but I agree with you that they would have no standard--

Justice Scalia: I suggest the reason is because it is not a qualification.

Arkansas has not said, this person may not serve.

It's simply said, this person may not run for office and be listed on the ballot.

If he accidentally gets listed on the ballot, he may serve.

Mr. Days, III: --Justice Scalia, I--

Justice Scalia: That seems to me to say it's not a qualification.

It's something.

Maybe you can argue, as Mr. Cohen does, it has the same effect and therefore it's bad--

Mr. Days, III: --Well, I do argue that--

Justice Scalia: --but you're trying to argue that it is itself a qualification, and that just flies--

Mr. Days, III: --It doesn't really make any difference, Justice Scalia--

Justice Scalia: --Okay.

Well, I'll... fine.

Mr. Days, III: --Because... because--

Justice Scalia: That argument I can understand.

Mr. Days, III: --All right, fine.

[Laughter]

Whatever that unidentified flying object is that's neither a qualification nor a time, place, and manner restriction is unconstitutional, because States cannot derive from the constitution the power to impose whatever we want to call it.

Justice Stevens: But if you make that argument, what do you do about the Tenth Amendment, with these--

Mr. Days, III: I would agree with my cocounsel--

Justice Stevens: --Why doesn't the Tenth Amendment preserve the right of the States to use all the flying objects it wants?

[Laughter]

Mr. Days, III: --Justice Stevens, I think this Court has made very clear that the Tenth Amendment restates divisions of authority that are provided elsewhere in the Constitution, and the very idea that the Tenth Amendment could give the States the power somehow to fill in the gaps with respect to the Federal structure when we're talking about provisions that do not grant Congress explicitly the power to address them, or deny to the States explicit power to deal with them, that somehow the Tenth Amendment provides that power.

I think if anything the Tenth Amendment is reinforced by the times, places, and manner provision.

That might be viewed as something that the Tenth Amendment reinforces, or vice versa, but I don't see how the Tenth Amendment could come into place under these circumstances.

It is truly an anomalous reading of the Tenth Amendment and this Court's jurisprudence.

I wanted to touch upon--

Justice Breyer: Before you leave that--

Mr. Days, III: --Yes, Justice Breyer.

Justice Breyer: --could I go back to what I think is Justice O'Connor's question, which is, I take that your basic position is that no additional qualifications can be provided by States.

Mr. Days, III: That is correct.

Justice Breyer: All right.

It says they shall choose whoever they want, the Constitution, subject to certain listed disqualifications.

Mr. Days, III: That is correct.

Justice Breyer: Birth would be no good, property would be no good, being... service in the legislature would be no good, term limits would be no good, and being a pre... and being a member of a political party such as being chosen by the Democrats or Republicans would be no good.

Mr. Days, III: That's correct.

Justice Breyer: Right.

All right.

But then in Storer, I take it it's okay to, through this back door, insist on one of the qualifications, namely, being chosen by the party.

Mr. Days, III: Yes.

Justice Breyer: But why, then, isn't it okay to insist on this other one, namely the term limits one.

Mr. Days, III: Well, as I indicated, Justice Breyer, I think--

Justice Breyer: That... I mean you... I just want to get a very clear--

Mr. Days, III: --Well, there's a temporal quality here.

The requirement with respect to being a member of the party, or if you wanted to run as an independent, not being a member of a party, is related to the integrity of the electoral process, and it focuses on that election cycle.

The people who were disqualified in Storer can, in the next election cycle, prepare themselves to qualify according to the rules of California.

Under Amendment 73, once a Member of Congress has served three terms in the House of Representatives or two terms in the Senate, there is nothing that that person can do to conform his or her behavior.

Justice O'Connor: --Well, would your answer be different, then, in a State which has just adopted a one-time interruption of the ballot access, as some have?

Mr. Days, III: It would not be different--

Justice O'Connor: I didn't think you were relying on that distinction.

Mr. Days, III: --I'm not.

You asked about the lifetime disqualification.

I don't think it makes any difference whether it's for a few years, or a lifetime disqualification.

It still--

Justice O'Connor: That's what you were just arguing in response to Justice Scalia.

Mr. Days, III: --I didn't understand myself to be responding in that fashion.

I--

Justice Souter: Don't you also, or wouldn't you also in that case accept the point that Mr. Cohen made, that there was a justification in Storer based on a demand for orderly election procedure, and that compliments the point that you've also made about the significance of the permanence of the disqualification in this case?

Mr. Days, III: --Yes, exactly.

Exactly so.

Justice Ginsburg: I take it you did not mean to concede that a State could say you have to be a Republican, or you have to be a Democrat, that you could be an independent--

Mr. Days, III: Well, that--

Justice Ginsburg: --you have to be independent early enough to make it persuasive.

Mr. Days, III: --That's right.

I mean, the requirements, what obviously you want to file under those circumstances, are First and Fourteenth Amendment criteria, so I was not suggesting that they would fly under those circumstances.

I just wanted to address a couple of other points that were raised during the argument, and that is that Justice Scalia, you talked about the disqualification clause.

This Court in Powell canvassed the history of that particular formulation and locution, and I think what the Court concluded was, it was done by the Committee of Style, and the Committee of Style had no authority to change the substance, and indeed, during that period it was quite often the case that alternative formulations were used that had no substantive significance.

Justice Scalia: Did people who voted for this Constitution know that?

Mr. Days, III: I'm sure some of them did.

Justice Scalia: I mean--

Mr. Days, III: They were a very learned bunch.

[Laughter]

Justice Scalia: --I don't care what the committee said and what the committee changed.

I mean, it was the Constitution as written that was promulgated to the people, and they adopted it, reading it as it was written.

I don't think they knew what happened in the Committee of Style.

Mr. Days, III: That's certainly--

Justice Scalia: Or, you know, I'm not sure that we do.

I mean, we're taking James Madison's word for it all, I guess.

[Laughter]

Mr. Days, III: --Well, he's a fairly credible source--

Justice Scalia: We could do worse, couldn't we?

Mr. Days, III: --Mr. Justice Scalia.

[Laughter]

We could do worse, I think, Justice Souter, was your point.

Chief Justice Rehnquist, you asked about residency requirements, and Justice Scalia, you asked about various limitations.

There have been some recent decisions, one in 1968, Exon v. xx in the District of Nebraska, where residency requirements were struck down.

This was also the case in Chavez v. Evans in 1968 in New Mexico, where the courts concluded that States did not have the power to impose those types of restrictions.

Mr. Chief Justice, and the other members of the Court, Amendment 73 is unconstitutional.

It is not a qualification in the sense that if it is a qualification it violates the Constitution, and it does not fit into the time, place, or manner powers granted to States under the Constitution.

It seems to me that if what Arkansas is done here can be done not only by other States but by Congress, we have closed the door that Madison had in mind that would be open to merit of every description with respect to service in the United States Congress.

We urge this Court to affirm the judgment below.

Thank you very much.

Rebuttal of J. Winston Bryant

Chief Justice Rehnquist: Thank you, General Days.

Mr. Bryant, you have 7 minutes remaining... General Bryant.

Mr. Bryant: Thank you.

Justice Stevens: General Bryant, before you start, how many terms did Senator McLellan serve?

Mr. Bryant: The Honorable Senator McLellan served at least five terms, and was probably into his sixth term.

Justice Stevens: Thank you.

Mr. Bryant: Two points, Your Honor.

First is the Respondents... Mr. Cohen has conceded that Amendment 73 does not amount to a qualification.

Under that scenario, it is the State's position, as I originally stated, that Amendment 73 is a ballot access regulation clearly permissible under Article I, section 4 of the Constitution, and the Arkansas court held that Amendment 73 was, in fact, a qualification.

Under that scenario, we request the Court... this Court to reverse the Arkansas court and remand--

Justice Breyer: But if it were a qualification, then would you lose?

Mr. Bryant: --No, Your Honor.

Justice Breyer: But why, if we're thinking on qualification, I take it if the States can pass qualification such as the one at issue, they also could pass qualifications setting requirements of birth, or property, or previous service in the State legislature, or add on to the list almost indefinitely, and why should we think that the Constitution, particularly with Hamilton and Madison, intended to give the States the power to create that kind of Congress?

Mr. Bryant: Your Honor, under your scenario, Article... the States can add additional qualifications.

That is our position.

Any qualifications added, of course, would be subject to First and Fourteenth Amendment scrutiny, so any scenario that the State came up with that violated the First and Fourteenth Amendment would, in fact, not pass constitutional muster.

The Tenth Amendment gives the States the authority to adopt additional qualifications, and as has already been pointed out here, the States, all the States in this Union have a number of qualifications on their books.

Arkansas requires a candidate for Congress to be a registered voter.

A registered voter cannot be a felon or a mental incompetent.

Arkansas... the Arkansas constitution prohibits a Senator who is appointed from running for reelection, so Arkansas has a number of laws on its books, both statutory and constitutional, that amount to qualifications under the Respondent's theory, and if qualifications--

Justice Breyer: But my question actually was why would Hamilton or Madison, who, after all, were writing before the Fourteenth Amendment was passed, think that it was possible that this Constitution would permit qualifications for the Congress based upon birth or property, and why would we today think that a State could pass a rule saying to be in Congress you have to be a previous member of the State legislature, for example?

Mr. Bryant: --Your Honor, our position is that Madison and Hamilton did not preclude the State from adding additional qualifications under the Tenth Amendment.

Justice Breyer: So therefore Hamilton and Madison, when they wrote the Federalists and said to the people, don't worry about creating a Government of birth or property, that they were wrong in that?

Mr. Bryant: Your Honor, no, Your Honor, because under the State's position any qualification that went to the point you suggested would be unconstitutional under the First and Fourteenth Amendments.

Justice Breyer: This was before--

Mr. Bryant: Yes--

Justice Scalia: --I guess that Madison and Hamilton and the people they were writing for weren't worried about their State legislatures.

They felt that their State legislatures were responsive to the people.

They were worried about whether this new animal that was being created would be responsive to the people, and they weren't about to give it vast powers to impose qualifications that their own people didn't like.

That's the only explanation for the fact that in all of this discussion there's no... in the debates there's no categorical mention about this issue about the States adding qualifications.

They weren't worried about the States.

The States were the people as far as they were concerned.

Isn't that the response to why--

Mr. Bryant: --Yes, Your--

Justice Scalia: --Madison and Hamilton--

Mr. Bryant: --Yes.

Yes, Your Honor, that is correct.

[Laughter]

Justice Kennedy: --Are you aware of any case in which we have said that a State may impose a burden or restriction by reason of the fact that someone has previously exercised a Federal right or privilege?

Mr. Bryant: I'm not sure I follow the question, Your Honor.

Justice Kennedy: Are you aware of any case in which we have said that a State may impose a burden or restriction on a person by reason of his or her having exercised a Federal right or privilege?

Mr. Bryant: If I understand your question, Your Honor, yes, I think the Storer case fit that, I think the Burdick case fit that, and the test in those cases, those cases stood for the proposition that a State can't add additional qualifications or barriers--

Justice Ginsburg: What was the addition... what was the Federal right or privilege exercised in Storer, which was someone who had signed up as a member of a party and didn't quit early enough?

Mr. Bryant: --Your Honor, in Storer, the Federal right or privilege would have been the candidate attempting to run for Congress as an independent candidate, but was precluded from doing so by California law, and in that particular instance, the State had erected a barrier, but by the same token under the First and Fourteenth Amendment analysis, the State... that barrier passed constitutional muster, and we submit that Amendment 73 falls in that category and is clearly authorized--

Justice Ginsburg: It's the most temporal of limitations, though.

It's kind of like you have to be living in a State a certain amount of time before you can get a divorce.

It was... it's very transient.

Mr. Bryant: --I'm... if I understand your question correctly, those prohibitions were temporary in that the candidate could run subsequently, but by the same token, Amendment 73 allows a candidate to serve for a certain number of terms before Amendment 73 comes into effect.

Chief Justice Rehnquist: Thank you, General Bryant.

Mr. Bryant: Thank you.

Chief Justice Rehnquist: The case is submitted.

Unknown Speaker: The honorable court is now adjourned until tomorrow at ten o'clock.

Attribution:

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Featured:

United States v. Texas - Oral Argument

Fri, 09 Jan 2009 14:49:28 +0000

Case:

United States v. Texas

Media File:

91-1729_19930301-argument.mp3

Related Transcript:

1992_91_1729_argument.xml

Transcript:

Argument of Thomas G. Hungar

Chief Justice Rehnquist: We'll hear argument first this morning in No. 91-1729, United States v. Texas.

Mr. Hungar.

Mr. Hungar: Thank you, Mr. Chief Justice, and may it please the Court:

This case involves the question whether the United States retains its long-standing common law right to collect prejudgment interest on debts owed by state and local governments.

The case arises in the context of the Federal Food Stamp Program.

Under that program the United States distributes food stamps to participating states for issuance to eligible individuals.

States like Texas that choose to distribute food stamps through the mail are contractually liable to the United States for a portion of the value of the food stamps that are lost or stolen in the mail.

In 1986 and 1987 the United States asserted claims against Texas amounting to over $400,000 for losses arising out of the State's issuance of food stamps in the mail.

Both the district court and the court of appeals upheld the validity of those claims, but the court of appeals also held that the United States was not entitled to collect prejudgment interest on the State's debts.

We submit that the court of appeals erred in reaching that conclusion.

As this Court has repeatedly indicated, an award of prejudgment interest is in keeping with fundamental principles of fairness and equity and serves to insure that neither party to a dispute benefits or suffers from a delay in payment.

For those reasons the right of the United States to collect prejudgment interest from the states and from local governments has long been recognized as a matter of Federal common law.

Respondents argue that Congress intentionally abrogated that long-standing common law right when it enacted the Debt Collection Act of 1982, but the language and purpose of that act and traditional canons of statutory construction require rejection of respondents' argument.

The language of the Debt Collection Act does not address the question at issue in this case.

The act says only that states are not persons for purposes of the mandatory prejudgment interest and delinquency penalty provisions of 31 U.S.C. section 3717.

Standing alone, that exclusion from the scope of section 3717 does not suggest that Congress intended to go further and to abrogate the existing common law remedy.

The common law remedy is discretionary and flexible and allows courts to weigh the interests of the state better in determining whether and to what extent to award prejudgment interest.

Unknown Speaker: If the state had just refused to pay, Mr. Hungar, and the United States had sued the state, which was not the case here, would it have had a choice to proceed under the Federal common law or under the Debt Collection Act, or does the Debt Collection Act not provide some substantial cause of action?

Mr. Hungar: In this case the United States would not have had the choice to proceed under the Debt Collection Act because the Debt Collection Act's prejudgment interest remedy expressly excludes the states.

Unknown Speaker: I mean for the substantive amount owed, for the principal amount owed.

Mr. Hungar: Well, the Debt Collection Act doesn't create a cause of action.

It just, it sets forth certain remedies and certain specific contexts for the Federal Government's debt collection efforts.

It's not even a comprehensive scheme in that respect.

Unknown Speaker: All right, so there's no substantive liability under... substantive cause of action created under the Debt Collection Act?

Mr. Hungar: Well, where the... that's correct.

Unknown Speaker: For the principal sum.

Mr. Hungar: That's correct, Your Honor.

The substantive cause of action comes from the Food Stamp Act.

Unknown Speaker: Would the... and is that the common law cause of action that the United States would proceed under in this hypothetical case where the United States is initiating the suit?

Would the United States then have a choice to say well, we'll proceed under the statutory cause of action or under the Federal common law, or are they the same thing?

Mr. Hungar: Well, if we're referring to the Federal common, the Federal cause of action, which is a different question than the remedy for prejudgment interest in our view, the cause of action... I am sure the United States would have a cause of action that could either be viewed as an implied right of action under the Food Stamp Act or as the more general Federal cause of action for money had and received, which is at issue in the United States against California case.

But in either event we would submit that prejudgment interest would be available under the separate remedial rule that this Court has repeatedly affirmed, which is that where a sum of money is owing to the United States prejudgment interest is generally available, depending on the equities of the particular situation.

Unknown Speaker: So if in the hypothetical case you had proceeded under the statutory authority to collect the money, the Debt Collection Act is still not applicable insofar as prejudgment interest is concerned?

Mr. Hungar: In this context, yes, Your Honor, because this would be an action against a state and states are excluded from the scope of section 3717.

Unknown Speaker: Mr. Hungar, in cases in which the common law remedy is applied, when does the interest run from?

Is it the date of the complaint?

Mr. Hungar: Again, Your Honor, because the common law remedy is flexible and discretionary, that is up to the court.

Unknown Speaker: Could the court assess it as of a date earlier than the date of the complaint?

Mr. Hungar: We believe it could, Your Honor, but it might, depending on the equities of the particular situation, if there had been some undue delay perhaps then it would be inequitable to impose liability prior to that date.

The court could determine that the date of the complaint would be the first date from which interest would accrue.

I would think the general rule, though, would be that interest begins accruing once the debt is liquidated and owing.

Unknown Speaker: Now, there's no discretion under the act, I take it?

Mr. Hungar: That's correct, Your Honor.

There's no discretion in the court.

Agencies have some limited discretion, assuming they have promulgated regulations to that effect.

Unknown Speaker: So that the State of Texas I take it then in your view is wrong in what it said in its brief on, I think it was on page 12, that what the Government is asking for here in fact is the same interest remedy that it would have had under the act.

It's not the same kind of remedy, I take it.

Mr. Hungar: That's exactly right, Your Honor.

The common law remedy is quite distinct and different from the statutory remedy.

The statutory remedy is mandatory.

It requires courts to impose prejudgment interest at a specified mandatory minimum statutory rate, which is not true of the common law.

It requires collection of processing fees and delinquency penalties in appropriate cases, which is not true of the common law.

It applies to more debts or more obligations than does the common law remedy.

And the biggest distinction is the fact of course that the statute is mandatory on the courts, the common law has discretion.

Unknown Speaker: Do you see the common law remedy as essentially a discretionary judicial remedy as distinct from something which is implicit in a contractual relationship?

I assume the answer is yes, it's a judicial remedy.

There's nothing contractual about it.

Mr. Hungar: That's correct, Your Honor, and I think prejudgment, although this case doesn't present that question, I think that prejudgment interest could be available under the common law even beyond a purely contractual relationship if it were appropriate.

Unknown Speaker: Mr. Hungar... I'm sorry.

If you're correct, Mr. Hungar, and there still exists this common law right to recover prejudgment interest, are any of the State's other arguments open for consideration on remand?

Mr. Hungar: Well, the State has argued in this Court that the plain statement rule announced by this Court in Pennhurst would bar application of prejudgment interest.

Unknown Speaker: Well, I think they have also made arguments that go to, that are equitable in nature, I suppose, the fact that the Government's own agent stole food stamps and things of that sort.

Mr. Hungar: That's correct, Your Honor.

To the extent the State is arguing that even if prejudgment interest is appropriate an award of prejudgment interest should not be awarded in this case, and it's not clear to what extent the State is making that argument, but certainly to the extent the State is making that argument that would be a valid consideration on remand in determining whether prejudgment interest is available.

The legislative history of the act--

Unknown Speaker: Mr. Hungar, before you get to the legislative history--

[Laughter]

--I suppose the best argument for the other side, it's really a sort of inclusio unius est exclusio alterius argument, and why doesn't it make a lot of sense?

Why, can you explain to us why it would, why the Government would want to establish these new rules that are apparently fairer and more efficient for all other interests but somehow not for interests owing by the states?

It seems to me much more likely that they were simply saying no interest from the states, you just don't get it, and where you get interest these are the fair and efficient rules for getting it.

Mr. Hungar: --Well, I'm sure that the private debtors who have now been subjected to section 3717 would disagree with your characterization that section 3717 is fairer than the common law.

Under the common law their equitable defenses could be considered.

Under section 3717 they cannot.

The courts must impose prejudgment interest at, according to the legislative history, at rates typically higher than were imposed under the common law.

Unknown Speaker: Well, they think that's fair to the Government.

Mr. Hungar: That's correct, but the Government--

Unknown Speaker: You don't mean Congress passed this not thinking it was fair?

Mr. Hungar: --Congress was attempting to enhance the Federal Government's abilities to collect debts as against those entities covered by the act, but Congress could well have determined that it would be inappropriate, for example, to impose on state and local governments the delinquency penalties and the processing fees that are mandated by section 3717 in addition to the statutory minimum rate of interest.

Congress could also well have determined that it would be appropriate to leave state and local governments subject to the flexible common law remedy under which the courts are permitted to weigh the interests of the state debtor in determining whether in the particular case an award of interest is appropriate.

None of that is possible under the statute, so it's entirely conceivable that Congress wanted to leave the states subject to the common law rather than imposing the stricter and harsher provisions of section 3717.

And that's the most natural, in our view that's the most natural reading of the language.

It's sort of an odd and round about way to achieve a formal, an affirmative abrogation of the existing law simply to exclude state and local governments from the scope of a non-comprehensive limited statute, which is what the Debt Collection Act was.

The Debt Collection Act was not a comprehensive scheme designed to answer all questions that might arise with respect to the Government's debt collection efforts.

It addresses a few discrete areas in an attempt, as the statute itself says, to enhance the Federal Government's debt collection efforts.

Unknown Speaker: And specifically doesn't address whether a cause of action exists.

Mr. Hungar: That's... it does not, that's correct, Your Honor.

The cause of action, the Debt Collection Act assumes that some other statute or some other--

Unknown Speaker: No, I mean for prejudgment interest.

Mr. Hungar: --As against the states, that's correct.

Unknown Speaker: As against anybody.

It doesn't address the--

Mr. Hungar: Well, I'm not sure whether it would be denominated to cause of action, but it certainly mandates that a prejudgment interest remedy in the context of private debtors but does not address the question of the existence or non-existence of a prejudgment interest remedy in the context of state debtors.

But at the very least the statutory language is equally susceptible to interpretation.

Even if it's equally reasonable, which we think it's not, to read the statute in the way that the State does, it's certainly reasonable to read it in the way we do.

If Congress had in fact intended to leave the law with respect to the states alone, a perfectly reasonable and rational way of achieving that result is to say this statute doesn't apply to the states, because the general presumption in all areas is, and specifically when we're talking about the common law, is that when Congress doesn't legislate with respect to that particular question it leaves the state of the law as it was.

And that's all we're saying happened in this case.

The legislative history of the act provides no support for a contrary conclusion.

In fact, as I have noted, that Congress expressly stated in its statutory preamble that the purpose of the act was to provide additional remedies to assist the Federal Government in collecting its debts.

It would be extremely odd to construe a statute intended to assist the Federal Government and enhance its debt collection efforts in a manner that would cut back on existing remedies against a certain class of debtors.

Unknown Speaker: --What is the meaning in 4 C.F.R. 102.13 subparagraph (2) on debts which are not subject to 31 U.S.C. 3717?

It says however agencies are authorized to assess interest and related charges on debts which are not subject to 31 U.S.C. 3717.

Is that a way of saying debts owed by state or local governments, or is that--

Mr. Hungar: Yes, Your Honor.

Unknown Speaker: --Is that all it includes?

Mr. Hungar: The section 3701(c) exempts state and local governments and Federal agencies.

I believe a separate provision of the C.F.R. exempts Federal agencies from the entire Federal claims collection standard, so in effect I think that's correct.

There may be other exemptions... I'm sorry, let me amend that.

There are--

Unknown Speaker: That's the regulation at 4a of your brief, and I'm just not sure what debts are included in the phrase debts which are not subject to 3717.

Mr. Hungar: --Your Honor, let me amend my previous answer.

They omitted from that, that excerpt that we have reproduced there because it isn't at issue, directly at issue in this case, other provisions, other exemptions from section 3717.

In particular 4 C.F.R. 102.13(i) states that the provisions of 31 U.S.C. 3717 do not apply to debts owed by state and local governments, to debts arising under contracts entered into before the Debt Collection Act was created, to debts arising under certain specific statutes such as the Internal Revenue Code, and so forth.

So there are, in addition to state and local government debts there are other debts that are not subject to the Debt Collection Act.

Unknown Speaker: Well, it says they are just not subject to 3717.

Mr. Hungar: That's correct.

That's correct.

In our view states and local governments are not subject to any of the provisions of the Debt Collection Act, although of course they are subject to other provisions of Federal law having to do with debt collection.

But the Debt Collection Act was merely a sort of haphazard collection of a few additional remedies that Congress wanted to give the Federal Government.

The only remedies that would have had any application to the states were administrative offset and prejudgment interest, and Congress excluded the states from those sections.

None of the other provisions of the act have any, appear to have any application to the states at all.

Respondents in their brief cite 31 U.S.C. section 3714, which provides an administrative offset against the states in limited contexts, but that is not part of the Debt Collection Act.

That was enacted as part of the act of March 25, 1870 and has been on the books for over 100 years and has nothing whatsoever to do with the Debt Collection Act.

As Respondents themselves say in their brief, Congress was not trying to deal with the problem of state and local government debtors in enacting the Debt Collection Act, it was focused on a different problem.

So it would be particularly unlikely that even though it was focused on a different set of problems it nonetheless went out of its way and intended to abrogate the common law in the context that it was not even addressing.

Unknown Speaker: Mr. Hungar, when you call our attention to the regulation, wouldn't it have been natural for Congress if they meant what you say to have done exactly what the author of the regulations did, at the end of subsection (c) to say however, agencies are authorized to continue to apply the common law rule?

Mr. Hungar: No, Your Honor, because Congress is understood to legislate against the backdrop of traditional canons of statutory construction, and one of those traditional canons is that Congress will not be deemed to have changed the law and in particular will not be deemed to have abrogated existing and long-standing common law rules.

Unknown Speaker: You must admit though it would have been rather clearer had they done that.

Mr. Hungar: Certainly.

We would not be here if they had done that, but the point is the rules of statutory construction consistently followed by this Court show that Congress doesn't have to do that.

The rule cuts the other way.

Congress has to give some express indication, not necessarily in the text, but somewhere, of its intention to achieve the opposite result or it will be deemed to have left the law as it was.

Unknown Speaker: Is there a case like this one where your rule applied to preserving a common law rule when a new statute has been, replace the general scheme of things?

Mr. Hungar: Mobil Oil against Higginbotham is perhaps an analogous statute.

In that case, that case involved the Death on the High Seas Act.

And in the context, in cases where the Death on the High Seas Act applied the Court held in Mobil Oil that it abrogated the common law.

You couldn't have a different remedy--

Unknown Speaker: But it didn't create a new remedy is what that did.

That didn't abrogate any remedy, the statute there, any preexisting remedy.

Mr. Hungar: --Well, with respect, Your Honor, the Federal common law does, it did not originally but I believe in 1970 in the marine case, or perhaps earlier, but in any event at some point the Court did determine that the Federal maritime law did create a cause of action for wrongful death.

Unknown Speaker: But that's your strongest case, is it?

Mr. Hungar: Well, if I may explain, Justice Stevens, the Death on the High Seas Act contains an express exception for cases arising in state territorial waters, but it applies on the high seas.

And in the Mobil Oil case the Court said where the act applies, where it creates a remedy and a legal standard that applies, the common law remedy does not apply.

You can't have a different result under the common law than you would under the statute.

But where the act does not apply, that is in state territorial waters, you can have a Federal common law cause of action.

Because the act doesn't apply there, therefore Congress has not abrogated the common law.

We think that's exactly what has happened in this case.

The act applies to private parties, and in that context therefore Congress has spoken and the Federal common law does not exist.

But the act does not apply to the states and therefore the state, the common law continues to exist in that context.

And respondents have pointed to no case in which the only evidence of congressional intent to abrogate the common law was the fact that Congress had chosen not to apply the statute in that context.

There is no case from this Court that stands for that proposition, and it would be quite an extension for this Court to say that merely by declining, merely by deciding not to legislate in a particular area Congress has thereby determined to abrogate the existing law in that area.

And we submit that would, that that is not an appropriate way to resolve this case.

Unknown Speaker: Mr. Hungar, does the regulation that we have just been discussing have a mistake in it in its statement that agencies are authorized to assess interest as they would have been able to do with the common law?

Because I thought you told me that that was a judicial remedy, so that the agencies wouldn't be assessing it, they would simply be asking a court for it if they won their legal actions for collection.

And yet this seems, this definitely says that the agencies can assess.

Is that a mistake?

Mr. Hungar: Well, it's certainly correct that agencies do not have the authority under the common law to require states to pay a particular rate of interest in a particular case.

That decision is up to the courts.

The agencies can--

Unknown Speaker: Well, that means they have to go to courts for enforcement just as they have to go to courts to enforce the underlying debt in the first place.

Mr. Hungar: --That's correct.

Unknown Speaker: But the regulation seems to say that, subject to whatever enforcement discretion a court may have, the agency has the common law authority to create an obligation, and I didn't think that's what you were saying before.

Mr. Hungar: We would not read the regulation in that way, Your Honor, and if it were read in that way it would be incorrect.

Federal agencies can, as the Federal agency did in this case, inform the state that they intend to seek prejudgment interest and even, as they did in this case, specify the rate at which they want prejudgment interest to accrue.

And if the case never gets to court, if it's settled and the state agrees to pay that obligation, well, that's the end of the matter.

But if the case does get to court obviously it's up to the district court to select the appropriate rate of interest and indeed to determine whether interest is available.

Unknown Speaker: That leads into a question that I had, Mr. Hungar.

You argue in your brief, and I suppose you were about to argue it here before you got interrupted, that we should defer to the agency's interpretation of the statute.

But if we're talking here about a cause of action, a judicially created cause of action as you have just said for the interest, do we listen to the agencies as to whether, for example, whether there's a cause of action under the securities law?

We don't listen to the agencies as to whether there's a judicial cause of action, so what difference does it make what the agencies think here?

We're talking about where there's a cause of action in the courts.

Isn't that our business?

Mr. Hungar: Well, in the first place, Your Honor, we would not, I would not view the remedy, the prejudgment interest remedy as a cause of action.

It's more of a remedy tacked onto an existing cause of action.

If... here the Food Stamp Act creates the liability and the right of the United States to recover, and the prejudgment interest remedy merely insures that that liability is in fact paid.

Unknown Speaker: Well, I don't care what you want to call it, it's judicially created.

That's the point, isn't it?

Mr. Hungar: Yes.

Unknown Speaker: I mean, you have said that.

That has been your argument here.

Mr. Hungar: That's correct, Your Honor.

In any event, deference to the administrative construction of the statute is appropriate because the question here is not whether prejudgment interest is appropriate in this case or whether the common law prejudgment interest remedy exists.

Those are questions for the court.

The question here is whether Congress, in enacting the Debt Collection Act of 1982, evidenced a congressional intent to abrogate the existing common law remedy.

And that is the issue that the administrative agency has determined in our favor, and we believe that is what is due deference.

Unknown Speaker: So what if an agency under the regulation says we think prejudgment interest should occur at the rate of 8 percent from the time they got notice of the debt?

Does the district court, assuming that it says we're going to follow the common law, does it have to defer to the agency's recommendation as to the rate of interest or the time?

Mr. Hungar: No, Your Honor, because the agency's authority to construe the Debt Collection Act is limited once the agency has determined, as the agencies have determined in this case, that the Debt Collection Act does not abrogate the common law.

When proceeding against a state, a Federal agency is by definition proceeding under the common law and under the common law of the courts, not the agency determining whether interest is appropriate and the rate of interest that is appropriate.

So the only, we're only asking for deference to the administrative determination that the act that the administrative agencies are charged to implement does not abrogate the common law, because that's not what Congress intended to achieve.

We submit that that is an entirely appropriate arena for--

Unknown Speaker: But do they implement the act or do the courts implement the act?

You just told us that the courts implement the act.

Mr. Hungar: --No, Your Honor, the courts implement the common law.

The agencies are charged with authority to construe the Debt Collection Act, and in the exercise of that congressionally delegated authority the agencies have determined the scope of the Debt Collection Act, and in their view the Debt Collection Act does not abrogate the common law.

That's the end of the agencies, of the scope of the agencies' deference.

But that determination, which is the determination at issue in this case, is entitled to deference.

Unknown Speaker: May I go back again to the text of the regulation that Justice Souter called your attention to, that they are authorized to assess interest on debts not subject to 3717 to the extent authorized under the common law.

I would have read that to mean to the extent that agencies are authorized under the common law.

Mr. Hungar: Well, any ambiguity that there may be in the regulation is quite clearly resolved by the explanatory statement in the notice of rule making that accompanied the promulgation of that regulation in 1984, which we have discussed that in our opening brief.

The agencies, the General Accounting Office and the Department of Justice, addressed the precise question whether the Debt Collection Act abrogated the Federal common law and concluded that it did not, and that the Federal common law right of prejudgment interest continued to exist in the case of state and local government debtors.

Unknown Speaker: But if we do read it literally, just looking at this text, to the extent authorized under common law would mean not authorized at all, ergo the regulation would forbid interest.

Mr. Hungar: Well, I'm not sure that it would mean that.

It would mean that the regulation is--

Unknown Speaker: One would have to know what the agencies were authorized to do under common law to answer it.

Mr. Hungar: --That's correct.

Unknown Speaker: We now know under common law agencies have no power just to assess interest willy-nilly, don't we?

Mr. Hungar: Well, in any event, Your Honor, deference is due not merely to agency regulations but in general to agency interpretations--

Unknown Speaker: But deference is due if we think Congress delegated to the agency the decision as to whether or not which way to go, and you think there's something in the statute that suggests Congress wanted the agencies to decide whether the common law rule should survive or not.

It's rather a strange kind of delegation of decision making.

Mr. Hungar: --Your Honor, the State has not disputed that the agencies possess the authority to implement the provisions of the Debt Collection Act.

31 U.S.C. 3711(e)(2) provides that authority.

The General Accounting Office and the Department of Justice are authorized to promulgate standards--

Unknown Speaker: But are they authorized to make decisions as to whether the common law rule survives the amendment of the statute or not?

Mr. Hungar: --Agencies routinely in the exercise of delegated power judge and determine the scope of Federal statutes.

Unknown Speaker: What is your closest case of agency delegation to this one?

Surely it's a mile away from Chevron, 100 miles away from Chevron.

Mr. Hungar: With respect, Your Honor, we have cited a number of cases in the brief, the K Mart case, the Rust against Sullivan, the National Railroad Passenger Corporation case.

In all of those cases the agencies were determining the scope of the statute.

In the K Mart case, for example, the court was, the agency was determining whether the statute allowed or did not allow, that is applied or did not apply to particular importations of gray market goods, and the regulations said that in some cases the statute does apply and forbid it, and in other cases it doesn't, the statute does not apply.

And the court deferred to that interpretation.

That's all we're asking here.

The agencies have determined that the Debt Collection Act does not apply, that Congress did not intend to, in enacting the Debt Collection Act, abrogate the common law, and therefore the scope of the act does not extend to the states.

And that's the end of the question.

Unknown Speaker: But in these other cases that you refer to, if the act does apply the agency has some responsibilities, as an agency, as an administrative agency.

Mr. Hungar: True.

Unknown Speaker: In this case if the act does apply the only consequence is that the court shall pronounce a judgment of a certain sort.

Doesn't that make a difference?

I mean, this is court's business, it seems to me, not agencies' business.

Mr. Hungar: With respect, Your Honor, in the K Mart case, by finding that the act did not apply, it did not forbid the importation of the particular gray market goods at issue, that was the end of the matter.

The goods could be imported.

The statute did not forbid it, and therefore the agency's duty to exclude it did not exist.

The same is here in the sense that the act does not apply, so... if the agencies had, if the Department of Justice and the General Accounting Office had reached the opposite conclusion and had determined that the act did abrogate the common law, it would have been their duty in implementing the act to instruct Federal agencies not to seek prejudgment interest from the states.

But they reached the opposite conclusion.

Our submission is that that conclusion was reasonable.

I'd like to reserve the remainder of my time for rebuttal.

Unknown Speaker: Very well, Mr. Hungar.

Mr. Todd, we'll hear from you.

Argument of James C. Todd

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

The resolution of this dispute has to begin and return to the observation that the Debt Collection Act unambiguously excludes states from the category of persons from whom a Federal agency may seek to collect a debt.

That's important for a number of reasons.

First of all, the act does apply to states.

It's only two sections that are taken out and removed as not applying to states.

3701(c) says that for purposes of sections 3716 and 3717 the state is not a person, obviously leaving the state a person for every other section.

So it's not a case in which Congress has simply chosen not to address the states at all.

Secondly, the Debt Collection Act comprehensively addresses the question of prelitigation debt collection.

In fact what the Debt--

Unknown Speaker: Mr. Todd, excuse me, before you go further.

How many of those sections that you referred to that the state wasn't excluded from, how many of those sections are part of the Debt Collection Act?

How many sections other than 3716 and 3717?

Mr. Todd: --Well, all of the others.

An agency still is mandated to seek to collect a debt which the state owes the Federal Government.

There is no doubt about that, and all these other sections deal with the procedures, the safeguards, and so forth.

Now--

Unknown Speaker: And they were all enacted at the same time?

Mr. Todd: --Yes... not all.

Before 1982 there was what was called the Federal Claims Collection Act of 1966, and some of these provisions, some parts of 3701 and 3702, and as Mr. Hungar just mentioned, 3714, were in that preexisting.

What the Debt Collection Act did was greatly expand the scope and really limit the discretion.

One of the most important things it did was to reduce the discretion of Federal agencies as to whether to seek debt, as to when to seek debt, as to how to seek debt collection, and from whom.

Now, it happens that in 3701(c) as to administrative offsets and charging interest, Congress removed discretion altogether from the Federal agencies.

But the... as has been brought out by questioning previously, we have a confusion here of two different points at which interest may be sought.

The Debt Collection Act deals with prelitigation debt collection.

In fact the original caption back in the Federal Claims Collection Act said in order to avoid unnecessary litigation the following procedures are enacted.

In prelitigation assessing interest, asking the state to pay interest, that's what the states have been removed from.

Now it's interesting to look at this case and see how this putative common law authority was exercised.

You'll see in the Joint Appendix, starting around page 6, the notice letters which the Secretary of Agriculture sent, really making a demand on the state.

It calculates a very precise interest, 7.625 percent, and it says that that's based on regulation 102.11.

102.11 then refers to 102.13, which is the one Mr. Hungar was discussing.

That 102.13 incorporates almost verbatim the provisions of 3717.

What happened in this case was the Secretary of Agriculture treated the Texas Department of Human Services exactly the way the state would have been treated if 3717 had been made by Congress to apply to the states.

So the effect of allowing this putative common law right is to read right back into the prelitigation debt collection process exactly the coverage of the state, local, and Federal government which Congress excluded.

There is nothing--

Unknown Speaker: When you say Congress excluded--

Mr. Todd: --Yes, Your Honor.

Unknown Speaker: --Congress excluded the states from the application of 3716 and 3717.

Mr. Todd: Yes, Your Honor.

Unknown Speaker: And the position of the Government is that leaves the common law remedies in existence as they were before the statute.

Mr. Todd: Right.

Unknown Speaker: And you say there's something inconsistent with the Government's position?

Mr. Todd: Yes, Your Honor.

Unknown Speaker: What is it?

Mr. Todd: Okay.

In that... I don't know about in, the Government's position is internally consistent.

I'm saying it's inconsistent with the scheme that Congress has created.

The common law right, to the extent it attaches, would be first of all if the state refused to pay its obligation at all.

That triggers a, in this case since this is dealing with the Food Stamp Act that would trigger the enforcement provision of the Food Stamp Act which is like just about every other spending clause Federal funds in return for compliance statute.

That is if the Secretary finds that the state is out of compliance with any provision, then the Secretary can do two things, cut off Federal funds or, two, refer it to the Justice Department for an enforcement action.

Now, in that enforcement action the Justice Department retains the right to seek remedies from a Federal court.

But we're not at that stage--

Unknown Speaker: You haven't yet gotten to the inconsistency, have you?

Mr. Todd: --Well, the inconsistency is in using... the inconsistency I'm talking about is an inconsistency with the exclusion of states from the prelitigation debt collection activity.

In other words now the Debt Collection Act is the consistent uniform set of rules for how every, and it says every agency of the United States Government is to go about prelitigation, making, assessing interest, making a claim, seeking--

Unknown Speaker: You said prelitigation, but certainly it has application considerably beyond prelitigation.

It specifies rates of interest that may be recovered by the Government if it goes to trial.

Mr. Todd: --Right.

Right.

If, let's say as to a debtor, an obligor, that the Debt Collection Act authorizes a Federal agency to seek repayment from, let's say a student loan, a student won't repay a loan, then the agency may assess the interest.

And there is a formula for how they assess it, it has to do with Treasury rates, rates on Treasury notes.

And then if they have to turn it over to the Justice Department and the Justice Department goes to court then they recover not only the interest but there are some other penalties that go along with losing litigation.

What Congress has exempted the states from is this authority to assess interest and to seek to collect, to seek to collect interest as part of the debt collection.

Agencies are, let me repeat, agencies are still, Federal agencies under the statute are still obligated to seek to collect any debt that the State of Texas owes the Federal Government.

So states are not out of this statute altogether.

Unknown Speaker: Well, if the state had refused to pay and the Government instituted suit, would the Government have a choice to say we're proceeding under the common law or we're proceeding under the statute?

And if so would the choice make any difference so far as the Debt Collection Act?

Mr. Todd: The answer to the first question is I don't think that the Federal Government's choice would be to proceed under common law.

I think it would be bound to proceed under the specific enforcement provision of the statute, and for the reasons that I want to discuss in detail as to how a statute displaces common law.

Once the Justice Department is in court on behalf of the Federal Government in litigation with the State, it has available under its authority an arsenal of remedies or tools that it can use which hasn't really been a subject of this litigation thus far.

I think the City of Milwaukee v. Illinois case in '81, and it sort of was a companion case to Northwestern Airlines v. National Transport Union, are two cases which really clarify and remind litigants of the proper scope of Federal common law when there has been a particular statute.

And I think that's a good starting point for analysis to then take a look and see what the Debt Collection Act has done.

That case reminded litigants that Federal common law is not like the common law, the body of common law that the state courts by and large have developed.

It's called common law because judges use a common law type of decision making process, but it's a limited stop gap measure.

It only arises in the situation where the Federal court needs to make a decision on a question, there is no Federal statute to guide it, and it's not appropriate to look to state common law.

In those limited instances then the Federal courts can fashion a sort of common law.

But as City of Milwaukee said, as soon as Congress has directly addressed the question covered by the common law, then the need for the common law disappears.

So that begs the question what does it take for Congress to directly address a question.

The decision goes on again, this is really a reminder of what had been the law all along.

It doesn't have to say expressly by this statute we intend to displace Federal common law.

In fact in none of the briefs in this case, in none of the circuit decisions, there are about 6 circuits that have addressed the question that we're here talking about today, has anybody cited an example of a statute where Congress has expressly said by this statute Congress hereby abrogates common law.

Now Congress does have to do that sort of thing in other contexts, like for example to abrogate a state's Eleventh Amendment immunity when it creates a private right of action.

It has to say, and this Court has told Congress it has to say this abrogates Eleventh Amendment immunity.

But it doesn't have to do that, according to City of Milwaukee and cases since then, when it's displacing common law.

It doesn't owe Federal common law the same deference it owes state common law, and it doesn't take as much as it does to preempt state law under the Interstate Commerce Clause, and yet a number of statutes can preempt state law without saying so.

To look and see whether it has directly addressed the question, this City of Milwaukee, and another helpful case is United States v. Fausto, said you look at the, not only the purpose of the statute but its scope and the structure of its remedial scheme.

Now as to the purpose, obviously 3701(c) is an exception.

It is an exception, so in a sense you can say any time a statute makes an exception, having made a broad across the board rule, any time it comes back and says but we except, we exclude these categories, you can say that's contrary to the purpose, but it isn't really in this case.

It's not at all unusual for Congress to choose to treat one class of debtors differently, governmental parties differently from others.

And what Congress has done in 3701(c) is consciously choose to treat governmental debtors differently from other debtors.

For example, under this Food Stamps Act, if grocer submits food stamps to the Federal Government for reimbursement at face value and the Federal Government delays in repaying, it doesn't have to pay interest.

It's very common to find that governments don't have to pay interest.

What you have as a countervailing incentive, disincentive to the state to unreasonably delay is a unique sort of relationship which state agencies have with their Federal funding agencies that the ordinary debtor doesn't have to a creditor.

The Texas Department of Human Resources, Services, excuse me, receives Federal funding from Agriculture and Health and Human Services.

Under those funding statutes the Secretary has broad discretion to determine that the state is out of compliance and cut off funds.

No state agency wants to engender ill will with the Federal funding agency, so you have some assurance that states are not simply going to default.

The only incentive--

Unknown Speaker: Your position, then, Mr. Todd, is that the correct reading of the Debt Collection Act is that the Federal Government is not entitled to claim any interest against the states?

Mr. Todd: --That's right, in this... they are not entitled to do what the Secretary did here, which is present a demand to the state for interest.

Unknown Speaker: That's quite a remarkable result, isn't it?

I mean, is there any other situation in which a debtor is not, a creditor is not entitled to any sort of interest?

Mr. Todd: Yes, and it's typically in a governmental context.

The debt we're talking about here is a delayed payment, but the obligation--

Unknown Speaker: Well, that's true of lots of debts.

Mr. Todd: --Right.

Well, typically the Federal Government doesn't owe interest when it is late in paying funds that it owes, and actually most of the traffic of money is from Federal Government to the states rather than vice-versa, and usually--

Unknown Speaker: Well, but when the Federal Government is a grantor and doesn't pay the grant on time, that's not quite the same thing as a debt or someone who is the recipient of an overpayment who is obligated to repay it.

I'm asking you for an analogous situation where someone who is clearly a debtor, as one understands that situation from law school, not having to pay any sort of interest on the debt.

Mr. Todd: --It's rare or non-existent in the usual debtor-creditor, outside the governmental context.

Unknown Speaker: In the governmental context where does it exist?

Mr. Todd: The... I'm not sure of all the situations outside the social service area where the Federal Government might be a debtor to the states, but I don't know of... I think that this is, I think this is the situation that has been created.

I can't give you an exact amount--

Unknown Speaker: How about tax refunds, Mr. Todd?

I don't get interest from the Government on my tax refunds.

I suppose that's a debt the Government owes me, isn't it, when I have overpaid my taxes?

Mr. Todd: --Yes, sir.

Right.

Unknown Speaker: I get the money back.

I don't get interest on it, do I?

Mr. Todd: I would agree that that's an instance in which a governmental entity does not pay interest and whereas another, someone else who has an obligation to pay somebody back in which there has been an overpayment.

And this is sort of that sort of situation.

Under the Food Stamps Act what the Government is saying is that money has been paid which the Government should not have had to pay, and therefore the State of Texas should refund or reimburse the Federal Government a portion of that money which the Federal Government should not have had to pay.

And so it's a similar sort of situation.

Congress has chosen, has made a very obvious policy choice that governmental debtors, including... and by the way that 3701(c) includes the United States Government as well, and subchapter 3 of the Debt Collection Act are claims against the United States.

So it runs both ways.

As to the deference that would be due to the interpretation by these Federal agencies, I think that the case which answers the question that took place in the dialogue earlier is Securities and Exchange Commission v. the Chenery Corporation, which I think both parties have cited in their briefs.

In that case the SEC wanted to penalize the managers during reorganization of a corporation for having purchased preferred stock in the reorganized corporation.

They relied for that ruling not on their specialized expertise that had been delegated to them by Congress of stock transaction, but the SEC's understanding of general principles of equity.

What the court said was fine, in the usual situation where an agency's ruling or decision or interpretation is in an area of law delegated to it by Congress and in which it has specialized expertise we defer, but when the agency is purporting to rely on judicial doctrines, then a court can and should substitute its judgment for the agency.

It's very clear in this case, in fact the best indication of it is in the Government's brief.

I think around page 21 they discuss, the comptroller specifically considered whether common law applied and decided that the common laws in force.

Now they're relying not on something that's within the specialized expertise of the comptroller general, now what the Government is doing is giving its understanding of when common law retains viability in the face of an explicit statute, and that of course is a matter of judicial doctrine and I think that the same deference would not be due.

If the Government's reasoning--

Unknown Speaker: Excuse me.

It's a matter... I don't understand your point.

Your point is if it's a matter of law it can't be, we don't owe any deference to agencies?

Mr. Todd: --Well, not just any law.

If it's a matter of that portion of law which are judicial doctrines, such as principles of equity, such as the general principle of when common law retains it viability.

This is not, for example, like... let's say if Congress passes a statute controlling the manufacture and distribution of pesticides and the Environmental Protection Agency says this is what we think the statute means as to what is a pesticide, that is obviously within EPA's expertise.

If--

Unknown Speaker: What about whether the statute is retroactive?

Mr. Todd: --That's closer.

Unknown Speaker: It's not close at all.

We would defer to EPA.

Of course we would.

Mr. Todd: The EEOC, for example, a number of circuits have deferred to EEOC... when the statute is dealing with that... there you're talking about whether the agency is asked to give an opinion on whether or not in this specialized area Congress, the remedial purpose of the statute--

Unknown Speaker: The Government says in this specialized area of debt collection, read 3717.

The head of an executive or legislative agency shall charge a minimum rate of interest, blah, blah, blah.

I mean, the agency heads have to know how to operate.

Are they supposed to charge rates pursuant to the Debt Collection Act or are they supposed to charge rates pursuant to the old common law?

Mr. Todd: --The statute has already told them very expressly that when they get to reading 3717 any place that it says person it doesn't include state, so their mandate to seek to collect debts owed by the states are covered by the rest of the statute, but they don't... that doesn't take, that part doesn't take constructing the statute, because the statute has already said don't look inside the statute for interest against states.

So you have to go totally outside the statute to common law.

Now, common law, the Federal common law is a species of law fashioned by the judiciary on what SEC v. Chenery called established judicial doctrines.

And so the agency really in effect is not interpreting the statute, it's interpreting common law.

Unknown Speaker: Mr. Todd, what if the agency, we're talking the Department of Justice, had decided that the Debt Collection Act does not, cancelled out any liability of the states to pay interest, that it just did away with the common law remedy?

Would you think we should owe some deference to their construction there?

I would suppose you would hope we would.

Mr. Todd: Well, I would say that... what I would say is this.

I would think the Court would wind up agreeing with the Department of Justice, not because when in that instance the Department of Justice is dealing with something within its specialized expertise but because they got it right if they had come out--

Unknown Speaker: So your answer to my question is no, no deference.

Mr. Todd: --Not as a... right.

My answer to your question is you would not reach the result of concurring as a result of deference.

You would reach the result of concurring because their conclusion--

Unknown Speaker: But what if we said it's a toss up, it's 50-50.

Here's the agency, thinks the common law has been repealed.

Would we, should we then give the nod to the agency or not?

Mr. Todd: --If you conclude, and I'll try to again answer this question--

Unknown Speaker: I would think you would just say no.

We do it de novo.

We do it--

Mr. Todd: --On matters of common law and established judicial doctrine, the Court is a much greater--

Unknown Speaker: --We're construing a statute.

Mr. Todd: --Well, but that's what, the construction of a statute I think stops with 3701(c).

The states are out of it.

And the Government itself doesn't, is not in here today saying we have authority under the Debt Collection Act to charge this interest.

So they're not construing the statute.

They're here to say we have authority under preexisting common law to seek this interest.

So the conclusion that results in this regulation 102.13 results from their understanding of the judicially fashioned Federal common law, and particularly since the Federal common law--

Unknown Speaker: But an agency would not, is not entitled to opine as to whether the Debt Collection Act left that common law intact?

Mr. Todd: --They are entitled to opine, and I think, and I'll go so far as to agree with Mr. Hungar that they have some duty here to make a call because they have to give guidance to their clients as to what they should do, but the conclusion of that opining is not due the same deference that it would be if, as in the example I gave, the EPA saying what is a pesticide.

Unknown Speaker: Is it due any deference?

Mr. Todd: I think it is due... well, is it due any?

I think the answer to that is yes, it's due some, and I don't know how to calibrate it so I can say how you measure weight.

Unknown Speaker: Well, if it's give any deference, in my 50-50 case we give the nod to the agency.

Mr. Todd: If you conclude, Your Honor, if the Court concludes that this is a very, very close call and it's extremely unclear, and furthermore that this is an agency which has traditionally exercised this common law right, then the deference is greater than what I am suggesting is actually the situation where the statute has been, first where the statute has... first of all comprehensively addressed the situation of prelitigation debt collection, seeking to collect debt.

And it's, I think it's all encompassing in that regard, as the Court found the Federal Water Pollution Act to be with regard to discharges.

It applies to every Federal agency.

It sets the, it makes every Federal agency have the same policy and the same procedure and give the same priority to seeking to collect debts owed to the United States as every other agency, which was not the situation previously.

So it's pretty comprehensive in that sphere.

Having occupied that sphere, Congress made a judgment... now, the legislative history won't tell you the articulated reasons because this was added on the floor of the Senate after the bill came there.

All we have is the post-enactment statement, so we have to... but you can see by the mechanics of the statute they had to, this had to have been deliberate to say, to add a subsection to the definitions section to say that persons in 3716 and 3717 doesn't include states.

That had to be very conscious.

As to the utility of leaving in place the, quote, discretionary and flexible type of common law interest as some sort of a supplement to the act while removing states from the mandatory provisions, I'll just return to the point that as a practical matter the agency has applied its putative common law authority to the State of Texas exactly the way 3717 would have been applied.

They have sent the same kind of notice, they have started the interest accruing at the same point, 30 days, and they have used exactly the same formula to compute the rate.

So from our standpoint it's the same.

It winds up having the same--

Unknown Speaker: Well, the court doesn't have to agree with that.

Mr. Todd: --That's right.

Unknown Speaker: And the Government has to know something.

I mean, the Government has to bill you something if there is interest owing, right, because it wouldn't know whether the debt has been fulfilled or not?

Mr. Todd: That would be the way it would, if they have to have, if they have to charge interest I would say that, as I was saying earlier, the one thing that distinguishes the relationship of the Federal recipient agency with the Federal funding agency from other types of creditor-debtor relations is this ongoing relationship that they have and the need that they have to maintain good relations with the... the states are simply not defaulting on their debts, and this is clear from the Senate report 97-378 which both parties have cited.

When you look at what Congress found as to who is deficient and who is not, they're really not talking about a big problem with states.

States are obviously some part of the problem, but they're not a big problem.

So Congress could very well decide let's remove discretion with regard to the states and focus the Federal agencies on going in a more aggressive manner after the debt which the others have owed.

I believe this discussion covers the really major points and major cases.

I would reemphasize--

Unknown Speaker: May I ask you just one background question I should know, but--

Mr. Todd: --Yes, Your Honor.

Unknown Speaker: --Prior to West Virginia against the United States had we ever held that a state is liable to the Federal Government for interest?

Mr. Todd: Not explicitly.

From United States v. West Virginia you have to go all the way back to 1939, Board of Commissioners v. the United States.

That was really a suit against a county, and although the United States brought it, the United States through the Bureau of Indian Affairs was really bringing it on behalf of a native American, and really the outcome of that case was based on the fact that really the United States Government's position there was equivalent to any other individual who was due a tax refund.

So the United States, although it's implicit if the Federal Government can sue a county, and although they didn't get interest in Board of Commissioners it apparently was one of their remedies, you might say it's implicit, but really West Virginia v. United States in 1987 is the first time it was said expressly.

Unknown Speaker: And that was after the Debt Collection Act was passed.

Mr. Todd: Right.

It was on, the very last footnote of that decision, 42, says the debt that was being sued upon, the obligation that was being sued upon arose before October 1982 and therefore it just was included.

Thank you very much.

Unknown Speaker: Thank you, Mr. Todd.

Mr. Hungar, you have 1 minute remaining.

Rebuttal of Thomas G. Hungar

Mr. Hungar: The State's burden in this case is to show that a statute expressly intended to enhance the Federal Government's debt collection efforts.

In fact it had the effect of creating an unprecedented disincentive for an important class of debtors to pay--

Unknown Speaker: May I ask you if there was a case other than the one that your opponent mentioned before West Virginia which squarely recognized the common law rule that you rely on?

Mr. Hungar: --No, Your Honor, West Virginia was the first such case.

Board of Commissioners said, treated state and local governments in the same breath, but that case involved a local government.

Unknown Speaker: What had the practice been?

Do you know what the practice had been?

I mean, surely there have been debts owing from the states to the Federal Government in various contexts from day one.

Mr. Hungar: Well, the West Virginia case itself arose in the mid 1970's.

It didn't reach the Supreme Court until 1987, but at least in that context the Federal Government had been seeking prejudgment interest from the states prior to the enactment of the Debt Collection Act and prior to the West Virginia case.

That's how the case came up.

The State argues that the City of Milwaukee case is the most relevant here, but the City of Milwaukee case is entirely distinct from the situation here.

The statute at issue in the City of Milwaukee case provided an express answer to the very question at issue in that case, the effluent limitations that should be imposed on the source of pollution.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. Hungar.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Perpich v. Department of Defense - Oral Argument

Fri, 09 Jan 2009 14:49:22 +0000

Case:

Perpich v. Department of Defense

Media File:

89-542_19900327-argument.mp3

Related Transcript:

1989_89_542_argument.xml

Transcript:

Argument of John R. Tunheim

Chief Justice Rehnquist: We'll hear argument first this morning in No. 89-542, Rudy Perpich v. Department of Defense.

Mr. Tunheim?

Mr. Tunheim: Thank you, Mr. Chief Justice, and may it please the Court:

This case concerns the constitutionality of the Montgomery Amendment which removes from states the power to withhold consent to foreign training of the National Guard because of objections to location, purpose, type and schedule of that training.

It's codified at Title 10, Section 672(f) and was enacted in November 1986.

The Montgomery Amendment effectively nullifies clause 16, and before I begin, let me just reference the three most relevant constitutional provisions, because they are referenced a lot in my argument.

Article I, Section 8, clause 12 gives Congress the power to raise and support armies, clause 15 gives Congress the power to provide for calling forth the militia to execute the laws of the Union, to suppress insurrections, and to repel invasions, and clause 16 gives Congress the power to provide for organizing, arming and disciplining the militia and for governing such part of them as may be employed in the service of the United States, but reserving to the states respectively the appointment of the officers and the authority of training the militia according to the discipline prescribed by Congress.

Now, the Montgomery Amendment effectively nullifies clause 16 by removing states' powers to consent.

It permits unlimited Federal authority over training, and leaves no control or authority to the states.

The Montgomery Amendment is unconstitutional because it violates the plain language and meaning of clause 16.

It overturns long settled understandings of the relationship among the clauses of Article I, Section 8, and it upsets a carefully established framework eliminating a fundamental part of the checks and balances as established by the framers.

Unknown Speaker: And it is your position, I suppose, that the part of Section 16 that it violates is that that says it is reserving to the states the authority of training the militia according to the discipline prescribed by Congress?

Mr. Tunheim: Yes, Mr. Chief Justice.

Even more extreme than the Montgomery Amendment is--

Unknown Speaker: Mr. Tunheim?

Mr. Tunheim: --Yes.

Unknown Speaker: The Montgomery Amendment appears, at least on its face, to apply only to the National Guard of the United States, not the state militia component.

Mr. Tunheim: The National Guard of the United States is essentially the same thing as the National Guard of the states.

Under the dual enlistment concept, yes--

Unknown Speaker: Well, of course, that's the question, whether, whether they operate as one and the same or differently somehow, at least on its face the amendment appears to apply to the National Guard of the United States.

Mr. Tunheim: --Yes, Justice O'Connor, it does apply to the National Guard of the United States, but are--

Unknown Speaker: Now, would you tell me whether the President, in this case, ordered the guard units to Honduras for training, or did the President order the National Reserve component to Honduras?

Did he federalize them and send them that way, or was this part of the two-week training program of the state militia?

Mr. Tunheim: --It's part of the two-week training program, but they were federalized, Justice O'Connor, as the National Guard of the United States in the reserve component part of dual enlistment.

But our argument in the case, Justice O'Connor, is that simply by creating the National Guard of the United States you can't simply remove from the National Guard the essential state organization, the constitutional limitations that are in Article I, Section 8.

Unknown Speaker: But at least the President attempted to articulate the position that they were being federalized and sent there in their capacity as the National Guard of the United States?

Mr. Tunheim: Yes, that's correct.

What's more extreme... yes?

Unknown Speaker: I take it... I take it you're saying that it's unconstitutional for Congress to divide by statute, as it has done, the National Guard segment of the militia and the so-called unorganized militia?

That is also unconstitutional in your view, I take it?

Mr. Tunheim: No, it's not unconstitutional to take the militia and organize it, which is what clause 16 gives Congress the power to do.

Unknown Speaker: Well, but Section 311 of Title 10 says that the classes of the militia are the organized militia, which consist of the National Guard, and the unorganized militia, which is not the National Guard.

So you have to say that that also is unconstitutional, I take it, to prevail?

Mr. Tunheim: Justice Kennedy, I wouldn't agree that we would have to say that.

The unorganized militia is really nothing.

It is a body, a pool of individuals who are able-bodied and able to perform military service if either drafted into a federal army, or if called into an organized militia.

It's the organized militia that can be called into the federal service, and that is the National Guard.

Unknown Speaker: The unorganized, you do not have in Minnesota?

Mr. Tunheim: Well, the unorganized militia by statute exists everywhere, in states and under federal law, but it really is... is nothing.

It's just a pool of eligible individuals, and that's all it is.

It doesn't, it's not armed, it's not trained, and it's not part of the fighting force at all.

Unknown Speaker: There's nothing in the nature of things that requires it to be that way, I suppose.

I mean, if the Governor wants to be able to prohibit his military force from training abroad, or wants to be able to direct it in all respects at all times, I suppose that he could expend the money to make the unorganized militia a full-fledged fighting force, buy them tanks and planes, which now the Federal Government supplies.

Mr. Tunheim: Well, Justice Scalia, currently under federal law there's no authority for a state to keep an organized militia, other than the National Guard, and the National Guard must be federally recognized, so there really is not an alternative for states.

It's a choice between accepting the federal funding and participating as the National Guard or not having an organized militia.

Unknown Speaker: Don't you think the... it seems to me a less extreme application of the militia clause of the Constitution to say that it reserves to the states the right to draft able-bodied people and call them the state guard, if you will, than the contention that you're construing... the construction you're contending for it?

Mr. Tunheim: The National Guard is the organized militia.

It is--

Unknown Speaker: Well, but I mean supposing the Governor wants to have a militia there in Minnesota to put down disturbances 365 days a year.

Is there any provision of existing law that would prevent him, or the Minnesota legislature, from passing an act creating a state guard, drafting people into it and making them available?

Mr. Tunheim: --Federal law currently does not permit states to maintain an organized militia, other than the federally recognized National Guard.

That's the requirement of federal law at this time.

Unknown Speaker: What do you mean by organized militia?

I mean, you're talking about it as though you can't have tanks if you're an organized... if you're an unorganized... is the term defined, "unorganized militia"?

Mr. Tunheim: Unorganized... the unorganized militia is defined under federal law, and I think the laws of most states.

It's simply defined as every able-bodied person between the ages of 18 and 45.

It's a pool of individuals that's available for military service at some point in time, but they are not trained.

They are not part of an organized militia in any sense.

Unknown Speaker: Is there some provision in the law that would prevent the State of Minnesota from setting out to train those people?

Mr. Tunheim: There's a provision of federal law that says that states may not maintain an organized militia, other than the National Guard.

It's... the National Guard is the organized militia.

Unknown Speaker: But what if the states were to draw on this unorganized militia?

Would that violate the federal law, do you think?

Mr. Tunheim: I think it would, because that would be organizing the unorganized militia, and federal law says that you cannot keep an organized militia, other than the National Guard.

Unknown Speaker: Define the term "organized".

I mean, I think we're playing with words here.

It seems to me all the federal statute says is that a state can have two kinds of militia, one which we'll call the "organized militia", can be called up and it's the United States National Guard, and the other, if the state wants to have another one, the states can do with what they want.

But is there any federal definition of "organized"?

Mr. Tunheim: There... there is a federal definition in federal law.

The organized militia means the National Guard.

It is defined as the National Guard.

Unknown Speaker: Well, if that's all it means, then you can create one that isn't the National Guard, and that will be the unorganized militia.

Mr. Tunheim: But there's another provision of federal law that says you cannot keep an organized militia other than the National Guard, Justice Scalia, or something called state defense forces, which are not militia, they're not defined as militia, they can't be called forth into the federal service, they can't be paid, and they simply are not an organized militia under the--

Unknown Speaker: But they can't be paid by the federal government?

Mr. Tunheim: --That's correct.

Unknown Speaker: Well, but what's wrong with the State of Minnesota paying them if they want to have them serve the purposes of the State of Minnesota?

Mr. Tunheim: Because the militia under the Constitution can be called forth into the federal service.

That's an essential element of the definition of "militia" in the Constitution as understood by the framers.

And the defense forces by federal law cannot be called forth into the federal service.

They can be used only within the borders of the states, and as a practical matter they... they simply don't exist.

They were created to... to... to help within states during World War II when National Guard members were in the federal service for the duration of the war.

Unknown Speaker: But... but they don't exist, I... I suggest to you because the states haven't chosen to call them into existence.

What... Mr. Tunheim, what do you make of footnote 5 in the Solicitor General's plea where he says 24 states have statutes providing for a state defense force or a state guard that is separate from the National Guard, listing Minnesota law appears to recognize a state guard in addition to the National Guard, citing the statute?

I think these later questions have all been directed toward this kind of thing, and you keep turning around to speaking of militia.

What do you make of footnote 5?

Mr. Tunheim: Well, certainly there exists statutory authority in each of these states for creation of something called a defense force, but it's carefully not described as an organized militia in any sense--

Unknown Speaker: This is what I meant by my part of the question that Minnesota hasn's chosen to... to go along this line yet.

Mr. Tunheim: --The... the provisions in Minnesota law allow for creation of this home defense force, and it... it was used during World War II.

It's not currently used at all, even though the provisions remain on the books.

But again, the defense forces are carefully referred to as not militia because that... that constitutes a different definition within the Constitution.

It calls into play the requirements of the Constitution, and... and it really... they have carefully not identified the defense forces as organized militia because of that.

Unknown Speaker: Oh, I don't think they are or are not a militia simply because Minnesota chooses to call them or not to call them a militia.

I mean, a militia is a militia.

Surely by simply not giving them a name Minnesota doesn't deprive them of that character.

Mr. Tunheim: Justice Scalia, it is federal law that doesn't define these home defense forces as organized militia.

Federal law identifies "organized", right.

Unknown Speaker: But they can be militia but not organized militia.

And certainly, organized really doesn't mean that they have no organization because, as you say, even Minnesota in World War II had a home guard which was, I assume, organized.

They had officers and subordinates and so forth?

Mr. Tunheim: It was, but it wasn't militia in the sense--

Unknown Speaker: So it was organized in some sense.

Mr. Tunheim: --It... it was organized by the state, but it wasn't militia in the sense given to it by the Constitution which allows the militia of the states to be called into the federal service, and this is where the National Guard has come from.

The National Guard was organized out of the state militia, and our argument is that you simply cannot take the Constitutional limitations that come along with the National Guard and take them away simply by calling them a different name.

That's the essence of--

Unknown Speaker: Are you questioning the constitutionality of the dual enlistment system?

Mr. Tunheim: --We are not, Justice Kennedy.

The dual enlistment system, properly interpreted, is... is a... is useful and, I think, constitutional.

What we are challenging is the use of dual enlistment to avoid the militia clause limitations.

The... when dual enlistments were created--

Unknown Speaker: Well, it's rather odd to say that Congress has the authority, as you just conceded, to have dual enlistment and then not permit the federal government to make that choice an effective one and to use all of its powers to make sure that the dual enlistment system works.

Mr. Tunheim: --Well, I think the answer to that lies in the purpose of the dual enlistment system, Justice Kennedy.

It was created in 1933 for... for one particular reason, and that was so that the... that National Guard units as trained units could be federalized quickly in case of an emergency or wartime situation.

The problem in World War I was that... that the National Guard units were disbanded.

The individuals were drafted as individuals, and then once they were in the federal army the federal government tried then to recreate these... these organized units.

That was the purpose of dual enlistment, to provide for a quick mobilization of organized units.

It had nothing to do with training; and also, it was expressly limited to use during a national emergency or wartime.

Congress, in 1933 when dual enlistment was created, in no way intended to divest from states the training authority over the National Guard, and Congress didn't understand in 1933 that it was divesting such training authority.

There wasn't federal training of the National Guard that went on at that time.

Unknown Speaker: Well, Mr. Tunheim, in this particular case were the troops federalized and ordered to Honduras for training?

Mr. Tunheim: Yes.

They were... they were federalized for purposes of Section 672, which is the training procedures, the training section for two-week purposes.

Unknown Speaker: Is it possible that the term "discipline" in the militia training clause includes the concept of location of the training?

Mr. Tunheim: Justice O'Connor, I think the term "discipline" clearly means the standards to be applied to training.

The framers, in fact, feared this very problem of confusing the authority of discipline and the authority of training.

One of the delegates proposed that... that the training reservation to the states simply be eliminated because, of course, the states would have that authority because it wasn't being expressly given to the new federal government, and the delegate was talked out of it because of the fear that discipline might someday be read and interpreted broadly enough to include training.

The framers were very concerned about maintaining an effective state control over the militia except during times of emergency, and the reservation of training clause really has to be viewed in that light along with the appointment of officers clause.

Unknown Speaker: Does the militia clause speak of... of emergency?

I mean, Section 16 which you say has been violated, the authority of training militia going to discipline, does it... is it qualified in any way by the existence of an emergency?

Mr. Tunheim: Not in clause 16, Mr. Chief Justice.

clause 15 sets forth three purposes for which the militia can be called into the federal service.

Those are, in essence, emergency situations, and the State's argument is also that Congress has the power under the army clause during an emergency to call the... to federalize the militia, to call the National Guard into the federal service based on this Court's decision in the Selective Draft Law cases.

Now let me just explain in a nutshell the State's position.

As I said, when... when the nation faces a national emergency, it is our view that Congress has complete power to federalize the National Guard under the army clause, or Congress can utilize the three purposes in clause 15 for calling the National Guard into the federal service.

In either case, state authority is completely removed; but, absent those circumstances, states retain basic control over the National Guard, particularly with respect to training which is expressly reserved to states.

This position harmonizes the army clause with the militia clauses instead of reading out of existence the militia clauses, which is the ultimate effect of Respondents' position.

The National Guard is really a quintessential state organization.

The state militias, which every state had and has had since the beginning, were organized into the National Guard pursuant to Congress' power to organize the militia.

They have remained state organizations of vast importance to the states throughout the years.

The National Guard is relied on very heavily--

Unknown Speaker: Excuse me.

You say they were organized pursuant to Congress' power.

Is there anything that would have prevented the Governor of Minnesota from simply issuing an order saying that henceforth what has been the... the state national guard is now denominated the state unorganized militia?

Could he do that?

Mr. Tunheim: --The State... unorganized--

Unknown Speaker: He just gives it a new name.

He says this is no longer Minnesota's organized militia.

Now the consequence of that will be that we would get no federal assistance, no tanks, planes and so forth, no firearms from the federal government, but it would be our... our own unorganized militia that we can train wherever we want.

Is there anything in law that would prevent him from doing that if he did not want a federally funded state national guard?

Mr. Tunheim: --Justice Scalia, if the governor wanted to do that he would not be able to maintain under federal law any other organized militia other than these defense forces.

Unknown Speaker: Fine.

It wouldn't be called an organized militia, but it would be the same unit, the same officers, the same enlisted personnel.

He could do that, couldn't he?

Just give it a different name.

You are henceforth an unorganized militia.

And the only consequence of that would be he'd get no federal money.

Mr. Tunheim: They would not participate at all in... in the federal system?

Unknown Speaker: That's right.

Mr. Tunheim: That's true; but, of course, federal law would not allow any organized militia.

You say an unorganized militia--

Unknown Speaker: But this is... he's called it an unorganized militia.

Mr. Tunheim: --Okay.

Well, the unorganized militia really is nothing.

It's not organized at all.

It's just a group of citizens.

Unknown Speaker: Well, he's chosen to do that.

He's chosen otherwise.

So, really, all you're complaining about is you want the federal money but you don't want to be subject to federal training orders.

Yeah.

Mr. Tunheim: I don't think that's the issue, Justice Scalia.

The issue is that the states were reserved the authority of training the National Guard, and that authority is now being taken away in the Montgomery Amendment.

It's express language in the Constitution in clause 16 that training authority is reserved to the states and just by--

Unknown Speaker: For... for the organized militia, which is your point?

Mr. Tunheim: --For... for the organized militia, right.

Unknown Speaker: But in the Selective Draft Law Cases the court said that the power of Congress to raise armies could narrow the effect of a militia clause.

Mr. Tunheim: During an emergency or wartime situation.

Unknown Speaker: Well, it did, but the language doesn't say that.

Mr. Tunheim: Well, I think... I think, Mr. Chief Justice, in reviewing the Selective Draft Law cases you really can't separate that case from the context in which it was written.

The issue in that case was whether the militia clauses somehow immunized an ordinary citizen from mandatory conscription during a world war and, of course, the answer to that was no.

Congress would not have any power to raise an army without conscription other than by volunteers.

That case did not involve the National Guard.

It did not involve the organized militia.

It did not involve the states or the states' reserved power under clause 16.

It did not involve training, either peacetime or wartime.

In fact, the Solicitor General in arguing that the Selective Draft Law was constitutional assured the court that had had no impact on peacetime training of the National Guard which was reserved to the states.

And that really in that case if you look at it properly, there was no conflict between the clauses because the militia clauses do not give rights to individuals.

They give rights to Congress and to the states in this balance of power that... that the framers created.

To the extent that I think Selective Draft Law cases is relevant here, they recognize that Congress has very strong powers during wartime and during emergency situations.

Congress understood that in 1933 when it codified this emergency power into... in... and created the dual enlistment system.

The court also warned in the Selective Draft Law cases against an interpretation that would effectively destroy the militia clauses.

I think that case has to be limited to the context in emergency, and that's completely consistent with the states' position in this case that Congress does have the army... army clause power during an emergency to federalize the National Guard.

Let me talk just briefly about... about the framers and what they intended here.

To the framers the militia were really the citizen soldiers belonging to the various states, an issue of... of extreme controversy and... and substantial debate in the summer of 1787 was how much control to take away of the militia, to take away from the states and give to the new federal government.

Many wanted to retain plenary state control over the militia because they greatly feared, the framers greatly feared, the effect of a large standing federal army, and they believed that state control would be a very important... a very important check on misuse of the federal... federal army.

They rejected Alexander Hamilton's proposal to make the militia totally subject to the federal government.

They were also concerned, however, with providing the federal government enough authority during an emergency situation to be able to have access to the militia, and so they reached a compromise.

The militia would remain a state organization, but in an emergency for limited purposes Congress would have power to call the militia into the federal service.

Unknown Speaker: Could Congress have had power to call the militia of Minnesota what we call the National Guard to Honduras for a year to execute the laws of the United States under clause 15?

Mr. Tunheim: If that were the purpose of the call, to call forth into the federal service to execute the laws of the United States, yes.

Unknown Speaker: And the governor would have no veto power with reference to that?

Mr. Tunheim: Absolutely none if there's a call pursuant to clause 15.

Unknown Speaker: But your position is that this call was under the training provision--

Mr. Tunheim: This was clearly--

Unknown Speaker: --not... not under any of the three purposes in clause 15?

Mr. Tunheim: --Yes, Justice O'Connor.

This clearly was a call for training purposes, or federalization for training purposes, and nothing more.

Unknown Speaker: So that means we are in a position where we can't train them to do some of the things that we have to call them forth to do?

Mr. Tunheim: The Constitution, Justice Kennedy, gives to states the power to train, the authority over training the... the militia.

Congress can prescribe the discipline so that the militias, the National Guards of the various states can work together and can fire the same weapons, can read out of the same drill manuals, can drive the same tanks or bulldozers.

That's Congress' power to specify the discipline.

But the power, the... the authority over the training, which is the precise words in the Constitution, is reserved to the states.

The framers thought it was so imperative to reserve this power to the states that they wrote it into the Constitution.

A document that writes in very little express reserved powers for states because it's a document that gives limited powers to a new federal government, it was so imperative for maintaining this control, this balance of power, the checks and balances which are inherent in the Constitution that they wrote it in, and it is the language of the Constitution.

Unknown Speaker: The power of training reserved to the state was to be exercised according to the discipline prescribed by Congress.

What does that mean?

Mr. Tunheim: The discipline, Justice White--

Unknown Speaker: You mean, does that--

Mr. Tunheim: --means the standards.

Unknown Speaker: --The standards and what they're supposed to teach them?

Mr. Tunheim: What they're supposed to teach them.

Unknown Speaker: What they're supposed to learn?

Mr. Tunheim: The... the... originally it was a drill manual.

Unknown Speaker: So the states would just be... would just be... sort of a, just carrying out what Congress says they must do.

Mr. Tunheim: That's... that's precisely correct.

The states, though, have the authority over the training.

I think that that--

Unknown Speaker: What is that... what is that authority over the training?

What if the Congress says twice a year you will train, and here's what you will... here's the routine you will go through, and the state has absolutely no discretion about either time or place or what they are supposed to do when they train.

Mr. Tunheim: --Well, if you read discipline--

Unknown Speaker: Is that right?

Mr. Tunheim: --I... I don't think that's right, Justice White.

If you read the term discipline that broadly, it encompasses a good part of what's involved in the authority of training.

There's not... it's difficult to find a bright line in here between discipline and training, but I think it is that the discipline is the generalized commands that are given by Congress to the states, and the particularized application of those general commands are what training is and what is reserved for the authority of the states.

I will reserve my remaining time if there are no further questions.

Unknown Speaker: Very well, Mr. Tunheim.

General Starr.

Argument of Kenneth W. Starr

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

The army clause of the United States Constitution provides in broad terms that the Congress shall have power to raise and support armies, and consistent with the breadth of the text of the Constitution this Court has broadly construed this clause and the powers that are granted under this clause.

The Court has described the powers granted under it as plenary, as broad and sweeping and, importantly for purposes of this case, as not limited by the militia clauses.

Coupled with the necessary and proper clause, there is little doubt... and we have heard today... that there is no dispute that Congress had the power under the army clause to create an entity.

That entity is the National Guard of the United States, and it created it as a component of the armed forces of the United States.

When it created the National Guard of the United States in 1933, Congress was very clear.

It relied expressly on this Court's World War I decisions in the Selective Draft Law cases and Cox against Wood.

And the theory of those cases is that to the extent that Congress exercises its powers under the army clause the efficacy, the sweep of the militia clause is thereby limited.

Unknown Speaker: Well, General Starr, in the statutes when Congress created this National Guard of the United States, as I understand it the statutes did provide that the Secretary of Defense could order any national guard unit into active duty for not more than 15 days a year with the consent of the governor.

Now I guess it's your position that that provision wasn't necessary.

Mr. Starr: That's correct.

That is our position.

Unknown Speaker: That Congress didn't have to say we'll give the governor a voice.

Mr. Starr: That is precisely our position because of what this entity is.

Unknown Speaker: Would you... would you be so kind as to tell me in this case whether you claim that the President called the guard to Honduras under one of the three purposes of the militia clause?

Mr. Starr: No, it did not.

The President did not, or the Secretary, and the authority did not.

This is not--

Unknown Speaker: Well, were they called under the training clause of the militia clause?

Mr. Starr: --No, they were not.

They were called under the army's clause.

They were called in their capacity as part of the Army and Air Force of the United States.

Unknown Speaker: Well, when... when the National Guard was created, was Congress acting pursuant to its power to organize the militia?

Mr. Starr: Congress was acting in 1933 under its army clause powers, not under its organization--

Unknown Speaker: Well, but Section 310 says that there is the organized militia, which is the National Guard.

And it seems to me very odd for you to say that the militia clause, the organization clause, is not being relied upon when they create the National Guard.

I just can't square that with Section 310.

Mr. Starr: --This is critical, Justice Kennedy.

Section 311 speaks of the national guard.

You're quite right.

What I'm speaking of is the National Guard of the United States.

There are two separate entities.

That is the thrust, that is the essence of the dual enlistment concept.

If I leave nothing else today, I want to leave the Court with that clear distinction.

An individual who serves in his or her national guard unit serves in two capacities.

That individual is, indeed, a state militia person, but that person also since 1933 takes an oath of allegiance under the Constitution of the United States to obey the orders of the President, and the Congress has seen fit to give powers both unto itself in its exercise of army clause powers to make use of this reserve component, and it's a critical part of the reserves.

The National Guard of the United States, when it goes to Honduras, when it goes as it is now--

As we speak, approximately 4,000 national guardspersons are in training operations in South Korea.

Some of those individuals who have been involved in that exercise are from Minnesota.

They are not there in their militia hats.

They do wear those hats when they return to Minnesota and the other states, but when they have been summoned under the authority of 672(b), they are summoned in their capacity as members of the reserves of the United States Armed Forces.

Unknown Speaker: General Starr, is it within the power of a governor of a state to say I want to have my own militia that works for me full-time, I am willing to fund them, to buy their arms or they will fight with karate if necessary, but I do not want them to be part of the national guard, and, therefore, I am establishing a state militia that will be an unorganized militia, we will have no organized militia.

Can a governor do that?

Mr. Starr: Several points.

There is no obligation on the part of any state to maintain a national guard.

The federal statutes--

Unknown Speaker: Why don't you answer yes or no and then go on and tell me?

Can a governor do that?

Mr. Starr: --The governor cannot violate Article I, Section 9 of the Constitution with respect to maintaining troops in peacetime without Congress' consent.

Congress has consented, as we have heard today, to the creation of state defense forces, and we see that in federal... I'm sorry?

Unknown Speaker: I thought the Constitution allows the state to have a militia.

They can't have a militia without Congress' consent?

Mr. Starr: In terms of maintaining... it depends on whether they are troops.

If they are... your hypothetical, other than karate training, contemplated equipping these individuals with arms.

Unknown Speaker: Well, I assume militia have arms.

Don't you think that--

Mr. Starr: Not at the time of the founding.

They supplied their own, and for over 100 years the individuals in the militia were obliged to supply their own arms.

Therein lies the purpose of the Second Amendment, to maintain the right of the people to bear their arms so they can serve in the militia.

Under your hypothetical, the governor is seeking to create an armed force.

That he can only do with the consent of Congress.

Unknown Speaker: --I see.

Well, this is a harder case than I thought, then.

You... you are saying, then, that the state cannot have a... a militia that it arms unless... any militia it arms will automatically be subject to this dual system.

It cannot avoid it.

Mr. Starr: Unless it comes within 109(c), which is the provision for state defense forces.

Congress has consented to the creation of--

Unknown Speaker: That's a matter of grace.

Mr. Starr: --Exactly.

Unknown Speaker: And you're saying that Congress can set it up in such fashion that the state cannot have any militia of its own which it arms that cannot be subject to the beck and call of... of the United States?

Mr. Starr: It cannot equip individuals without the consent of Congress.

May I... may I, however, add this very critical point?

The militia is contemplated by the founders.

This is clear as can be.

I don't think there is any dispute that the militia was viewed as it is used in the Constitution, as the able-bodied populace, able to pick up and bear arms to defend.

It did not mean those individuals who are serving in a particular unit.

Unknown Speaker: But the framers, General Starr, were very careful to say that Congress has the authority to organize that militia?

Mr. Starr: That is true.

Unknown Speaker: And you have been very careful to say that that isn't what's happening here.

Mr. Starr: In this respect, that is exactly right, that Congress has not been exercising its militia powers, which it does have under clause 15, to organize, and we think that includes defining who is serving in the militia.

Unknown Speaker: Well, is it... is it clear that the framers thought that Congress could prevent the states from setting up their own militia and giving them equipment?

Mr. Starr: In terms of giving them equipment, I don't think the record is clear on that, but what we do know is that the Congress in 1792 determined that the individuals who would in fact be serving in the militia, all able-bodied persons, would supply their own, and it certainly was--

Unknown Speaker: What... what provision of the Constitution is it that you rely on to say that a state may not have its own militia that it arms?

Mr. Starr: --Oh, I'm sorry, not militia, but may not maintain troops in peacetime without the consent of Congress.

Unknown Speaker: What provision is that?

Mr. Starr: That is Article I, Section 9, which limits the powers of the states.

"No state shall, without the consent of Congress, lay in a duty of tonnage, keep troops or ships of war in time of peace. "

and so forth.

Unknown Speaker: That means full-time troops, isn't that the meaning?

The militia, you know, the Minuteman, he's a farmer and then he's called to service, but when he's called to service it doesn't mean he can't use a tank.

I don't know how you read that to say that the state can't arm them, as opposed to meaning that the state cannot have a full-time army, but that's not what we're talking about here.

Mr. Starr: As long as the individuals do not rise to the level of troops, there is no question that the Governor... first of all, the Governor enjoys--

Unknown Speaker: But that's not involved here, is it, Mr. Starr?

Mr. Starr: --It is not involved here, at all.

That is correct, Justice Kennedy.

What is involved here--

Unknown Speaker: What troubles me is that the Congress of the United States has authority to organize and arm the militia, not to create it, and the state has the right to create it, and there's a reserved right of the state to control it.

There is reserved power in the Governor to control the militia, is there not, under the Constitution?

Mr. Starr: --The only control is that of the appointment of officers, clause 16, and the authority of training the militia according to the discipline prescribed by Congress.

That is to say, Congress could, if it saw fit, summon forth all able-bodied persons into service of the country.

It could authorize the President to do that.

That is precisely what the President did, and that's what Congress has authorized it to do, in providing for military training for those persons who wear their twin hats, their double hats.

These individuals are being trained in Honduras or South Korea or Europe or elsewhere as members of the reserves of the United States Armed Forces, and this is critical.

This is absolutely critical, that as a practical matter, since the 1970s, U.S. strategic doctrine is such that the use of the National Guard of the United States as members of the reserve component of the Armed Forces is critical.

As we outline in our brief at a time of full mobilization, 18 of the Army's combat divisions, 18 of the 28, would be National Guard of the United States units.

A very substantial part of the United States Air Force is the United States National Guard Air Force, the National Guard of the United States.

Unknown Speaker: Is it fair to say that the war power here is being used, in effect, to override a reserved power given to the states under Article 16?

Mr. Starr: I don't think so.

I think this is... I would say, it's an exercise of the army's clause power.

I don't think there's any override, because the state interest that is involved here is a very strange one.

What the Governor is seeking to do is not to forbid overseas training of the Armed Forces of the United States.

There's no objection to their being trained in South Korea and Europe.

What the Governor has sought to do is to play a role in the foreign policy and defense policy of the United States, to say they should not be trained in Central America, even though troops are employed in Central America and National Guard of the United States troops are employed and were employed in the Panamanian operation, they were employed in the Grenadan operation, they were employed in the Libyan air strike, and they have been employed in all major activities of the Nation's Armed Forces since the creation of the National Guard in '33.

Unknown Speaker: Did any governors object to any of those instances you mentioned?

Mr. Starr: No.

There was no gubernatorial--

Unknown Speaker: Well, then there was no constitutional problem.

Mr. Starr: --There was no gubernatorial objection, because I think until quite recently there was no sense at all that there was any basis for objecting to the training of individuals in their capacities as the Armed Forces of the United States.

Again, that is what these individuals are.

Unknown Speaker: General Starr, can I ask you a question?

I just want to be sure I understand your position.

Mr. Starr: Yes.

Unknown Speaker: On the basic notion of the dual enlistment system, do I correctly understand you to say that the states really have no alternative, they cannot operate a separate militia as contemplated by the militia clause, if Congress says the only militia you can have has to have this dual status?

Do they have any kind of option under the Constitution?

Mr. Starr: They certainly have the option not to participate in the National Guard system, that is clear.

Unknown Speaker: But can they have... if they don't participate in the National Guard system, may they have their own separate militia?

Mr. Starr: They may have their own state defense forces--

Unknown Speaker: No.

Mr. Starr: --that are carrying out militia functions.

Unknown Speaker: Can they have the militia... whatever that term means in the militia clause of the Constitution, can they have that animal without having that animal become part of the United States Army?

Mr. Starr: Yes, they can.

I don't see any reason constitutionally that they cannot.

Unknown Speaker: I thought earlier you said that they couldn't.

That's why I'm really puzzled.

Mr. Starr: The concern I have is with respect to consent with respect to maintaining troops.

It has to do with what the function is.

If the function of the state defense forces, as it is, is to maintain law and order and to respond in terms of emergencies and the like, then they certainly do have that power to maintain that sort of entity.

Unknown Speaker: Well, they want to have a militia that would be available to become part of the United States if war should be declared.

They want to train their own people, and so forth, according to the discipline prescribed by Congress.

But you say they cannot do that, because that would be maintaining troops in violation of--

Mr. Starr: Well, in addition, what Congress has seen fit to do is to define in federal law the militia of the United States, and it is indicated that that consists of all able-bodied males of a certain age.

It then breaks the militia into two classes.

Unknown Speaker: --What section is this?

Mr. Starr: This is 10 United States Code Section 311, and the organized militia is then defined as the National Guard and the naval militia.

Now, Congress has seen fit, as I say, to provide for the creation of state defense forces, but Congress has the power given to it at the founding in the Constitution to provide for organizing and arming and disciplining the militia, so Congress can, in fact, organize it and has done so.

Unknown Speaker: The Petitioner says that Congress has also forbidden the states to have an organized militia except under the terms that Congress has provided, which also makes them part of the national reserve component.

Is that correct?

Mr. Starr: Well, I take issue with that in terms of the definition in the Constitution of the militia.

That is to say, the militia is not defined, and it was understood... it was understood at the founding that the militia consisted of a body of persons.

Those individuals may, in fact, be called into the service of the United States.

That has the effect of preempting any state functions that those individuals might in fact otherwise be carrying on.

Unknown Speaker: Yes, but they can only be called, according to the Constitution, into the service of the United States for the three purposes that are specified: to execute the laws of the Union, suppress insurrection and repel invasion.

Mr. Starr: That's quite true.

They can only be called... the militia can only be called into service--

Unknown Speaker: That's quite different from calling them into duty for the purposes of training in Honduras.

Mr. Starr: --That's quite right, and that's why Congress in fact exercised army clause powers in 1933.

It did not exercise militia clause powers.

If one looks at the background of what Congress did, Congress did not say, we are exercising our rights to organize the militia, clause 16.

We're doing that in order to prepare for the exercise of clause 15 powers.

Not at all.

They said, we're exercising our army clause powers.

That's what we're exercising, and these individuals are becoming members of the reserves, of the Armed Forces of the United States.

Unknown Speaker: Well, Mr. Starr, when Section 311 says that... in 311(b)... the classes of the militia are (1) the organized militia, which consists of the National Guard and the naval militia, (2) the unorganized militia, which consists of the members of the militia who are not members of the National Guard or the naval militia, does "organized" and "unorganized" have any objective meaning, or is it just a convenient term to refer to those militia that are the National Guard and those militia that aren't?

Mr. Starr: I think it means Item (2), (b)(2), means that part of the pool of able-bodied persons defined in (a), the militia of the United States consists of all... in fact, it's--

Unknown Speaker: What does "unorganized" mean?

I mean, does it mean that they can't be organized?

Mr. Starr: --No.

What it means is, they have not been organized.

Unknown Speaker: They haven't been federally organized?

Mr. Starr: They haven't been organized at all.

Unknown Speaker: So a state cannot have any organized militia that isn't part of the National Guard.

They can also--

Mr. Starr: No, that's not true.

Cannot have a militia--

Unknown Speaker: --Well, they have to be federally organized?

Mr. Starr: --Our definitional difficulties are arising by virtue of different uses of the term "militia".

The term "militia" as used in the Constitution, as I see it, has to do with those able-bodied persons who can in fact be summoned by the state, by the Governor... and the Governor has that power.

This is important.

The Montgomery Amendment does not... does not... even if one were to say this is the militia, the Montgomery Amendment simply says, Governor, you can't object to their training as Armed Forces of the United States on these four enumerated grounds.

If you need them... if you need them in Minnesota, you can keep them in Minnesota.

Unknown Speaker: I'm trying to get back to whether the Governor can organize them.

I mean, surely the... surely the state's ability to train them includes the ability to organize them.

The state cannot have an organized militia, it can only have... you know, able-bodied men out there who may have their own rifles, and it can't even appoint officers and... I mean, the appointment of the officers is left to the state.

That implies organization, doesn't it?

Mr. Starr: It certainly implies that those individuals who are in the unorganized militia may become organized.

Now, Congress has been given the power to organize.

Unknown Speaker: So you really think the unorganized militia means... in this statute means unorganized, that the state has no independent authority to organize a militia, all it can do is designate a bunch of people who we say, you are militia, but we can't organize you without federal consent.

Is that the government's position?

Mr. Starr: In terms of maintain... as long as they do not run afoul... it's not involved in this case, but as long as they do not run afoul of the maintaining troops in wartime... in time of peace.

I see... there's nothing specific that says, you cannot take certain actions.

What we do have in federal law are authorizations to establish state defense forces, and 30 states have availed themselves of that, and that is completely outside the ambit of the National Guard.

Unknown Speaker: I think you've said they can organize, so long as they don't run afoul of the maintaining troops clause, whatever that might mean.

Right?

Mr. Starr: That is correct.

They can... they can organize, but that power can in fact, it seems to me, be overridden, if Congress sees fit to exercise its clause 16 power.

Unknown Speaker: There are a lot of questions that are kind of lurking on the edge of this case--

Mr. Starr: Yes.

Unknown Speaker: --that we really don't have to decide in writing an opinion one way or the other.

Mr. Starr: I fully agree with that.

[Laughter]

And many of those questions have been discussed at length here.

If one reads the Court of Appeals opinion en banc, one sees, it seems to me, a very clear and correct opinion.

When Judge Magill, in writing for the overwhelming majority of the en banc court, comes to the conclusion, at that part where he says, Congress was exercising its army clause powers here, and that power is sufficient to establish the armed forces of the United... to include in the armed forces of the United States, these individuals, that is the end of this case.

Congress' power is plenary.

There is no question.

Getting back to Justice O'Connor's earlier questions.

There is no question that these individuals were in federal status.

Whatever the limits of power, there is no question that they were in federal status.

Indeed, they need to be in federal status in order to enjoy federal benefits, in order to enjoy federal protections under status of forces agreements.

Unknown Speaker: General Starr, I have no doubt that Congress' power is plenary, but I'm not sure that we're going to read Congress' power to totally eliminate another power, namely, the power of the states to maintain militia, any more than we would enable Congress to... to draft all state governments, and say all members of state governments are automatically members of the National Guard, and we may send them abroad at our will.

That would be destroying another governmental institution that's in the Constitution.

And what I'm concerned about is the position you're taking is indeed, in fact, that that's what the government can do.

That by simply waving a wand over the state militia and saying you are now federal militia, the government, you are saying, I think, can eliminate the power that was reserved to the states to have their own militia and to train them.

Mr. Starr: I think, Justice Scalia, that, although not involved in this case, I must state that that is not involved in this case.

This is an extremely limited regulation.

This is a system of cooperative federalism that works very well.

It worked extraordinarily well until governors sought to play a role on the stage of foreign policy, and then Congress stepped in.

It stepped in narrowly; it stepped in precisely.

But, to get to your theory, I think that is the theory of the case in selective draft law cases.

Unknown Speaker: Do you know of any authority for the proposition that an express power given to Congress can override an express limitation on Congress' power under some other provision of the Constitution?

Mr. Starr: When these individuals... the answer is... is no.

But when these individuals have been summoned to serve their country, I don't think there is any doubt that Congress has the power to pass a law that has the effect of summoning all able-bodied persons to serve their country.

That has the effect... and that's what Chief Justice White recognized in Selected Draft Law cases, he recognized it again in Cox against Wood, that that has the inevitable effect of shrinking the compass, shrinking the operation of the militia clauses.

Congress does not do that.

It does not do that because Madison saw it at the founding.

That there were protections... there were political protections, that states are represented in the Congress of the United States.

But in terms of pure theory, pure theory, the pure theory of Selective Draft Law cases is when it... and it stands to reason, that were we truly in a time of crisis, and the nation needed the help of every able-bodied person, then we ask the Congress--

Unknown Speaker: Of course, those cases are easy when you get a time of crisis.

The question is what about training when you're not in a time of crisis?

That's what this case is about.

Mr. Starr: --That's correct.

This is not the--

Unknown Speaker: May I ask you?

What do you think the word militia means in the Constitution?

Mr. Starr: --I think it means the pool of able-bodied persons who are able to serve their country or to serve their state.

I think it means a pool of persons.

And that is the definition, in effect, that was given to the militia in 1792 by the initial Militia Act that remained in effect until 1903.

The militia is you and I, if we're of a certain age category--

Unknown Speaker: Which we aren't--

Mr. Starr: --who can be--

[Laughter]

I am still in the militia.

Unknown Speaker: --All right.

[Laughter]

Mr. Starr: Others, I suppose, are emeriti members of... of... of the militia.

[Laughter]

I think--

Unknown Speaker: I don't know what I was now.

[Laughter]

Mr. Starr: --But I think that's what the militia clauses of the Constitution are getting at.

Unknown Speaker: May I ask--

Mr. Starr: They're talking about that pool of persons who can be summoned.

Unknown Speaker: --May I ask one other question?

Is the argument you're making today the same argument you submitted in your brief?

Have you changed your position at all?

I didn't really... I had a different view of your position in your written brief than I do now.

Mr. Starr: No, and--

Unknown Speaker: For example, I don't think you relied at all on the troops... the prohibition--

Mr. Starr: --Oh, I did that only in response to questions about what is the authority of governors to go and organize militia units?

That's correct.

This case is a very narrow case.

The argument has very been wide ranging.

But the case, the issue that is before the Court is exceptionally narrow, that does not require us to visit--

Unknown Speaker: --It involves training in a time when there's no emergency.

Mr. Starr: --That is correct.

But the critical point, Justice Stevens, is, what are these individuals when they are "being trained"?

They are troops of the United States.

They wear two hats.

When they went to Honduras, they were wearing their federal hats.

Unknown Speaker: They wear two hats, and as I understand it now, and frankly I didn't... but they must wear two hats, too.

That's what I... that's the impression I have from your whole argument.

Mr. Starr: The National Guard, since... that is correct.

To be in the National Guard of the United States one must be in the National Guard, the state National Guard.

There may be some individuals who are members of the National Guard but who are not members of the National Guard of the United States.

I understand there are a few persons in that category, but you're quite right, since 1933, an individual to sign up, to enlist in the National Guard, enlists in both.

Unknown Speaker: General Starr, as an old buck private in the rear rank of a Minnesota guard, I can say that not a one of us in the rear rank would understand this argument today.

[Laughter]

We... we knew that we had to go to Camp Ripley... you won't know where that is, but Mr. Tunheim will.

Or to, indeed, Lake City.

But the thought of this dichotomy would be too much for the ignoramuses, such as I, that were in that rear rank.

[Laughter]

I'm delighted to learn about the Minnesota National Guard.

Mr. Starr: May I respond very briefly to that?

Unknown Speaker: No, that's not a question, General Starr.

[Laughter]

Mr. Starr: I thank the Court.

Unknown Speaker: Mr. Tunheim, you have two minutes remaining.

Rebuttal of John R. Tunheim

Mr. Tunheim: Thank you, Mr. Chief Justice.

The essence in this case is really a dispute over what dual enlistment means.

And I remind the Court that these two entities are the same organization.

These are the same people.

Dual enlistment merely created a reserve force which relies completely on the states, on the National Guard, that the state organize militias for its members.

The Respondent tries to claim, somehow, that the National Guard of the United States and the National Guard are kind of like apples and oranges; you can switch the hats.

They really aren't even apples and apples.

They are the same apple.

These are the same people, and you just cannot wave this magic wand and eliminate constitutional protections, constitutional limitations, which were the essence of a compromise that the framers made 200 years ago over the control over the... of the militia.

The--

Unknown Speaker: May I ask you what you think the term militia means in the Constitution?

Mr. Tunheim: --I think the term militia in the Constitution refers to the militia organizations that the states had at the time that the framers sat down to write the Constitution.

It has been used in the sense of every able-bodied person who's available, but once it is organized, it is organized as a militia.

Unknown Speaker: But... but the power to organize the militia is given to Congress.

Mr. Tunheim: And Congress has exercised that power, has organized the militia, and has created the National Guard.

That is the entity that we're talking about today.

Now they've gone beyond that to interpret dual enlistment, which has never been interpreted to... to eliminate constitutional protections to... to now require that... that to be done under the army clause.

In 1933, when dual enlistment was created, its use as a federal force, the National Guard of the United States was expressly limited to emergencies, relying on the Selective Draft Law cases.

When that was changed to bring the National Guard into federal training for the first time in 1952, it was done only pursuant to the governors' consent.

State authority over training has been consistently recognized for 200 years, until the enactment of the Montgomery Amendment.

Unknown Speaker: Thank you, Mr. Tunheim.

Mr. Tunheim: Thank you, Mr. Chief Justice.

Chief Justice Rehnquist: The case is submitted.

Attribution:

The OYEZ Project

Featured:

West Virginia v. United States - Oral Argument

Fri, 09 Jan 2009 14:48:28 +0000

Case:

West Virginia v. United States

Media File:

85-937_19861110-argument.mp3

Related Transcript:

1986_85_937_argument.xml

Transcript:

Argument of Charles G. Brown

Chief Justice Rehnquist: We will hear argument first this morning in No. 85-937, West Virginia versus the United States.

You may proceed whenever you are ready, Mr. Brown.

Mr. Brown: Mr. Chief Justice, and may it please the Court, in 1972, amid torrential rains, a dam burst in southern West Virginia.

The valley below was flooded.

Over 100 people were killed.

Thousands were left homeless, and millions of dollars of property damage ensued.

There was an immediate federal-state cooperative effort to deal with the tragedy, a joint effort by both, each side spending millions of dollars of appropriated funds.

One of the efforts dealt with housing.

The Federal Government supplied housing units.

The state supplied the land.

And the Army Corps of Engineers prepared the sites.

They prepared the sites in a relationship under which the District Court found to be a contract between the Federal and state government.

Although finding a contract existed, the District Court held that prejudgment interest would not be allowed against the United States.

The Court of Appeals reversed, applying cases involving private litigants in suits against the United States.

Unknown Speaker: You mean in favor of the United States, don't you, rather than against the United States?

Mr. Brown: Reversed... the Fourth Circuit reversed in favor of the United States... excuse me... applying cases involving private litigants in suits against the Federal Government.

Excuse me, Mr. Chief Justice.

We contend two points on oral argument today.

One is that the Fourth Circuit erred by equating the state and private parties, and two, the prejudgment interest may not be awarded without Act of Congress or consent against a state.

Number One.

States are not private litigants.

The Fourth Circuit committed error when it put states into the shoes of private litigants on the prejudgment interest issue.

The last time the Court dealt with the question it explicitly rejected exactly the same argument, Board of Commissioners of Jackson County, Kansas, versus United States, in which Justice Frankfurter, for the Court, said,

"Nothing seems to us more appropriate than due regard for local institutions and local interests. "

The Fourth Circuit did not even cite Board of Commissioners of Jackson County, Kansas.

The Congress subsequently has acted as well and acted in the same direction in the Debt Collection Act.

The Congress excluded state and local governments from the statute, so Congress as well believes that states and private litigants are two different entities indeed when it comes to prejudgment interest.

The more recent cases since Board of Commissioners are along the same lines which this Court has dealt with.

Congress is to decide the constitutional balance between Federal and state governments.

In Garcia, the Court said that Congress would determine the reach, how far the relationship would go, how far Congress would reach into the power of states, and that is a Congressional decision.

In Bowen v. American Hospital Association the plurality said that Congress must speak with a clear voice if it wants to change the relationship between Federal and state governments, and in Pennhurst I you said that a state must know the terms and conditions of a grant, know what is expected of us before we get that grant.

Not surprisingly, the Court as well has said that the Congress is the one to decide how the Federal Treasury is to be protected.

The Fourth Circuit reached in to protect the Federal Treasury, but that is not their judgment to make.

It is the Congress's decision, US v Standard Oil in the 1940s, so Congress has determined and this Court has determined, both have said that private litigants and states are two different entities, and the Fourth Circuit did not recognize that.

Argument Number Two.

There is no statute and there is no consent applicable here so there is no prejudgment interest.

The Debt Collection Act is a comprehensive statute dealing with all debts owed to the United States Government.

Congress is no longer silent on the issue of treating states different from private litigants, so the need for interstitial law, for the Court to move in and make law, is reduced.

Senator Percy, and he said this in a letter after the statute was passed, but Senator Percy was the author of the Debt Collection Act.

Senator Percy said that Congress will decide when the states and local governments will pay interest.

He said this in a letter to the solicitor general.

Unknown Speaker: General Brown, did you rely on the Debt Collection Act in the Court of Appeals?

Mr. Brown: No, we did not.

We did not below.

Unknown Speaker: Do you think you can raise a new argument in this Court that you didn't raise there?

Mr. Brown: Justice Stevens, we don't think we are raising a new argument.

We have continued to stress that there is no statute and no consent pending or applicable here to have prejudgment interest.

Unknown Speaker: You were arguing there was no authorization.

Here aren't you construing this statute as a prohibition?

Or are you?

Maybe I don't get the--

Mr. Brown: We argued heavily Board of Commissioners of Jackson County.

We said that's what the Fourth Circuit should rely on.

The Fourth Circuit didn't even cite the case.

We feel now that the Debt Collection Act, although not governing because it was passed after the flooding occurred, is an act of Congress which demonstrates that Congress believes what you said in the 1930s, which is that states are to be treated very differently from private litigants when it comes to prejudgment interest.

Unknown Speaker: --Did you make this argument in your principal brief.

Mr. Brown: Yes, we did.

Unknown Speaker: Where was that?

Mr. Brown: We made the argument that the starting point has to be the Act of Congress and we focused in our principal brief not on the Debt Collection Act but on the Disaster Relief Act.

Unknown Speaker: Did you say anything about the Debt Collection Act in your principal brief?

Mr. Brown: No, we did not.

Unknown Speaker: So you come in with a reply brief that the other side hasn't had an opportunity... has no opportunity to respond to.

I frankly don't know what the practice is on this Court, but on the Court that I came from we don't entertain arguments first made in the reply brief.

If this is such a basic point, it should certainly have been in the main brief.

Mr. Brown: Mr. Justice Scalia, we apologize.

We do think that the argument is consistent with the points we raised in the initial brief, although we did add an analysis of that statute in the reply brief.

Unknown Speaker: Just to clarify it, you are not urging us to hold that the Debt Collection Act applies to a previously entered into agreement, are you?

Mr. Brown: We think that the Debt Collection Act... no, you don't need to do that.

We think that the Debt Collection Act provides the same Congressional guidance that you did with Board of County Commissioners.

Unknown Speaker: Well, it is certainly possible that Congress included the provision that it did in the Debt Collection Act about interest against states because it thought that otherwise the rule was to the contrary under Federal common law.

Mr. Brown: I think Congress has said that they are supporting the common law and they will decide when the states are to pay interest.

That is what Senator Percy said in his letter and that is what we believe.

Justice Scalia, in Footnote 3 at Page 23 of our brief in chief we did mention the Debt Collection Act when we analyzed the Pennsylvania v. U. S. and the Perales case, which were the two circuit decisions which said that there would be no prejudgment interest going against a state.

We did mention it at that point.

Congress will decide when the states are to pay interest, and Congress has said so.

Unknown Speaker: Excuse me.

That footnote continues after analyzing the state decisions,

"although this statute does not apply to the current dispute, because the contract was entered prior to the effective date of that Act. "

"It does, however. "

--I would take that as a concession that the Act is not applicable here, and so would the other side, so they do not brief the point.

They do not discuss the point.

It looks like a concession.

And then in comes the reply brief, and lo, they have been sandbagged.

If this point is as basic as you say, it should certainly have been relied upon in your principal brief.

The footnote says the statute does not apply to the current dispute.

Mr. Brown: The solicitor, us having dealt with the case in a footnote, the solicitor deals with the case in the footnote on Page 9 of the solicitor's brief in opposition to cert, so they mention it at that point.

But we do think that the Board of Commissioners of Jackson County, Kansas, is the case the Fourth Circuit should have looked at, and it was the case we presented to them as the deciding point, as a lodestar for deciding the case.

Congress will decide when interest is to be imposed, and they have done that in very clear terms, as we have said.

In the Social Security Act,

"interest at a rate of 6 percent per annum from date due until paid. "

that is quoting the language of the Social Security Act, where Congress specifically said when interest would be imposed.

In the Medicaid statute they were even more lengthy in making clear that interest was to be imposed against a state government.

The quote is

"plus interest on such amount disallowed beginning on the date such amount was disallowed and ending on the date of such final determination at a rate based on the average of the bond equivalent or the weekly 90-day Treasury bill. "

So, Congress has said when they feel that the interest is to be imposed.

Now, the Disaster Relief Act simply uses the word "charges".

It does not say that interest is to be imposed.

Interest is not mentioned in the statute.

Interest is not mentioned in the legislative history.

Interest is not even mentioned in the Code of Federal Regulations.

The government doesn't... the executive branch therefore hasn't even contemplated interest in this matter until this case is brought, and by the way, we think this is the only case that we can find under the Disaster Relief Act where the government is seeking prejudgment interest.

The Disaster Relief Act indicates there is no duty of the state to pay.

The duty was imposed because of the contractual relationship between the parties.

The purpose of the relevant section, of course, was to provide temporary housing for the victims.

The Disaster Relief Act contemplates, in fact, five different ways for the states to pay these obligations or for others to pay the obligations, states, local governments, private parties, the Federal Government itself, or any combination of those four.

The Disaster Relief Act even contemplates percent loans and money paid back.

They mention that 6 percent loans can be made to businesses.

That is in the same Act, the Disaster Relief Act.

If Congress at one point talked about 6 percent loans, talked about percentage interest, they didn't talk about it here, so it is a different matter.

Just as there is no statute which calls for interest to be paid by the State of West Virginia in the Disaster Relief Act, there is no consent either.

There is no language in the letters.

The letters were the basis of the contract, according to the District Court, and under the record at 821 and 884, the Federal officials outlined what the letter should say.

If there is no such language in those letters which contemplates interest, we would think the government at that point didn't contemplate interest, nor did the government contemplate interest, as the record shows, in the bills that they sent out.

There was no indication over the years that interest was going to be due to the state.

I think when we see the word "charges" in the statute it is hard to take that word and say, well, that must mean prejudgment interest, too.

Many of us when we get our bills, if we get a bill from a department, store we expect the interest to be added each month.

If we get charges, a bill from the doctor, interest is usually not added each month.

So, the word "charges" is a word that does not automatically mean interest, and we think Congress has to say it.

Unknown Speaker: You mean just as a matter of general law, General Brown... certainly if this were a quasi-contract or money had in received action between private individuals and the bill had been sent that didn't indicate interest, I wouldn't think under ordinary common law that would preclude a claim of interest.

Mr. Brown: No, it would not, but I was just talking about the word "charges" as not reaching into the word "interest" because Congress at other points such as in the Social Security Act and the Medicaid Act have indeed said that there should be interest.

Historically it has been that way.

There has been reliance.

People's expectations is that the sovereigns do not pay prejudgment interest.

Both times this case has come to the Supreme Court in the Jackson County case we mentioned and a case earlier than that, the Supreme Court has held that prejudgment interest is not to be made against the state from the Federal Government.

Unknown Speaker: General Brown, would you tell me what your understanding of the holding of the Jackson County case is?

Mr. Brown: Yes.

Yes, I would, Justice Stevens.

The holding of the case was that Justice Frankfurter said that equitable determinations would govern, but the equitable matter, the equitable factor that he used that made the decision was due regard for local interest, and that was that factor.

Unknown Speaker: Weren't there a number of other equitable factors in the case as well?

Mr. Brown: After he made that decision that there would be no interest for the state, he said, however, if we had to rule on general equity we would rule with Jackson County Commission as well, so as I read Justice Frankfurter's opinion he held for the state solely on that basis... held for the County and the state would have at least as much basis a fortiori as the county would, but he held first solely on that equitable ground.

Then he fell back to balancing more equities, he said, if we had to, but he started with, however, if we had to do it the other way.

Unknown Speaker: Do you think there are any equities supporting the state's position here?

Mr. Brown: Yes, yes, yes, I think there are.

First, I think any balancing of the equities has to recognize in the balance that West Virginia is a state, and that is a fatal error.

The District Court in fact balanced the equities in favor of the State of West Virginia.

Looking at the Disaster Relief Act, saying that the Federal taxpayers were the ones to bear much of the burden of national disasters, saying that the people in West Virginia had suffered enough by going through the flood and that the obligation of the state was not voluntary because it was amid chaos.

There were four factors the District Judge used in determining in balancing the equities that the state, just on a balance of equities, that the state should rule, should win.

I wanted to point out as well that the state did make a commitment of its own.

It mobilized a lot of effort, and ultimately, although the advisory jury held there was no contract, the Court held there was a contract, so we feel there was litigation in good faith throughout the proceeding, but litigation based on the exchange of letters, which held that the state was liable.

If there aren't more questions, we feel that it there is to be prejudgment interest that decision must come from Congress or there must be consent.

Neither exists today, and we ask that the Fourth Circuit decision be reversed.

Argument of Albert G. Lauber, Jr.

Chief Justice Rehnquist: Thank you, General Brown.

Mr. Lauber.

Mr. Lauber: Mr. Chief Justice, may it please the Court, I would like to make three points about the Debt Collection Act to begin with.

First of all, that statute does not apply to any debts incurred before October 25th, 1982.

Unknown Speaker: By its terms?

Mr. Lauber: By its terms.

It is 31 USC 3717(g)(2), by its terms.

Now, that statute was passed by Congress to tighten up on Federal debt collection practices, and it did so by mandating that interest be charged on debts owed by any person, so it made more stringent interest requirements nationwide.

It defined "person" to exclude states.

Both the Comptroller General, an officer of Congress, and the Justice Department in regulations interpreting that statute nave interpreted it simply to preserve, by excepting the states from the mandatory interest requirement, have simply preserved the common law entitlement, whatever it was, of the national government to get interest from the states, and those are set forth in regulations at 4 CFR 102.13.

Unknown Speaker: You may have to litigate some time, I suppose.

Mr. Lauber: We are litigating that right now in several Courts of Appeals and have not--

Unknown Speaker: Yes, I would think you would.

Mr. Lauber: --and have not prevailed thus far, but even if we don't prevail on that argument, as the Third Circuit held, the effect of the Act would be to abrogate the common law rule under which the Third Circuit held we were entitled to interest, and because the common law rule applies here, that would lead us to win this case, we hope.

I would like to turn next to a brief summary of what we think the salient facts are here, and we think these are important because the outcome may turn on the relative equities between ourselves and West Virginia.

The District Court found and the Court of Appeals agreed that West Virginia had entered into an express unilateral contract to pay the Corps of Engineers for their site preparation work.

The Governor requested that the Corps undertake the site preparation activities, and that oral request was confirmed shortly thereafter in writing by the state's director of emergency planning, who wrote a series of letters to the Corps acknowledging that site preparation was the state's responsibility under the Federal statute and that the state

"will be responsible for the costs incurred. "

The Corps performed the work quickly and efficiently and the state gave us releases to that effect.

The Corps replied that bills would be forthcoming.

They were promptly tendered in the amount of about 4.2 million.

The Governor acknowledged the debt, stating that he would take steps to "consummate reimbursement", although he expressed his doubt that he could accomplish reimbursement during the then current fiscal year.

In response to a series of dunning letters from the Corps the Governor asked for a meeting at which he again acknowledged the debt but asked that the Corps forbear from collection for a time to permit him to negotiate with the state's delegation in Congress with a view to getting possible relief from Capitol Hill.

When that failed settlement negotiations ensued, and when those proved fruitless we were forced to bring this action to prevent the statute of limitations from running against our debt collection activities.

In the lawsuit the state's defense was that the Governor was incompetent to contract with the Corps on behalf of the state.

Their theory was that in the middle of this flood emergency the Governor would have had to go through the normal procurement process of competitive bidding before awarding a contract to the Corps of Engineers.

The court below rejected that defense, found there was a binding contract, and held the state was in breach of its contract.

The only... and this Court denied review of that question.

The only question at this stage, therefore, is whether the Court of Appeals erred in holding that the state should be required to pay prejudgment interest as one element of the damages for its breach of contract.

The interest would run from the date the bills were tendered in 1972 until the date of the judgment of the District Court eleven years later.

The aggregate interest is now about $6 million, well in excess of the original principal amount.

The petitioner appears to agree with us that this question must be answered by referring to Federal law.

That is so because Federal law governs the interpretation of contracts to which the United States is party and also because the debt here was incurred ultimately under a Federal statute, namely, the Disaster Relief Act.

Petitioner also seems to agree that the Federal common law rule is that prejudgment interest is awarded as matter of course to the United States in action for breach of contract.

The rationale of that common law rule is that where there is a breach of the contract to pay money the creditor is damaged by the delay in getting his money, and should be awarded interest to make him whole for his loss.

The only exception to this rule recognized by this Court is where it would be inequitable on the facts to award the Federal Government prejudgment interest, and the situation that typically has led the Court to find such inequity is where the Federal Government delayed unreasonably in asserting its claim.

That happened, for example, in the old case of United States versus Sandborn in 135 US, where the Court denied interest to the Federal Government, where it delayed for ten years in seeking to recoup money erroneously paid by the Treasury to a private party.

It happened again in the Board of County Commissioners case referred to earlier where the Court denied interest to the Federal Government where it delayed for eight years in seeking to recover taxes on behalf of an Indian wrongfully collected by a state, a county in Kansas on Indian property.

Therefore we believe that the Federal common law rule applicable both in cases against private parties and against states and their subdivisions is that interest is allowable unless it would be inequitable to allow it.

Petitioner here argues that this Federal common law rule should not be applied here, but that the Court instead should adopt state law as the Federal rule of decision, and by state law petitioner does not mean the generally applicable West Virginia law of contract damages which, like the Federal rule, would allow interest for a breach of contract.

Rather, by state law petitioner means the exception to the general West Virginia rule of damages under which... which operates where the state itself is the defendant in the contract action, and under that exception a state is not liable, unlike other parties, for interest for a contract breach unless it has waived sovereign immunity expressly.

So it is that sovereign immunity based exception to the general rule that petitioner wants to incorporate here.

That contention brings us to the Clearfield Trust line of cases where this Court has set for the factors that are relevant in deciding whether to apply a Federal common law rule or rather to adopt state law as the Federal rule of decision.

The Clearfield trust doctrine as elaborated in later cases like Yazell and Kimbail Foods essentially requires a balancing of the Federal interest against the state interests at stake.

Now, the Federal interest will typically require resort to a Federal rule, as this Court said in Kimball Foods, where the Incorporation of state law would

"frustrate a specific objective of the Federal program. "

And we think that would be the case here.

Although the Disaster Relief Act imposed much of the responsibility for bearing the cost of disaster relief on the national government it does affect a clear division of labor and cost as between the national government and the states.

One of these is that the states are required by the statute to prepare sites for temporary housing, and the statute requires that this site preparation be done by the state

"without charge to the United States. "

We think that this statutory division of labor and cost would be frustrated by adoption of petitioner's state law rule here because the United States would then be required to bear a substantial portion of the site preparation cost through the loss of a time value of its money.

Quite plainly the present value of paying the Corps of Engineers $4.3 million when it is due as compared to the present value of paying it $4.3 million eleven years later is much larger, and we think that the difference between the present value of getting your money now and getting it 15 years down the road would operate as a direct subsidy to the state's site preparation undertakings in defiance of the statutory mandate that site preparation be done by the state without charge to the United States.

For these reasons we think that adoption of the state no interest rule here would frustrate a specific purpose of the Disaster Relief Act and would therefore be improper under Clearfield Trust.

Unknown Speaker: Although Congress doesn't now think so, anyway.

Mr. Lauber: That depends on whether we are right in our construction of the Debt Collection Act.

Unknown Speaker: For the future.

I mean, should the same series of events arise in the future it is clear what would happen, isn't it, under the Debt Collection Act?

Mr. Lauber: We don't think it is clear yet.

Unknown Speaker: Why?

Mr. Lauber: Because our interpretation of that '82 Act is that by excepting the states from the definition of "person" the statute merely excepted the state from mandatory interest pursuant to the statute and preserved the status quo ante under which states could be held liable under the common law where applicable.

So, in our view of the statute which the Comptroller General and the Department of Justice have concurred in, we would still be litigating this very issue under the new statute.

We have lost that interpretation, I think, in two Courts of Appeals now, and it is pending in others at the present time.

The second element of the Clearfield Trust doctrine requires reference to the state interests that are implicated, and we think that this factor as well points to the result I have just reached.

I think it is helpful here to consider the kinds of state interests that this Court has found persuasive in the past in adopting state law as the Federal rule of decision.

In the Yazell case, for example, the Court held that Texas law respecting marital property governed in interpreting the terms of an SBA loan contract.

The Court noted that the contract had been negotiated with specific reference to Texas law and that the state law at issue involved the "intensely local interest" of family property and the rights of married women, including their capacity to contract.

In Kimball Foods the Court held in another SBA loan case that state commercial law governed the priority of creditors' liens on secured property.

The Court noted that the SBA loan there again had been negotiated by reference to state law, that the Federal Government was acting as a money lender in an ordinary commercial context.

The state law at issue was a commercial code of general application on which businessmen relied daily in making their lending decisions, and the Court held that failure to adopt state law there would have disrupted commercial relationships in the state, for example, by impairing the integrity of the state's notice filing system.

Thirdly, in United States versus North Carolina, a case in 136 US, the Court adopted state law to decide the availability of post-maturity interest on a defaulted state bond held by the United States.

We think the reasoning of that case has been superseded by modern cases like Clearfield Trust.

We think the result in that case was plainly correct under the modern Clearfield Trust doctrine.

There the Federal Government had invested in state bonds, and state law denied post-maturity interest to investors in those bonds generally, and the Court, I think, quite sensibly held back in 1890 that it would have been impossible to have the rights attaching to a bond vary depending on who happened to own the bond at the time of the lawsuit because the bonds were freely transferable.

Therefore the Court correctly held, in our view, that the state law denying post-maturity interest should apply to all investors, whether they be private parties or the Federal Government.

I think that the interests referred to in the Court in these earlier cases stand in rather stark contrast to the interest the state is urging upon the Court here in support of its state law rule.

Here the state is not trying to preserve the integrity of any state program like a bond program.

It is not trying to protect family or property values.

It is not trying to protect marital relationships.

It is not trying to protect settled commercial expectations of its citizens, nor is it even seeking to apply the general law of interest under the state's contract remedy statute because that would allow interest here.

What the state is trying to do is to avoid paying money because of a claim of sovereign immunity, but we think that a claim, a mere claim of sovereign immunity standing alone is entitled to no weight when the state is litigating against the United States.

It is clear that sovereign immunity did not bar the Federal Government from bringing this lawsuit in which a state has been held liable for breach of contract, and there is no reason why sovereign immunity should be any more relevant in and of itself in determining the measure of damages for breach of contract.

So, for these reasons we think--

Unknown Speaker: Yet you have the Jackson County case, which of course suggests that the fact that the state is a litigant in the action is entitled to some consideration.

Mr. Lauber: --Well, the opinion there referred to state... to local institutions and what Justice Frankfurter went on to say was that under the more modern law of the Court, Indians had come to be regarded increasingly as like any other citizens.

Although they were in a way the wards of the Federal Government, Justice Frankfurter said that the law had evolved to try and treat them as much as possible like any other taxpayer.

So the Federal Government there was suing on behalf of an Indians not in its own right, and I think the Court suggested that under those circumstances it would be important to defer to the state's treatment of taxpayers generally because Indians want to be treated like any other taxpayer as far as possible, and in any event he went on to base the holding of the case on the Federal rule under which interest is recoverable unless it would be inequitable, and he found it would be inequitable because the government had delayed for ten years... eight years in bringing the action.

So, I think even the earlier discussion by Justice Frankfurter in that case does not work against our position here because he was talking about the state's interest in maintaining parity among its taxpayers, including Indians, and there is no equivalent state interest in this case.

Unknown Speaker: Mr. Lauber, isn't it also true that there was no question about the state's interest as a litigant because the state wasn't a litigant in that case, it was just the county?

Mr. Lauber: It was just the county.

That's correct.

Unknown Speaker: So their argument they rely on that case ought to apply to counties as well, I suppose.

Mr. Lauber: I think they would make the same argument for any political subdivision as well as for themselves.

That's correct.

So we think that for these reasons the state interest here, because it is merely sovereign immunity without more, is not enough to justify the adoption of the state no interest rule.

Therefore the rule that should be adopted is the Federal interest rule which, as I said before, is that interest is awarded unless it would be inequitable to do so.

Unknown Speaker: Or in this case you would say you resort to state law but the exemption just isn't applicable.

Mr. Lauber: That would be another way of putting it.

I think that's right.

Unknown Speaker: Well, which one?

Which do you think we should take, the Federal rule or the state rule without the exemption?

Mr. Lauber: We think the proper approach is to adopt the Federal rule, and the fact it is the same as the general state rule maybe makes an even stronger case for doing that.

As I noted before, the inequity that typically has caused this Court to deny interest to the United States under the Federal common law rule is where the U.S. has delayed in presenting its claim and the other party is innocent.

Here, we did not delay and the state was not innocent.

The Corps of Engineers undertook this work at the express request of the state.

The work was well and promptly performed.

We demanded payment promptly and repeatedly, and the state kept putting us off, using a variety of dilatory tactics, forced us to bring suit, and then interposed the strained defense that they were not liable for the debt they had acknowledged all along because the Governor was incompetent to contract on behalf of the state.

If any inequity was practiced here, we think it was practiced against us by the state, and to decline to award us interest would damage us considerably and would reward the state for its dilatory conduct.

Thank you.

Rebuttal of Charles G. Brown

Chief Justice Rehnquist: Thank you, Mr. Lauber.

General Brown, do you have something more?

You have 15 minutes remaining.

Mr. Brown: I have a few brief points.

Your Honor.

First, I wanted to respond to the charge of the state being dilatory.

The fact is that the advisory jury held that the state was correct that there was no contract.

The fact is that the first District Judge on the case held that there was no duty by the state to pay.

He denied summary judgment, and he said there would have to be a trial on the facts.

Those facts in turn the jury found to be such that the state prevailed.

The District Judge found otherwise and ruled against the state, but the District Judge, partly based on these equities, determined that the state would not have to pay pre judgment interest.

Unknown Speaker: But even during the period when the state was acknowledging the debt it wasn't paying it.

It is true that later there was some reason to believe there wasn't any debt, in this state claim there was none, but even when the state acknowledged there was a debt it just wasn't coming up with the money.

How long did that last?

Mr. Brown: Justice Scalia, the government alleged that the state was acknowledging the debt through letters from the Governor and other officials.

The state never conceded that it was acknowledging the debt through those letters.

I think the District Court found that the letters themselves constituted the debt, not the later acknowledgment, but that the later acknowledgment certainly factored against us in his findings, I am sure.

The point is, there were a lot of equities on both sides in this case from the start.

The state was informed that it had a duty to pay for site preparation.

The government continues to argue that.

Judge Copenhaver in the District Court said the state has no duty to pay, and as I pointed out, there are a lot of ways that this could happen, including the Federal Government paying.

There was misinformation on both sides.

The Corps of Engineers dealt with a person that had a budget of $50,000.

He in turn mounted up $4 million of obligations, and the Corps never informed him or any of his superiors what the ongoing cost was despite their procedures generally to do so.

There was no mention in those letters that interest would be paid and the so-called dunning letters the government mentions, there was no mention there that the state would owe interest.

Interest was something that the state found out about in 1978 from a 1972 flood, and it is something that we never were held liable to pay until a 1985 court decision which we would not be able to pay until 1987, and that gets us very much to the reason that there is no prejudgment interest against sovereigns without Act of Congress or consent.

It has been that way historically and interest has always been treated differently.

Witness Library of Congress versus Shaw in the last term where you treated interest as something different.

The budget process is different with states.

We have a balanced budget.

Forty-nine states are required to have one, all but Vermont.

We have to plan.

Every two years we have to start over with a new legislature.

There has to be this planning, and the states simply cannot act with the celerity of an average man.

A court decision in many close calls may be necessary and the state won't even know what interest would be owing in the area of prejudgment interest.

The state, by the way, never pays prejudgment interest under state law.

I wanted to clear that up as well.

The other reason besides the budget process the historic--

Unknown Speaker: General Brown, I understood Mr. Lauber to say that the state never pays it because there is an exception for the state in West Virginia--

Mr. Brown: --Yes.

Unknown Speaker: --but that prejudgment interest is normally awarded between private litigants in a contractual type--

Mr. Brown: That's correct, Mr. Chief Justice.

Besides the budget process the other historical reason is, we are punishing innocent taxpayers.

Congress protects itself through its use of sovereign immunity in prejudgment interest except when it grants exceptions.

Congress also acts to protect, state and local taxpayers as well.

It Is no surprise that 27 states filed in a cert petition an amicus petition that cert be granted in this case because of the very broad impact, the impact that this case would have in hurting the targeted populations, the populations Congress has sought to help in foodstamps, in education, and so on, and so on.

A Ninth Circuit decision, Riley v. Bell, is pending waiting on what the Court will do here.

So, we will be hurting innocent, taxpayers and we will hurt the targeted populations if the Court chooses to uphold the Fourth Circuit decision.

Besides the... I wanted to deal with one other point and that is the Disaster Relief Act.

Unknown Speaker: --May I just interrupt--

Mr. Brown: Yes.

Unknown Speaker: --on your notion about hurting innocent taxpayers.

I suppose the cost of the use of the money has to be borne by--

Mr. Brown: Some taxpayers.

Unknown Speaker: --either the West Virginia taxpayers or by the taxpayers of the country as a whole.

So it is just a question of which one has to bear this burden.

Isn't that right?

Mr. Brown: That's right.

Unknown Speaker: And the taxpayers from California and other states are innocent in the same sense.

Mr. Brown: That's right.

I think that is why the District Judge, Justice Stevens, said that the Disaster Relief Act was an effort to spread out the loss of these disasters to national taxpayers to the extent possible.

Unknown Speaker: And of course I gather on that point the Federal Government did pay a fair amount of money in connection with the disaster--

Mr. Brown: We both did.

Unknown Speaker: --that was not recoverable.

Mr. Brown: We both did.

The Fourth Circuit--

Unknown Speaker: How much did the Federal Government pay?

Mr. Brown: --I believe $30 million.

The Fourth Circuit indicated the state had not appropriated any money.

The state spent $2.2 million, proportionately a lot more, and the state committed really hundreds of people in terms of resourcing and so on.

That amount is not calculatable any more.

Unknown Speaker: Why isn't it fair to have the cost of the use of the money borne by the people who have been using the money, which is the taxpayers of West Virginia, who should have paid up the money many years ago, and have been using it in the interim?

Why isn't it entirely fair to say they have been using the money, they have had the advantage of it?

It is not as though we are taking any money away from them.

We are--

Mr. Brown: We are asking them to appropriate in 1987 based on a 1972 disaster.

We are--

Unknown Speaker: --That may well be, but they have had the use of that money during that whole interim period.

Why should the Federal Government pay for that use?

Mr. Brown: --I believe because historically it has always been that way, Justice Scalia, that the sovereign, it doesn't have prejudgment interest against it.

When we have two sovereigns, of course, to get into the equitable--

Unknown Speaker: That may be, but, I am just... as a historical matter it may be, but there is no overwhelming fairness case.

I mean, if there is any fairness case the person who has been using the money has been the State of West Virginia, and all the Federal Government is asking them is to reimburse them for the use of the Federal Government's money during this period.

Mr. Brown: --If the states could act with the celerity of a private person, as Justice Holmes said once, that may be the same thing, but the states simply are not called on to do that, and the historical basis is, we have budgets and we have delays in putting all that together.

That may be one of the reasons--

Unknown Speaker: Maybe that is why you do a better job of balancing your budget than the Federal Government does.

0 [Generallaughter.]

Mr. Brown: --We have a smaller budget to deal with, Justice Stevens.

Unknown Speaker: Don't you have some trouble with Courts of Appeals cases?

Don't you think some Courts of Appeals disagree with you?

Mr. Brown: In fact, we have the Second Circuit, Third Circuit, and Ninth Circuit.

The Second Circuit in Perales and the Third Circuit in Pennsylvania v U.S.--

Unknown Speaker: What Courts of Appeals agree with you?

Mr. Brown: --Second and Third Circuit agree with us.

Unknown Speaker: And how about the other side?

Mr. Brown: The only side that doesn't is the Ninth Circuit.

It was a very perfunctory treatment of the issue.

The issue was presented to this Court and the petition presented didn't even make that an issue, the issue of prejudgment interest.

California did not even appeal on that issue.

The Board of Commissioners was not cited.

It was simply a short statement by the Court that interest would be due.

It did not have the analysis that the Second and Third Circuit did, so we think the weight is more the other way with the Second and Third Circuit, although the Fourth and the Ninth, the case below in the Ninth Circuit had gone the other way.

Unknown Speaker: Is the Pennsylvania case the Third Circuit case?

Mr. Brown: Yes, it is, Pennsylvania v. U.S. Perales is affirming a Southern District of New York case that--

Unknown Speaker: What do you do with Clearfield?

Mr. Brown: --Your Honor, on Clearfield?

Unknown Speaker: Yes.

Mr. Brown: We think the Clearfield line and the Royal Indemnity Line are private parties.

We think that the analysis should be between the relative weight of two groups of taxpayers, and we feel if we had to get into a state-Federal question the issue should go back to the equities, the balancing of the equities used in Board of Commissioners.

Unknown Speaker: There are two groups of taxpayers in this case whether your taxes or my taxes pay the bill?

Mr. Brown: Somebody's taxes are going to pay for this, Justice Marshall.

Unknown Speaker: Either yours or mine?

Mr. Brown: That's correct.

Unknown Speaker: So that is two taxpayers groups.

Mr. Brown: Yes, it is.

Unknown Speaker: So that is Clearfield.

Mr. Brown: Yes, it is.

Yes, and in Board of Commissioners the Court determined the dispositive issue was the due regard for local interests, and we would hope the Court would likewise give that due regard to local interest unless the Congress has specifically said otherwise.

The Disaster Relief Act simply doesn't call on interest to be paid.

The only word in there is "charges".

If Congress wanted interest to be paid it could have used the Medicaid or Social Security language and that language simply wasn't present.

We ask the Court to adopt the common sense meaning of this, which is that there has never been any decision, any effort by Congress to ask the states to pay interest in the Disaster Relief Act.

Chief Justice Rehnquist: Thank you, General Brown.

The case is submitted.

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Bennett v. Kentucky Dept. Of Education - Oral Argument

Fri, 09 Jan 2009 14:48:24 +0000

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Bennett v. Kentucky Dept. Of Education

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83-1798_19850108-argument.mp3

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transcript.xml

Transcript:

ORAL ARGUMENT OF KENNETH S. GELLER, ESQ., ON BEHALF OF THE PETITIONER

Chief Justice Burger: Mr. Geller, you may proceed whenever you are ready.

Mr. Geller: Thank you, Mr. Chief Justice, and may it please the Court:

Two years ago in Bell v. New Jersey, this court unanimously held that the federal government may recoup misspent grant funds under Title I of the Elementary and Secondary Education Act of 1965.

The two cases that the Court will hear this afternoon involve Court of Appeals decisions announcing erroneous rules of construction that substantially frustrate the exercise of this recoupment remedy.

In this case, the Kentucky case, the Sixth Circuit has held that misspent grant funds may be recovered only when the violation is so plain that the grantee could not reasonably have believed that its expenditures were lawful.

In our view there is no legal basis for this ruling.

Now, as the Court is aware, Congress passed the Title I statute in 1965 for the purpose of expanding and improving programs designed to meet the special educational needs of educationally deprived children in low income areas.

Now, from the outset, the Title I program has been designed to provide supplemental federal educational aid to these educationally deprived children over and above whatever assistance they would be entitled to receive from state and local funds, and in order to ensure that federal monies are used solely for this purpose, the Title I program has always included since 1965 the so-called supplanting prohibition.

Now, this provision expressly states that Title I funds may be used only to supplement the level of funds that would in the absence of Title I be made available from state and local sources for the education of children participating in the Title I program.

In other words, Title I is designed to provide an additional layer of federal benefits for certain educationally deprived children rather than to take the place of any money that the state or local government would otherwise provide for educating these children.

The antisupplanting requirement has always been at the heart of the Title I program, and it has always been an express condition on the receipt of federal funds.

Now, this case involves the way in which Kentucky operated its so-called readiness programs in 1974 under Title I.

These readiness classes were for children who were not prepared to enter the regular first or second grade because of educational difficulties.

And in states other than Kentucky, Title I programs provided children such as these with federally funded supplemental instruction in addition to whatever state-funded instruction they were entitled to receive.

But what Kentucky did was the following: it set up special self-contained full day classes for these educationally deprived children wholly apart from the regular instructional program, and it funded these classes almost exclusively out of federal Title I funds.

In other words, these students received virtually their entire academic instruction for the first and second grade through the Title I program rather than through the regular state-funded school program.

As a result, it is quite obvious that Kentucky was using federal funds to supplant state and local funds that otherwise would have been available for the children in these readiness classes.

And the readiness classes unquestionably took the place of the regular first and second grade classes that these students would have attended in the absence of the Title I program.

And in fact, nearly half of the students in these readiness classes were actually promoted to the second or third grade after they had completed their year of readiness training.

So it is quite clear that at least as to those students, federal funds were being used for regular rather than supplemental instruction.

Now, when federal auditors examined the Kentucky Title I program for 1974, they concluded not surprisingly that a supplanting violation had occurred.

Kentucky challenged this finding before the Education Appeal Board.

Now, Kentucky conceded that virtually no state and local funds had been spent for the basic instructional costs of the Title I children in the readiness classes, but it argued that a supplanting violation nonetheless had not occurred because there had been no decrease in state and local funds for the schools involved.

Now, this argument was rejected by the auditors, by the Education Appeal Board, and by the Secretary of Education, all of whom concluded that the antisupplanting provisions of the statute and regulations were crystal clear in their emphasis on maintaining state and local funds for the particular Title I children rather than simply for particular schools.

But as I mentioned a moment ago, the Sixth Circuit reversed the recoupment order.

The Court of Appeals agreed actually with the Secretary's reading of the antisupplanting provisions.

The Sixth Circuit specifically held that the prohibition against supplanting state and local funds with federal funds could be read to refer to expenditures at the level of the educationally deprived child rather than at the school level, and it therefore held that the Secretary's reasonable interpretation of the supplanting provisions would govern all future Title I grants.

But the Court then went on to say that Kentucky's interpretation of the supplanting prohibition also was reasonable, and in these circumstances the Court held that the Secretary could not recoup the concededly misspent funds because the statutory and regulatory provisions at issue were not sufficiently clear to apprise the state of its responsibilities.

Now--

Unidentified Justice: Mr. Geller, the Congress enacted amendments to Title I in 1978, and some of the legislative reports in connection with that observed that the supplanting regulations lacked sufficient clarity.

Did Congress itself think that they were confusing, I gather?

Mr. Geller: --Well, Congress did not amend in any way the supplanting provisions.

We don't contend, I should add quickly, that every conceivable application of the supplanting provisions would be crystal clear to every observer.

What we do contend that is that in this case there really was no two, there weren't one or two reasonable constructions of the statute, and that is what we are concerned with here.

But Congress didn't amend the supplanting provisions, and in fact, they--

Unidentified Justice: Well, if there were two equally plausible constructions, is it appropriate in your view that we might treat this much like a contractual arrangement and say that we are going to apply the most reasonable interpretation?

Mr. Geller: --Well, in our view, even if there were two reasonable interpretations, the question would still be was the Secretary's interpretation correct?

In other words, what is the correct interpretation of the statute if in fact under that interpretation of the statute the funds were misspend?

Unidentified Justice: In other words, what is the more reasonable or most reasonable?

Mr. Geller: Yes.

Well, the question, the issue in this case really only arises, Justice O'Connor, when there has been a determination as there was in this case that the funds were in fact misspend.

Unidentified Justice: Right.

Mr. Geller: In that situation, our submission is that the Secretary's recoupment authority is not in any way limited by the fact that the state may have been acting reasonably.

I hope to discuss a little bit later on, after lunch, why... what the state should do when it is faced with an ambiguity, and it should not, as it did in this case, simply adopt whatever interpretation was most favorable to it, and then spend the money--

Unidentified Justice: Mr. Geller, why was the amount reduced in the determination of how much had been misspend?

Mr. Geller: --The amount--

Unidentified Justice: From some $700,000 to $300,000.

Mr. Geller: --It was seven hundred... yes, it was reduced by the Secretary of Education--

Unidentified Justice: Why?

Mr. Geller: --from $700,000 to $300,000 because these readiness classes had a smaller student-teacher ratio than in the regular classes.

I think the ratio in the readiness classes was 13 students to one teacher--

Unidentified Justice: Are you saying in effect the Secretary simply conceded he had made a mistake and he--

Mr. Geller: --No, no, not at all.

What the Secretary concluded is that some supplementing was going on in these readiness classes.

It wasn't a question of total supplanting.

There was some additional benefit being given to the Title I students in the fact that they had smaller classes, and the Secretary took account of those smaller classes by reducing the recoupment to the amount that constituted the supplanting.

Unidentified Justice: --Well there was a mistake in the first place, then, in asking for so much.

Mr. Geller: Well, there wasn't a mistake, there was a different--

Unidentified Justice: Well, you did--

Mr. Geller: --different calculation of the--

Unidentified Justice: --Well, you did ask for that much, $700,000.

Mr. Geller: --Well, the--

Chief Justice Burger: We will go on at 1:00 o'clock.

Thank you, Mr. Geller.

Mr. Geller, you may resume the argument.

Unidentified Justice: Mr. Geller, excuse me.

Before you start, would you mind telling me something about how this grant process works?

For example, did Kentucky make any undertaking as to how it would use the--

ORAL ARGUMENT OF KENNETH S. GELLER, ESQ., ON BEHALF OF THE PETITIONER -- Resumed

Mr. Geller: Yes.

In order to get the Title I grant--

Unidentified Justice: Yes.

Mr. Geller: --the local school district had to make certain representations to the state itself as to how it would use the grant.

The state... one of those representations was that it would abide by the supplanting prohibitions of the statute, and the state made similar representations to the federal government in order to get the federal Title I grants.

Unidentified Justice: And what is required appears on the application form or something?

Mr. Geller: Yes.

In fact, it is even more... it is even more explicit than that, Justice Brennan.

The specific form that the state, the local education agency filled out in this case is on page 27a of the Appendix to the Petition--

Unidentified Justice: Yes.

Mr. Geller: --the standard grant application completed in the middle of the page by each of the 50 LEAs, or the local school districts, for the year in dispute, contain the following question, and that was will you use this program to assure that children participating in the component activity will receive this Title I service in addition to services that they are ordinarily entitled to receive from state and local funds, and the district obviously answered that question that it would, and as the Education Appeal Board stated right after that, if they had abided by this assurance, there wouldn't have been any supplanting violation here.

Unidentified Justice: While I have you interrupted, may I ask one other question?

Mr. Geller: Yes.

Unidentified Justice: You argued I think in your brief that the Kentucky authorities could have requested clarification.

Mr. Geller: Yes.

Unidentified Justice: How would they go about that?

Mr. Geller: There is constant contact, as the Court will imagine, between the local Title I administrators and the federal Title I administrators.

In fact, during the year in question in this case, in 1974, there were program review teams right on the premises in Kentucky, and they could have been asked for an opinion.

But beyond that, over the period that the Title I statute has been in existence, there has been a formal mechanism for constant communication between federal and state authorities whereby state authorities that have some question as to how an ambiguous provision should be interpreted can get a determination from the federal authorities.

And I would like to call the Court's attention--

Unidentified Justice: Well, Mr. Geller, was that provision you just read ambiguous?

Do you think it is ambiguous?

Mr. Geller: --We don't think it is at all ambiguous, but the state thought it was ambiguous, or at least they now allege that they thought it was ambiguous, but rather than asking for a definitive interpretation of the ambiguous provision, they adopted their own interpretation and spent the money in accordance with it.

Chief Justice Burger: And you say they do that at their own peril.

Mr. Geller: That is our... that is our position.

I would like to call the Court's attention in this regard to the report of the National Institute of Education, a copy of which has been lodged with the clerk of this Court.

This was a report prepared after a comprehensive study of the Title I program undertaken in the mid-1970s by the National Institute of Education.

Unidentified Justice: Is that in the record, is that... or is that something--

Mr. Geller: This is not in the record but it is--

Unidentified Justice: --judicial notice of?

Mr. Geller: --Yes, it is a report of the National Institute of Education, which is part of the Department of Health, Education and Welfare.

Unidentified Justice: Did you furnish one or nine?

Mr. Geller: Well, this was furnished by the amici, and the clerk would have the copies.

I am sure how many... we would be glad to furnish extra copies to the Court, but one of the... this was, as I say--

Unidentified Justice: Does that purport to be an official position of the Department or not?

Mr. Geller: --No, this is a study that was undertaken at Congress' behest of the Title I statute, Title I... administration of the Title I program in the mid-1970s by--

Unidentified Justice: Well, is it--

Mr. Geller: --It is not by the Department of Education.

Unidentified Justice: --Well, who... was it a study by a high school person or by a... or by a real expert?

Mr. Geller: It was a study by I think real experts.

This is the National Institute of Education, Justice White, and one of the points that they made... this is at page 18 of the report which is in the clerk's possession, is that the Office of Education, as it was then called, had a formal mechanism by which is gave advice to grantees when they were confronted with ambiguous provisions in the statute and regulations as Kentucky claims it was confronted with here, and if I could just read one sentence from this NIE report, the report said in an effort to improve the clarify of the legal framework, the Office of Education has adopted the practice of providing individual interpretive responses to state and local inquiries.

On the basis of a review of the responses issued since 1968, NIE, which was the National Institute of Education, concluded that the Office of Education has addressed many of the most difficult and controversial issues in the legal framework, and then the report goes on to discuss one particular area in which a number of interpretations had been given to state grantees, and that is the supplanting area, the very area that we are involved with in this case.

Unidentified Justice: Is there a citation to the specific provision for the formal mechanism for obtaining clarification?

Mr. Geller: The citation in the NIE report?

Unidentified Justice: Well, do you have it or do you know where we would look to find it, Mr. Geller?

Mr. Geller: No, no, but... I don't know that there is a formal citation.

This is something--

Unidentified Justice: I thought I understood you to say there was a formal mechanism, but it isn't--

Mr. Geller: --The mechanism was--

Unidentified Justice: --It isn't established by regulation or anything of that complexion.

Mr. Geller: --It's not established by... as far a I know, by regulation, but every grantee obviously was aware because there was this constant contact with federal administrators of the opportunity to ask for a clarification of an ambiguous provision rather than simply to adopt one's own interpretation and to act accordingly at one's peril.

Unidentified Justice: Well, Mr. Geller, is it true that the federal auditors long before this dispute arose had reviewed Kentucky's program and approved it?

Is that true?

Mr. Geller: That's not... they had never approved.

Unidentified Justice: That is not--

Mr. Geller: That is not true.

There had been program teams on the premises, but they had never approved the actual funding of these programs because just simply by looking at the program there would be no way to know how it was funded, and the supplanting violation occurred not in the way the program was organized but in the way it was funded.

Kentucky never asked for an interpretation of whether the way it was funding its program violated the supplanting provisions until after the year in question here, and as soon as it asked for that interpretation, it was immediately told by the federal officials that this was a supplanting violation because all of the monies of this instructional program were federal monies, and as a result, state and federal authorities immediately got together and worked out a program by which the readiness classes could be continued under a funding arrangement that would not violate the supplanting provision.

So if Kentucky had simply asked before 1974, none of this would have occurred.

Unidentified Justice: --Incidentally, does the government take the position that there are no limits on recoupment other than such as might be prescribed by the Congress or by the Secretary's regulations?

Mr. Geller: That is our legal position.

Obviously the Secretary as a matter of administrative discretion does not seek recoupment in every circumstance in which it could.

Unidentified Justice: But basically, whatever might be the terms, the Secretary sets, and that's it.

Mr. Geller: Basically... that's right.

Well, Congress sets.

Unidentified Justice: Or the Congress, yes.

Mr. Geller: Congress sets, and Congress has set out recoupment provisions.

Now--

Unidentified Justice: What if the federal agency were aware of the state's particular utilization and funding and made no objection?

Does that make any difference in your view?

Mr. Geller: --I think if the state got an interpretation from the Education Department that its program was in compliance with the law, it would make a big difference.

As far as we know, there has never been an instance... the NIE report talks about 20 years worth of interpretations given to the states.

We don't know of a single instance in which a state asks for an opinion as to whether what it was proposing to do would violate the statute, was told by the Department of Education that it wouldn't, and thereafter there was an attempt at recoupment.

Unidentified Justice: I suppose, though, that we have not found that estoppel runs against the federal government generally, even in that situation.

Mr. Geller: Well, I am not sure it would be an estoppel situation, Justice O'Connor, because if it was an authoritative interpretation... I mean, agencies do have to follow their own regulations.

The estoppel cases that this Court has confronted, such as Community Health Service and Schweiker v. Hansen and cases like that were all cases in which the person giving the advice was not authorized to give the advice to bind the agency.

But we are talking here about authoritative interpretations from the Department of Education.

And there has never been a litigation over estoppel because the Department of Education has never tried to repudiate one of these positions.

Unidentified Justice: Mr. Geller, do you think it is appropriate to analogize to contract law to a degree in looking at these cases of Title I grants?

Mr. Geller: Well--

Unidentified Justice: Don't they impose contractual type relationships on the--

Mr. Geller: --Well, it is contractual type in the sense that there is an agreement, but it is not a contract, and I think it is important to understand that the requirements that are imposed here are requirements imposed by Congress pursuant to statutes and regulations.

They are not contractual provisions whereby A and B sit down and work out the best arrangement between themselves in anticipation of what is likely to occur.

Here we are talking--

Unidentified Justice: --Is it sufficiently like a contract to apply against the government that old principle of contract construction that ambiguities are resolved against the drafter of the agreement?

Mr. Geller: --No, we have answered that, I think, in our reply brief, Justice Brennan.

It is not.

we are construing here not contract terms but portions of a statute and regulations.

I don't know of any authority for the proposition that a statute should be construed against the drafter, that is, the United States.

Unidentified Justice: Well, but don't those statutes and regulations in effect become part of the contractual type agreement that is entered into with the state?

Mr. Geller: In the sense that the grantees are bound by them, but that is not the question.

Unidentified Justice: I am not sure it would alter the result, but I am trying to explore the framework within which it would make sense to analyze it.

Mr. Geller: There is an agreement here, and I think the framework to analyze whether the agreement has been violated is to recognize that this is an appeal of an administrative order finding recoupment, and there is a body of law as to when a court can set aside an administrative order.

And that is how I think this Court has to analyze the correctness of the Sixth Circuit's decision in this case.

Unidentified Justice: Mr. Geller, can I just ask one question about the clarity of the violation of the supplanting regulation?

The Court of Appeals indicates that the local education agency in Kentucky had to certify that there would be the same number of teachers that would be paid for with state and local funds as without the Title I?

And also I understand at least as much money went into each local education agency of old funds.

Isn't that kind of a good prima facie indication, unless you have much larger student bodies, that there was no supplanting?

Mr. Geller: I think not, Justice Stevens.

There were a number of obligations imposed on LEAs, or local education agencies.

One was the comparability requirement which required that schools get as much money from the LEA each year as they got before the Title I money came into effect.

Now, we are talking here about a totally different requirement which is the supplanting requirement, which on its face, if the Court will look at the statute and regulations, talks about the amount of local money being spent on the children involved.

I think there was some confusion on--

Unidentified Justice: Well, but you spend money on children indirectly by hiring teachers and providing classrooms, and I guess they did pay for the classrooms and they paid for the same number of teachers, as I understand, with local funds--

--The amount, the confusion, if there was any confusion here, was that the amount of local money given to the schools each year remained the same, but the problem was that the Title I children were not getting the benefit of any of that money.

All of their instruction was being paid for by the federal money, and that is where the supplanting violation occurred as the Sixth Circuit ultimately agreed, there was in fact a supplanting violation.

And therefore the same amount of money was being in effect used to give a better education to those who were not--

Mr. Geller: --To the non-title--

Unidentified Justice: --being the beneficiaries of Title I.

Mr. Geller: --Exactly, non-Title I children.

So they were getting the benefit of all of the state money rather than simply their proportionate share.

Unidentified Justice: And in deed, the regular first and second grade students were getting the benefit of a lower pupil-teacher class ratio as well--

Mr. Geller: These are non-Title I statutes.

Unidentified Justice: --because the Title I children were pulled out of their classrooms.

Mr. Geller: Exactly, exactly.

Unidentified Justice: And weren't holding them back.

Mr. Geller: That's exactly right.

That's in large part the supplanting violation here.

The money, the state and local money was being used for the benefit of... only of the non-title... non-Title I children.

So we don't think... we think the Court of Appeals decision is plainly wrong for two independent reasons.

One is I don't think that anyone looking at the statute and regulations, the clarity with which they are written, could really conclude that there was an ambiguity here.

Unidentified Justice: But then you are arguing... I hate to, don't mean to interrupt you... you are arguing they are wrong for two reasons: one, the standard, but even under their own standard they are wrong is what you are saying.

Mr. Geller: Even under their own standard, that's correct.

Unidentified Justice: Because their standard is really not all that... doesn't seem all that unreasonable to me, to be quite frank with you.

Mr. Geller: Well, I think the stand is wrong, but even under their own standard, it is hard for anyone I think to look at the statute and regulations here and conclude that there was an ambiguity or conclude that Kentucky actually had a reasonable interpretation of that statute and regulation.

So even by their own lights, I think the Sixth Circuit was wrong.

But I think that there is a problem with the Sixth Circuit's test as well because even if we were to assume for the moment that the supplanting statute and regulations were in fact ambiguous, and even if we were to assume that Kentucky adopted a reasonable interpretation of those provisions, both assumptions I think are quite dubious, but even if we were to make them, we still think that the Court of Appeals was wrong in reversing the administrative order requiring recoupment of the misspent funds and that is because I think it goes without saying that there has to be some violation of law before a Court of Appeals can set aside an administrative order.

Now, as I noted a moment ago, the Court of Appeals here found that in this case the Secretary's interpretation of the supplanting provisions was reasonable.

In fact, far from finding that the Secretary's interpretation was arbitrary or capricious or in violation of law, the Sixth Circuit held that it was reasonable and would govern all future grants, and there has never been any question here that there was substantial evidence.

Unidentified Justice: Yes, but Mr. Geller, if you take your standard... and I realize we are not necessarily talking about the facts here... you are in effect saying that the local agency must take the funds at its peril unless it is willing to go get an advisory ruling before it actually adopts a plan.

If it is a doubtful case and it takes the money, it may end up having to spend that amount of money itself.

That's what you are saying.

Mr. Geller: If... we don't say that they take it at their peril, Justice Stevens, because there is an important point, and that is they can ask for an interpretation.

Unidentified Justice: Yes, I understand, unless they go and get advice.

Mr. Geller: Unless... and I don't think that is unreasonable.

Unidentified Justice: And you don't have any regulatory scheme regulating the way to go get advice.

Understand it was available and they could do it, but you didn't spell it out in your regulation.

Mr. Geller: Well, I think that the Court has to understand under the Title I program, as in many of these grant programs, there is constant contact between the state and the federal administrators.

There is no suggestion here on the part of Kentucky that they didn't know they could ask for advice.

In fact, they asked for advice in the next year, and when they got the advice, they stopped the way the readiness program was funded.

Unidentified Justice: Well, I suppose under your test, even if they got advice and the advice was wrong... say they asked the wrong official and he misread the regulations, too, the government wouldn't be bound by that advice.

Mr. Geller: Well, I think that relates to the response I gave to Justice--

Unidentified Justice: But that's part of the problem of the--

Mr. Geller: --Justice O'Connor.

I don't think there would be an estoppel problem if they got advice from the official who is authorized to speak for the Department on that matter.

I think what I am saying here is nothing more than what the Court said last term in the Heckler v. Community Health Services case, which was a very similar case, and the Court there said explicitly that people who get federal funds have to act cautiously.

If there is an ambiguity, they have to ask for advice, and they have to ask for advice from an official that they--

Unidentified Justice: --Yes, but it also said you can't rely on oral advice.

Mr. Geller: --No, but... well, first of all, there is no suggestion that the advice from the Department of Education here would be oral.

The National Institute of Education is talking about written.

Unidentified Justice: But the bedrock here--

Mr. Geller: Excuse me?

Unidentified Justice: --The bedrock in this case is that it was not ambiguous.

Mr. Geller: It was not ambiguous and Kentucky never asked for advice if they thought it was ambiguous.

Now, as I was saying, here the Sixth Circuit found that the Secretary's interpretation is reasonable.

There has never been any suggestion that there wasn't substantial evidence to support the Secretary's determination.

So what legal basis is there to set aside the administrative order?

Now, the Sixth Circuit clearly couldn't have been relying on the Title I statute itself because I think it is important for the Court to look at the recoupment provisions of the Title I statute.

20 U.S.C. 1234(a), which is the recoupment provision, says whenever the Secretary determines that an expenditure not allowable under a program has been made by a state, the Secretary shall give such state written notice of a final audit determination and shall recoup the money.

And the audit statute, which is 20 U.S.C. 2835, says the same thing.

It says the Secretary shall require the repayment of the amount of funds under this subchapter which have been finally determined through the audit resolution process to have been misspent or misapplied.

There is no suggestion in the statutes that Congress passed that the Secretary's recoupment authority was limited to situations where the grantee has acted in bad faith or is limited to situations where the grantee has acted reasonably, or that in determining whether a recoupment order is valid, the Court of Appeals is supposed to defer to the grantee's reasonable interpretation of the statute rather than the Secretary's.

The statute itself say precisely the opposite.

And I should add in this regard that in the last few years the states have sought an amendment of the Title I statute from Congress which would have done precisely what they are asking this Court to do in this case, which is to essentially have a qualified immunity defense in these sorts of proceedings.

And Congress has on several occasions refused to do that.

If there are no questions, I would like to reserve the balance of my time.

Unidentified Justice: Well, I think I would just explore with you again the fact that getting a clear answer from the federal agency in these cases isn't always as easy as I think you may have painted it.

Wouldn't you agree with me.

Mr. Geller?

Mr. Geller: Well, I can't--

Unidentified Justice: I mean, it sounds nice here at this level, but on the practical level, it is sometimes very difficult for states or local school districts to get a response to a question.

Mr. Geller: --All I can say in response, Justice O'Connor, is that the report of the NIE found otherwise, that there is this regular process of giving advice.

I would say in this case that that is a particularly hollow claim for Kentucky to make in this case when they never even sought advice, and also, that the year afterwards, when they did seek advice, they had no trouble whatsoever in getting the correct answer.

Unidentified Justice: Well, it may not provide the answer in this case, but I think it is something we have to be mindful of in establishing the proper mechanism for reviewing these cases.

Mr. Geller: Well, I don't disagree with that.

I just think that when the Court announces what the rules will be in this case, it has to think of the rule rather than the exception, and I am not prepared to say that grantees as a rule have any trouble in getting answers to their ambiguous questions.

I think that the experience of the last 20 years and the experience in this very case suggests otherwise.

Thank you.

Chief Justice Burger: Mr. Chenoweth?

ORAL ARGUMENT OF ROBERT L. CHENOWETH, ESQ. ON BEHALF OF RESPONDENT

Mr. Chenoweth: Mr. Chief Justice, may it please the Court:

In this federal-state grant program case involving Title I funds, the Secretary of Education wants retroactive application of his interpretation of the law on supplanting.

To agree with the Secretary's position would be to allow him to use his interpretation of the law retroactively to achieve a recoupment of Title I funds that have already been expended in the Commonwealth of Kentucky.

Such a penalty should not be imposed where Kentucky acted in good faith, on a reasonable interpretation of the provisions of the Title I law, and when there had not been adequate notice of the obligations under the Title I provision to the Commonwealth.

Unidentified Justice: Do you say that these provisions were ambiguous, Mr. Chenoweth?

Mr. Chenoweth: Your Honor, yes we are saying that they are and that they were ambiguous.

Unidentified Justice: Why not get a clarification then?

Mr. Chenoweth: I think that is a very, very fair question, but the important point concerning that is that you truly have to believe that there is something wrong with your program, something wrong with the way that you are using the law and getting the funds.

You don't--

Unidentified Justice: Well, maybe it would be a splendid program, a beautiful program, but not authorized by the statute.

The merits of the program in the abstract are not the issue here.

The issue is whether the money was spent within the framework of the particular purpose for which it was given.

Mr. Chenoweth: --Yes, Your Honor, we very much agree with that, but the point, while not being in the abstract, is also that we are simply not only looking at what we believe to be facial ambiguity of this law, but really perhaps more importantly than the facial ambiguity, what is meant by supplant, what is meant by supplementing as seen in that law.

We are not looking at just the facial ambiguity, but we are also looking at the ambiguity as applied, as those words were applied, and as seen by the Secretary of Education.

We believe that it is a both level of ambiguity that was evident in this case.

Unidentified Justice: Tell me, Mr. Chenoweth, were the details of the readiness program given in the initial application for the grant by the state?

Mr. Chenoweth: The details of the program as such were not set out in that application.

It is very important to understand, Justice Brennan, that when Congress enacted this law in 1965, specifically in the law there is the intention of Congress of having the programs that were going to benefit these educationally deprived children developed by the states.

They were intended to be innovative.

The design was going to be left for the states to come up with on the belief that the way Kentucky dealt with this problem would be different than the way it would be dealt with in another state.

So there was no a requirement or an expectation that in the receiving of those Title I funds that you were going to establish at that very point exactly the nature of the program.

Now, the Sixth Circuit Court of Appeals in looking at this case very much relied upon the Bell v. New Jersey decision and the 1981 decision in Pennhurst of this Court.

The Pennhurst decision is applicable in this case because Title I is a grant in aid program, and it is based upon the concept of cooperative federalism.

Unidentified Justice: Well, Mr. Chenoweth, I think there is a significant difference between this case and Pennhurst in that the argument, as I recall, was... that Pennhurst was all about was had the Congress made a particular thing, a condition of the grant of these funds, and the Court ended up saying no, Congress has to speak unambiguously if it is going to make something a condition.

Here there is no question but what compliance with these regulations was a condition of the grant.

Mr. Chenoweth: Your Honor, I understand what you are saying, but while the words "supplant" are in the law, and Kentucky knew that that was in the law, it is not just simply that that condition was in the law, it is how that condition was applied, and therein is the similarity between this case and Pennhurst because we had not in the Commonwealth been given adequate notification as to what that--

Unidentified Justice: Well, but I think there is a significant difference between saying Congress has to speak unambiguously when it makes a particular requirement a condition of a grant.

That's what Pennhurst said.

And to go further and say Congress must speak unambiguously when it is laying down requirements for something that is concededly a condition, I think there you have got a weaker case.

Mr. Chenoweth: --Well, Your Honor, we do believe, and it is clear in the Sixth Circuit Court of Appeals that the Court was believing that Kentucky had not had adequate notice of its obligations in the same sense as this Court addressed that in Pennhurst.

Again--

Unidentified Justice: That's why I don't think I agree with the Sixth Circuit on that point.

Mr. Chenoweth: --Your Honor, we do--

Unidentified Justice: Mr. Chenoweth--

Mr. Chenoweth: --Yes, ma'am.

Unidentified Justice: --on the same point, it is a little difficult for me to understand why you contend that the statute and regulations are ambiguous or confusing in any way.

When the regulation says federal funds made available will be used to supplement the level of state and local funds that would be used in the absence of the federal funds for the education of the pupils participating in the project.

Now, how is that ambiguous?

Mr. Chenoweth: Justice O'Connor, we believe that in that provision of the law that you are reading, not only does it talk about children, which is a collective reference, first of all--

Unidentified Justice: Well, it talks in the regulation about the pupils participating in the project.

What could be clearer than that?

Mr. Chenoweth: --The provision of the law while, and the regulation while talking about pupils, it also is talking about project area.

We go back and we look at what was meant by supplanting, what has been looked at as supplanting from the very beginning, and we understand from virtually the beginning of the Title I law that the expenditure of the federal dollars for programs that had previously been paid for by state money, the type of situation with the enrichment types of programs that we had as a part of our readiness program that was paid for with state money, previously early practice, pre-1970 practice would have been that those kinds of services would have been paid for by federal funds.

Kentucky understood that those kinds of services could not be paid for with the federal funds.

Unidentified Justice: Well, can you point to anything in the language of that regulation which I read from that is ambiguous?

Mr. Chenoweth: Your Honor, simply pointing to that, I cannot point to the provision.

The point though is, one, it is not just facial ambiguity that I think that we have to consider.

We need to look at the context in which this program was being operated.

We need to look at the manner of application.

Part of the divergent interpretations involved in this case came from the perspective of whether you accept that the supplanting issues are to be monitored at the level of the child or whether you are going to monitor the expenditure of money at the school district or at the classroom level.

Unidentified Justice: Well, the regulation refers to the child.

Mr. Chenoweth: Your Honor, we believe that it also is talking about the project area, and that you look at those together.

I think, though, importantly, that we... what we need to zero in on is not really the interpretations that are involved in this case, because it is not a matter of choosing between those interpretations.

The question here is what Kentucky understood the commitments under that Title I contract to be.

Unidentified Justice: Is that an estoppel argument of some kind?

Mr. Chenoweth: Your Honor, we do not believe that it is an estoppel matter any more than the Solicitor General's office has indicated it to be.

We think that there are significant differences between this case and the Crawford Community Services case, the Heckler case.

One, that was not a spending power case, it was a private party that was receiving these funds, and there was certainly a very questionable interpretation upon the law that was involved in that case.

So we don't see that what we are having to focus in on in this Title I case as being an estoppel case or a Heckler case at all.

Again, we believe that the pertinent question that has to be addressed is what were the understandings of the commitments under that Title I contract, the contract that is in place because Title I is a spending power clause provision of the federal constitution, and it is very much in the nature of a contract.

There has to be a meeting of the minds of we are going to have a good contract.

And we believe that it is clear that there was not a meeting of the minds here as to what Kentucky's obligations were going to be under that Title I provision.

Unidentified Justice: How soon did Kentucky find that out?

Mr. Chenoweth: I'm sorry, Your Honor, I--

Unidentified Justice: How soon did Kentucky find out that there was not a meeting of the minds?

Mr. Chenoweth: --Your Honor, we found that out really as the audit was being completed in 1974.

The audit period was 1967 to 1974.

Unidentified Justice: The basis of that, but to ask when did you try to get an understanding about it?

Mr. Chenoweth: Your Honor--

Unidentified Justice: When it became ambiguous to you was in '74?

Mr. Chenoweth: --It was not a matter that at that time--

Unidentified Justice: Was that when it was ambiguous?

Mr. Chenoweth: --It was not ambiguous.

Unidentified Justice: Was it beginning to be ambiguous?

Mr. Chenoweth: Your Honor, the ambiguity--

Unidentified Justice: My question is, when did you first let anybody know that you considered it to be ambiguous?

Mr. Chenoweth: --Your Honor, the answer to that, and the only answer that I can give to you is that it was not at a particular point in time.

We did not believe--

Unidentified Justice: About when?

Mr. Chenoweth: --There's... there's no way really to answer that, Your Honor.

Unidentified Justice: Well, it was a little before today wasn't it?

Mr. Chenoweth: Certainly that's true.

The point that we have to consider is that we had these programs developed before the 1970 supplanting provision.

We continued on with those programs for six years.

We had encouraged other school districts to develop those programs.

We thought that they were a showcase program, that they were a good example of a design by a state to serve the intent and purposes of Congress.

You don't ask what is wrong with the law unless you believe that there is something wrong with what you are doing under the law.

Unidentified Justice: Well, then, I misunderstood your original answer, was that in '74 you realized that they were ambiguous.

Mr. Chenoweth: Your Honor, we found out that was so in the sense we were told after the audit that what our program had been doing and the manner in which that program had been developed, that there was a problem with the law as seen by the auditors.

So at that point in time certainly we did become aware that our education staff had not looked at this law at the same level of monitoring as had the state or the federal education officials.

So yes, it was brought to our mind then.

But we did not have, and our education people did not have a question from the very beginning that this was a problem.

Again, there would have been no incentive... if we thought that there was a problem and we were unsure of that, there was no incentive to continue on with this program.

Unidentified Justice: Well, I thought you said there was a problem in '74.

Mr. Chenoweth: But this is... that was after the fact, Your Honor.

That was after the audit exception--

Unidentified Justice: '74 is not after the fact of what you are arguing now.

Mr. Chenoweth: --Your Honor, the important point that we are trying to make here is that we believe we had a program that was consistent with the law, and that we do believe that there is considerable moment in the fact that there were operational review teams that did come in on a yearly basis to Kentucky.

Those operational people from the Federal Office of Education went out to the school districts.

They saw these programs in effect.

And the record is clear that the directors of the Title I wanted to show off this program.

Now, the comment and the response on this as to, well, we didn't look at the funding.

We suggest to the Court that that really cannot be the answer.

That was exactly what the operational team had to look at was whether or not these programs were complying with the law on the expenditure of that money.

That was their only purpose for looking at the program.

Unidentified Justice: Aren't you now arguing estoppel?

Mr. Chenoweth: Your Honor, we are not arguing estoppel.

We are not arguing that at all, but we do believe that the Sixth Circuit did look at a coalition of factors in looking at this request to apply the Secretary's interpretation of what was prohibited by supplanting, and one of those factors is Kentucky's good faith, and that is very much shown in the record, that Kentucky did attempt to follow this law in good faith.

We--

Unidentified Justice: Well, Mr. Chenoweth, I suppose that the program itself, operationally, in the sense of providing smaller classroom settings for children within an appropriate project area, children who qualified for the aid, is something that the federal government would want to examine in any event, and did, and the question of whether the state had reduced its level of support for those children is a different question, is it not?

Mr. Chenoweth: --Yes, we believe that is a different question, but also is a part of the consideration of the design of that program.

Kentucky as well as other states were attempting to create innovative ways to meet the needs of these educationally deprived children.

Unidentified Justice: Well, certainly the federal government could have picked up its alleged problem earlier than it did, but do you think that that alone means that no recovery can be had?

Mr. Chenoweth: Not alone, Your Honor, but we do believe importantly in looking at the way the Sixth Circuit in reviewing this issue which we believe is the pertinent issue, and that is what the understanding of the commitments were by Kentucky in the receipt of those Title I funds, that that was a factor, that Kentucky had had the operational people in looking at the design, and they had not been told that there was anything wrong with those programs, and we believe that was a part of the good faith of the Commonwealth concerning these self-contained readiness programs.

Unidentified Justice: Well, good faith is not normally a defense either to the application of an appropriate federal statute or regulation of this type or, if you treated it as a contract, to a defense under a contract theory, is it?

Mr. Chenoweth: As a pure contract theory, no, we would agree with that, Justice O'Connor.

But again, we are looking at a contract here in the nature of a grant in aid program, in the nature of the cooperative federalism where the state is giving up something, giving up rights that it has in order to enter into that cooperation with the federal government.

We believe that in order to do that... and we did think consistent with Pennhurst, and that Pennhurst is very much applicable in this case, as the Sixth Circuit Court of Appeals believed, that if there is going to be that giving up, then there is going to have to be a clear understanding of what it is that the state is giving up.

To that extent, we do believe that the Court's consideration that there had not been any finding of bad faith is very much a part of the standard of review that the Courts of Appeals are to exercise pursuant to this Court's decision in Bell v. New Jersey when you are looking at a recoupment of Title I funds.

Again, you don' go into a program, and if you have reservations of that program, start encouraging other school districts within the state to develop those programs.

We had in 1974, when again that audit signalled to us that there were problems, by that time we had 69 school districts that had readiness programs.

That's a third of the Kentucky school districts.

Importantly also, we believe, is the fact that there were not any incentives any the state or the local districts to keep doing this.

We were not saving any money.

There were the same amount of money, as indicated by Justice Stevens, we had the same amount of money going to those school districts, we had the same number of teachers.

So that the only incentive that possibly could have been available to the state, to the local districts, had to be a belief that those programs were serving the intent and purpose of having Title I programs and the receipt of that federal money.

Unidentified Justice: You are not now arguing that the mere fact that the state continued to supply the same amount of money would demonstrate that there was no supplanting, are you?

Mr. Chenoweth: Your Honor, we are not saying that any of these matters as a sole factor show the point.

Unidentified Justice: For example, if they shifted all the money they... all their first and second grade teachers into the higher grades and reduced the ratios in the higher grades and then financed first and second grade entirely with federal money, you would say that would be a clear violation?

Mr. Chenoweth: Your Honor, I think that that is obviously a different situation, and yes, that would be supplanting--

But here we were not doing that.

The benefit that was derived from having these self-contained readiness programs was a matter that was agreed and conceded in the administrative proceedings.

It was a matter that was made reference to by the Sixth Circuit Court of Appeals, to the fact that when the auditors made the exception, they made the exception only for the children that were going to be promoted and not for those children that were going to be held back.

We believe that that tends to indicate that there were differing levels of understanding even by the auditors and the education appeals board as to what was meant by supplanting, and that it was not just our perhaps reading of the law, but it was also the reading of the law by others.

That ambiguity that we do believe existed both facially and application, can be seen in the fact that, one, it is in the NIE report that there was a lack of clarity in the issue of supplanting.

This ambiguity, the unclearness of the understanding as to what was supplanting, existed even after 1977, or 1974.

It went on even through 1977, and that again is in the NIE report that that had been very much an issue in the Office of Education between various members of that office.

So we have a continuation even past the period of our audit when there was still some problems as to what was meant by supplanting.

The supplanting statute certainly stated a goal, but we argue that it did not explain how that goal was going to be achieved and was going to be gained, and we do believe that when you look at the language and look at the manner in which that is applied, look at the different kind of indicators that are going to have an important play upon what is meant by supplanting, again, whether you look at that as the Secretary would like, at the pupil, whether you look at that in the pupil and also the classroom, the school district, those indicators, are you going to look at it simply money, or are you going to look at it benefit?

The Secretary must have looked at it not only in terms of money; he had to have looked at it in the sense of benefit, a benefit supplement because he reduced it merely on the fact that we had the lower student-teacher ratio.

That didn't change the dollars approach to it at all, but still gave us a modification of the amount of money on the basis of the benefit.

So two levels are existent, even through the proceedings of this case over six or seven years.

The third factor that the Sixth Circuit Court of Appeals looked at in applying the proper legal standards, again as it was supposed to do, and looking at this case in the sense of Pennhurst, and looking at it in the sense of the significant issue that was identified in Justice White's concurring opinion in Bell v. New Jersey, and that is whether the state should be held liable in a recoupment action, in a post-audit recoupment action if there was merely a technical violation or if there was a different construction of the statute after the state had had their plan submitted and approved--

Unidentified Justice: You mean a changed construction.

Mr. Chenoweth: --I'm sorry, Your Honor.

Unidentified Justice: A change in the construction.

Mr. Chenoweth: A change in the construction.

Unidentified Justice: Was there any change here?

Mr. Chenoweth: We believe that there was a change in the construction--

Unidentified Justice: Well, not by the secretary.

Mr. Chenoweth: --Well, there was not an explanation of what the construction of the supplanting law was--

Unidentified Justice: Well, this may... this... at most here, this was the first time that the construction was ever spelled out.

I mean, the state says that you finally learned what the Secretary really thought it meant.

Mr. Chenoweth: --Yes, Your Honor, and we believe that--

Unidentified Justice: That's not a change.

Mr. Chenoweth: --Well, it certainly is a change from what Kentucky--

Unidentified Justice: It's from a change, it is a change with respect to what you thought it meant.

Mr. Chenoweth: --Yes, and we think that that's very important.

Again, not the least by which we had these people in looking at the way that we were doing things and then later told that the way we were doing things was not in compliance with the law.

We think that change in construction or the notification of the construction of the law on supplanting is a factor and is a part of what the Sixth Circuit was obliged to do in the reviewing of this recoupment consideration in Title I.

Certainly the retroactive, post-audit recoupment of Title I funds as desired by the Secretary would be inconsistent with the consensual nature of a grant program, like Title I is, where a state ought to... it really has to be able to weigh what the benefits and the burdens are.

The Secretary's desire to have his interpretations applied retroactively is not in keeping, we believe, not only with the Pennhurst decision, but is not in keeping with the Rosato v. Wyman approach.

Unidentified Justice: Well, now, without looking at a retroactive change at all, just looking at the statute and the regulations as they existed, can't they be enforced in the way in which they were written at the time the grant was made?

Mr. Chenoweth: We do not believe that the interpretation that has been placed upon them by the Secretary in this decision--

Unidentified Justice: Well, as an abstract matter, would you agree they can be applied as they were written when the grant was made, in the abstract?

Is that a valid approach?

Mr. Chenoweth: --In the abstract, Justice O'Connor, the pertinent question still has to be what did Kentucky understand its commitments to be under this contract?

While we are fully willing to allow the case to follow this case, the New Jersey case, be argued by the able counsel for those parties, I can't help but inject that in that case, the Secretary, where the Secretary does not want a retroactivity of the education law, the contention is that the point of reference must be whether the state complied with its Title I commitments as they were understood at the time.

That is a contemporaneous understanding perspective, and that is what we are contending is and should be applicable in this case.

We believe that to apply the Secretary's interpretation retroactively would create a manifest injustice.

We believe that if you look at the matters looked at by the Sixth Circuit Court of Appeals, that there should not be a retroactive, post-audit recoupment of Title I funds.

The standard of review the Sixth Circuit set out is simply one that protects a state in a grant program from retroactive liability where the state has applied in good faith--

Unidentified Justice: You know, I just really am troubled by your insistence on the repetition of the word "retroactive".

The question, of course, is whether it is, and I don't think that has been conceded at all.

Mr. Chenoweth: --Your Honor, we believe that the Secretary is applying a construction of the statute and his interpretation of the statute and the level by which that was going to be considered, he is applying that retroactively, and only by doing that could there be a recoupment of the expended Title I funds.

So we are arguing, we believe that the facts show that it is a retroactive application of that.

Unidentified Justice: Well, the agreement itself, of course, if you wanted to treat it as a contract, provides that if the regulatory requirements aren't met, that the federal government may require reimbursement.

Mr. Chenoweth: Yes, Your Honor, but a part of that is going to be that Kentucky had a notice of what those obligations were going to be, and it is our contention that Kentucky did not have adequate notice of those obligations in keeping with Pennhurst, and that therefore it would not be reasonable to have this recoupment of already-expended Title I dollars that would have to be paid for out of Kentucky general tax dollars.

We believe that is the... that in order to apply the proper legal standards which we think the Sixth Circuit did, and the considerations in the application of Pennhurst, that the... there cannot be that recoupment of monies.

We submit to Your Honors, that the Sixth Circuit Court of Appeals decision should be affirmed.

Chief Justice Burger: Do you have anything further, Mr. Geller?

Mr. Geller: Unless the Court has any questions, I don't have anything.

ORAL ARGUMENT BY KENNETH S. GELLER, ESQ. ON BEHALF OF PETITIONER -- Rebuttal

Unidentified Justice: Let me just ask you one... it is in the brief, I know, but would you state again for me the standard for which you contend?

Mr. Geller: Is the legal standard that the Court--

Unidentified Justice: Yes.

Mr. Geller: --This is a review of an administrative order.

Unidentified Justice: So it is an arbitrary and capricious?

Mr. Geller: It is more contrary... well, it is the Administrative Procedure Act.

There has to be a finding of lack of substantial evidence, which there hasn't been here, or there has to be a finding that the Secretary committed some legal error in seeking recoupment.

But it has been conceded, I think, that there was a misspending here.

So unless something in the Title I statute prevents the Secretary from recouping money that has been misspent, we don't think that there can be any overturning of that recoupment decision.

And as I read earlier, the Title I recoupment provisions contain nothing suggesting that there is a requirement of showing bad faith or showing that the grantee did not act reasonably or any of the other things that Kentucky is arguing for today.

Unidentified Justice: So you would say the normal rule should be followed that if the Secretary's interpretation of the statute is a reasonable one, we should accept it.

Mr. Geller: That is correct.

Unidentified Justice: Even in a grant program.

Mr. Geller: Even in a grant program.

This Court, let me just add by saying--

Unidentified Justice: Well, and even if you didn't, you still would reach the result for which you are--

Mr. Geller: --Well, because I think, as you correctly stated, there is really no ambiguity here.

Thank you.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.

We hear arguments next in Bell v. New Jersey.

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Bennett v. New Jersey - Oral Argument

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Bennett v. New Jersey

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Transcript:

ORAL ARGUMENT OF MICHAEL W. McCONNELL, ESQ. ON BEHALF OF THE PETITIONER

Chief Justice Burger: Mr. McConnell, I think you may proceed whenever you're ready.

Mr. McConnell: Thank you, Mr. Chief Justice, and may it please the Court:

This case, like the last one, arises from an attempt by the Secretary of Education to recover federal Title I funds spent by a state in violation of its grant agreement.

The grant agreement principally involved here is one entered into between the State of New Jersey and the federal Office of Education in 1971, whereby New Jersey received some $52 million in federal funds, in return for which it provided assurances that it would spend those funds in accordance with Title I and the implementing regulations.

Unidentified Justice: Was that a formal commitment, Mr. McConnell?

Mr. McConnell: It was, Justice Brennan, the formal commitment required by statute and by regulations and on file with the Department of Education.

All of the events at issue in this case took place in 1971 and 1972.

It was in those years that Respondent had on file with the Office of Education its grant application.

It was in those years that Respondent approved a plan submitted by the Newark Board of Education that was not in compliance with those regulations, and it was in those years that Respondent spent over one million dollars providing Title I services in parts of Newark that were not eligible for Title I projects.

In the years since 1972, federal educational policy has undergone many changes, including specific changes by both the agency and the Congress in the standards for determining which areas are eligible for Title I projects.

Respondents error back in 1971 was a straightforward mathematical mistake.

But as it happens, under standards subsequently enacted some, although not all, of the areas that were mistakenly included in the Title I projects would have become eligible had subsequent standards been in effect at the time.

The question before this Court today, therefore, is whether Respondent's compliance with its 1971 grant agreement should be judged in accordance with the standards that were in effect at the time or whether, as the Court of Appeals held, it should be judged according to standards enacted some six years after the grants were awarded and the moneys were expended.

Unidentified Justice: Mr. McConnell, do you think that there is any inconsistency in the position of the Solicitor General in this case from the position in the Kentucky case?

Mr. McConnell: No, Your Honor.

In both cases we are seeking to enforce the requirements that were in effect at the time.

We believe in the Kentucky case that there was no ambiguity, but in any event the only question there was whether the interpretation of the requirements might have left room for doubt.

There is no suggestion in the Kentucky case by the Court of Appeals that the standards were actually changed, that there was any kind of a retroactive application of standards.

I think it would be helpful at the outset to clarify several questions that are not before the Court in this case.

First, the validity of the regulations violated by Respondent is not at issue.

In the Court of Appeals below, Respondent contended that these regulations were inconsistent with the purpose of Title I and thus that they were invalid.

Had the Court of Appeals accepted that theory, the result would have been to enter a judgment that Respondent owes the Federal Government no money.

The Court of Appeals did not accept that argument and instead entered a judgment that was Respondent owes the inconsistent with it, namely that Federal Government at least $249,000.

Respondent did not take a cross-petition for certiorari from that decision and accordingly is not free to argue in this Court that those regulations were invalid, since that would result in a judgment granting it greater relief than it was awarded by the court below.

Unidentified Justice: Mr. McConnell, there were other arguments raised below in defense of the state's position, were there not?

Mr. McConnell: Yes, Your Honor.

Unidentified Justice: And I suppose even if you were correct that the Court of Appeals here committed error in applying a subsequent Congressional interpretation, the case would once again have to be remanded, would it, for those other issues?

Mr. McConnell: Well, Your Honor, I agree that the case will have to be remanded, but only for those issues that Respondent has preserved.

And for any argument that Respondent made which would result in relief which is greater than it won the first time, it was required to file a cross-petition; any argument now would be foreclosed.

I was going to point out another prominent example of that, which is that Respondent also contended in the court below that it was in substantial compliance with the regulations at the time, relying upon the Sixth Circuit's Kentucky decision.

Unidentified Justice: And is that open on remand?

Mr. McConnell: No, Your Honor, because again as Respondent itself concedes in its brief, the result of such a holding would be that it would be absolved from all liability.

The Court of Appeals did not accept that.

The judgment of the Court of Appeals was inconsistent with that, and in light of the fact that there was no cross-petition that issue is now foreclosed.

Accordingly, in the posture of the case today this Court may assume that Respondent in fact violated regulations that were valid and enforceable at the time.

Unidentified Justice: Is it not true that in this case, unlike the Kentucky case, the violation was that they spent the money in the wrong districts?

There's no doubt about they were spent for the correct purposes?

Mr. McConnell: well That's... well, that's correct.

They spent the money in the wrong attendance area.

Unidentified Justice: And the wrong attendance areas in which they did spend the money would qualify under today's standard for the money?

Mr. McConnell: Some of those districts would, Your Honor.

But let me point out that in a sense the problems are not that different, because the question is still which children receive the benefits of Title I.

And Congress intended that the children in the areas with the highest concentrations of poverty would receive those services.

Unidentified Justice: Until 1978?

Mr. McConnell: That's still the standard.

There is now an exception for very poor districts, where the levels of poverty are in excess of 25 percent, that it would not be confined just to those areas that are above average, but in fact those areas above 25 percent.

But the fact that Congress has made an exception to the general principle does not at all affect the fact that the general principle of the statute is to concentrate the expenditures of Title I funds in areas that are the neediest.

Unidentified Justice: Let me just ask one further question.

What will happen with this money if you're successful in recouping it?

Will it go back to New Jersey or will you keep it?

Mr. McConnell: The statute provides that the Secretary may in his discretion grant back 75 percent of the recovery to New Jersey where it would be able to demonstrate that those funds could be used essentially for the purposes for which they should have been used the first time.

Unidentified Justice: Take an attendance area that has more than 25 percent of low income families, but less than the average throughout the larger area.

Would they get the money back?

Mr. McConnell: Your Honor--

Unidentified Justice: They'd be eligible to, would they not?

Mr. McConnell: --I do not know whether in the grantback authority whether in the grantback authority whether the standards today would apply or whether the standards in effect at the time would apply.

I think that's a very different question.

I suspect, Your Honor, but this is only my speculation, that the recruitment would be that the money be spent in the neediest areas of Newark.

Now, whether those would be the same areas geographically that were the neediest back in 1971 or whether, due to demographic shifts or regulatory changes, either one, they might physically be different areas, I don't know.

Unidentified Justice: They might possibly be the same areas?

Mr. McConnell: It might very... I suspect that any area that was--

Unidentified Justice: Well, wouldn't that be spinning wheels a little?

Mr. McConnell: --No, Your Honor.

This would be additional funds that were not spent in those areas the first time, that would be required to be spent this time.

Unidentified Justice: What this is is the money went to the wrong poor people.

Mr. McConnell: That's correct, Your Honor.

And the remedy would be to require New Jersey to spend... well, either to recoup, but given the grantback authority that New Jersey would have to spend additional money this time for the poor people for whom the services were required.

Let me note that no children are going to be worse off as a result of this proceeding.

On the contrary, it's very possible, given the grantback authority, that the children for whom the statute is intended will receive additional moneys, namely 75 percent of the recovery.

Unidentified Justice: Not these children.

These children are out of school, aren't they?

Didn't you say it was in the seventies?

Mr. McConnell: Yes, I assume that they have graduated, but their successors in interest, shall we say.

Unidentified Justice: Well, if they haven't graduated they won't deserve the money.

Mr. McConnell: Presumably they are beyond our reach.

But there are poor children in Newark today who may very well be the beneficiaries of this decision.

Your Honors, there are three reasons why it makes sense when judging an audit recovery of a grant program to apply the standards that were in effect at the time.

I'll touch upon the first two briefly and then would like to spend most of my time on the third.

The first is that Congress has definitively resolved this issue.

For over a century it has been the law that when a statute is repealed any liability incurred under such a statute shall not be released or extinguished, and the statute shall remain in force for the purpose of sustaining any proper action for enforcing such liability.

This provision, which is now codified at 1 U.S.C. 109, has been applied to all manners of liability, including taxes, fines, criminal penalties.

It's been applied to amendments as well as repeals, and it's applied to all liabilities incurred under the statute, which this Court has held includes liabilities incurred under a regulation which was authorized by the statute.

Thus, we submit that this savings clause applies directly to the decision in this case and that it is dispositive.

Second, the 1978 Act upon which Respondent relies was by its terms prospective only.

It had an effective date which applied by its terms to its repeal as well as to its new provision, and that effective date was October 1st, 1978.

It also provided that its standards would apply to grants in the years 1978 through '83.

Moreover, the legislative history of the specific change at issue here spoke in prospective terms.

It referred to the manner in which school districts are to distribute Title I funds.

Finally, three times since 1978, in 1981 and twice in 1984, Congress has considered legislation that would have the effect of applying the 1978 standards to the pre-1978 audits.

Each time Congress has rejected this, but most importantly, each time during the debates over the provisions no member of Congress ever suggested that this result might have occurred under the force of the 1978 Act itself.

Thus, it's quite clear that Congress both intended and understood the 1978 Act to be prospective only.

Finally and perhaps most importantly, inherent in the nature of a grant agreement is the understanding that it must be enforced in accordance with the terms in effect at the time.

And this is true whether you look at it from the point of view of the grantee, whether you look at it from the point of view of Congress, or of the agency which is entrusted with the responsibility of enforcing the grant agreement.

From the point of view of the grantee, it's very important that the obligations be fixed and foreseeable in advance, because this is the only way grantees can act with any kind of assurance that they will administer the program and not be hit with liability for something unforeseeable in the future.

In some senses, one can say that this is a principle by analogy to the Pennhurst decision.

The Court of Appeals' holding in this case thus is far more likely to injure than to help most grantees.

As Justice White intimated in his concurring opinion in this case the last time it was in this Court, New Jersey would have a legitimate complaint if it were the Federal Government that was trying to enforce new provisions of law instead of the other way around.

And for evidence that that was in fact the shared understanding of the Federal Government and the grantee, we need look no further than the conduct by Respondent in this very litigation, because all of the changes on which they rely were promulgated by the agency in '76 and then enacted by Congress in 1978.

It was not until the Respondent's brief in this Court in 1983 that it first occurred to Respondent to suggest that anything other than the standards in effect at the time might apply to this case.

Respondent in its brief now castigates Secretary Hufstedler for having upheld the audit determination in this case, while ignoring, as Respondent puts it, the 1976 regulations and the 1978 regulations.

But it's far more difficult to understand, given the Respondent's position now, why Respondent during that period of litigation before Secretary Hufstedler never cited '76 regulations or the '76 Act, certainly never suggested that they should apply to judging their compliance with the 1971 grant agreement.

This perspective is also shared by Congress, because under Congress' spending power each Congress has the right to determine how the federal tax dollars are going to be spent.

This applies not just to how to divide federal funds among the various projects and activities that are in the federal budget or might be, but also to how those funds are to be spent.

The grant conditions are simply the strings attached by a Congress to the particular grants that it is appropriating money for.

Subsequent Congresses, of course, have the power to alter the conditions on the grants.

Subsequent Congresses can even relieve grantees of the consequences of having violated conditions that had been imposed in the past.

But it makes no sense to presume that when a Congress alters the conditions on the grants that it is appropriating money for that it intends in any sense to alter the conditions that a previous Congress had attached to the funds that it was appropriating money for.

Policies change--

Unidentified Justice: Could Congress do so affirmatively?

Mr. McConnell: --Your Honor, what Congress can do is relieve a grantee of the obligation, of all of the consequences today of having violated its obligation in the past.

I don't understand metaphysically how it would be able to remake the history of whether the grantee had violated the grant agreement that it was operating under at the time.

As a practical matter, though, yes, Congress could do that.

And indeed, among those changes that I was referring to in 1981 and 1984 that Congress considered and rejected would have been provisions that would have done just that.

But those provisions were not enacted.

Policies change--

Unidentified Justice: Is this a fair statement of your position?

I want to be sure.

The money was spent in years past in a district which would now be an appropriate district to spend the money.

But you're saying that Congress in effect said, we want you to recover it back, even though it would now be appropriate, because you should have given it to even needier people, a district that was even more in need of the money than the one you actually gave it to, which would now qualify?

Mr. McConnell: --Well, the point is that they should have spent it in those areas that qualified under the standards at the time.

Unidentified Justice: But the result of this position is that--

Mr. McConnell: And it happens that--

Unidentified Justice: --it can't be spent in either.

That's what troubles me.

Mr. McConnell: --Oh, oh, that's not at all true, Justice Stevens.

The money has already been spent.

Unidentified Justice: Well, but it comes back.

New Jersey has to finance it.

Mr. McConnell: The money does not come back.

They're not going to be able to de-educate the children that they educated.

Unidentified Justice: No, no, no.

But New Jersey has to finance it itself, is what you're saying.

Mr. McConnell: Which will lead, in a sense, not to... it's not that neither will be served, but that both will be served, because New Jersey serves some non-Title I eligible children to an extent that it is not required to do under federal law.

It did that back in 1971 and '2.

Today if the money is recovered and then if there's the grantback, it will serve the children in the areas that are actually eligible.

Unidentified Justice: But that's only a percentage of it.

Mr. McConnell: I beg your pardon?

Unidentified Justice: You said only 75 percent, didn't you?

Mr. McConnell: That's correct.

Unidentified Justice: And so another 25 percent will be put on armaments?

Mr. McConnell: It'll be covered into the Treasury, Your Honor.

Apparently Congress intended that there be some incentive left in the program for the state to comply with the grant agreements, and that's why there's net a 100 percent grantback authority.

Congress has a continuing interest in ensuring the grantees comply with lawful restrictions, whatever they happen to be at the time and regardless of whether policies may change later that lead subsequent Congresses to make a different substantive decision.

This same perspective... that is, the contemporaneous perspective... is also important to the agency which is entrusted with enforcement of these grant agreements.

It is no exaggeration to say that adoption of the Court of Appeals' holding would lead to chaos.

Auditors have trouble enough as it is, given all of the categorical and cross-cutting requirements that they are asked to enforce, without also being required to measure compliance under standards that were not applied by the grantee at the time.

And those who review audit determinations should be able to review those determinations on the basis of the same standards that the auditors applied.

Unidentified Justice: At any given time, Mr. McConnell, in round figures how many programs are extant out of the Department?

It must run into thousands, must it not?

Mr. McConnell: Do you mean Title I programs or do you mean all of the programs?

Unidentified Justice: Just Title... all of the variety of Title I programs.

Mr. McConnell: There are Title I programs in all 50 states, and the Federal Government... it would be impossible for the Federal Government directly to enforce requirements in every school district that had a Title I program because, although I could be wrong, to my knowledge every state participates and every part of every state participates, and I believe that there are no districts that are not eligible for at least a small Title I project.

So the enforcement scheme of the statute provides for a relationship between the enforcing agency, the Department of Education, and the states, rather than directly between the Federal Government and the local districts.

And it is for that reason that the grant agreement requires the state to provide an assurance that the local school districts will also comply.

And the local applications go to the state, they do not go to the Federal Government.

Newark's 1971 application is in the joint appendix.

It's the last item in the application.

That went to the state officials.

It did not go to Washington.

The state officials simply provide an assurance that they are going to enforce and ensure that all the standards are carried out.

This is really quite important for the point, because it would be meaningless to say to the states that they are required to enforce the requirements of Title I as they may subsequently be amended, because the states have no way of knowing what amendments may be made at some point in the future.

The only sense in which a state can be said to enforce the requirements of the law are the requirements of the law as it exists at the time.

Now, as it happens the State of New Jersey did not make any inquiries about the errors in the Newark application.

It was thus derelict in its responsibilities.

The fact that by happenstance some of those mistakes later would for other reasons become non-mistakes is quite irrelevant to the point that New Jersey failed in a responsibility that is very important under the statutory enforcement scheme, to ensure that its local districts in fact were in compliance with the law.

To apply the Court of Appeals' standard would require that there be re-audits of all pending cases every time there's a change in educational policy, and it's not at all clear that those re-audits could be conducted because--

Unidentified Justice: Mr. McConnell, you don't have another state like New Jersey that presents the same kind of problem that this case does, do you, where you have seven, for example, seven districts that are ineligible, they have over 30 percent poverty within the district, but the area-wide average was 33 percent, so they were ineligible?

Mr. McConnell: --Justice Stevens--

Unidentified Justice: That sort of problem isn't typical?

Mr. McConnell: --the problem here was that the mathematical formula was misapplied.

Unidentified Justice: Right.

Well, it happened in seven districts, though.

Mr. McConnell: It so happened that... you stated the underlying economic context correctly, but the problem was that they simply did their mathematics wrong.

And I suspect that that is, although not common, at least I would suspect that that's as likely to occur in any other state as it is in New Jersey.

Unidentified Justice: Well, it could only occur in states where your average low income percentage is over 25 percent.

Mr. McConnell: It's only those states where the 1978 change would make any difference.

Unidentified Justice: Right, correct.

I just wonder if there are any other states.

Mr. McConnell: I do not know.

Certainly there are other cities with low income percentages above 25 percent, and if there were errors of any sort in their designation of--

Unidentified Justice: They have to be both--

Mr. McConnell: --their attendance areas--

Unidentified Justice: --above 25 percent and below the average for a larger area, which is a fairly unique kind of situation.

Mr. McConnell: --Well, there simply seems... all that's really required is that there have been an error in a city over 25 percent, and it's not at all unlikely in that case that the change, the drop in the threshold, might pick up a few of the mistakenly included areas, regardless of what might have been the source of the error.

The results of the Court of Appeals' opinion, in addition to creating extreme difficulties for audits, requirements for re-audits, difficulties in reviewing audits, would also create incentives for delay in the proceedings, because a grantee that was found in violation of its agreement would have every reason to protract the administrative and judicial proceedings in the hope that Congress might subsequently change the standards would in addition have a fairness problem, because it would result in treating grantees differently.

New York and New Jersey might very well make the same mistake, but if New York's audit had been finally determined before 1978 it would be decided on the basis of one standards and New Jersey on another.

Surely the consequence of this would be cries to Congress for redress, and it would be necessary to set up some sort of a proceeding to reopen past cases to make sure that all grantees are equally granted the benefit of subsequent changes in the law.

Thus, from the point of view of fairness and finality, the Court of Appeals' decision would be a disaster.

Perhaps most importantly, the Court of Appeals' decision would undermine respect for the very idea of the rules, because the only standards that the grantees have to comply with are those that are in effect at the time.

To say that those standards fluctuate is to say that the grantees are not under a strict obligation to comply with the agreements that they have signed.

Unless there are further questions, I'll reserve my remaining time for rebuttal.

Chief Justice Burger: Very well.

Ms. Burgess.

ORAL ARGUMENT OF MARY ANN BURGESS, ESQ., ON BEHALF OF RESPONDENT

Mr. Burgess: Thank you, Mr. Chief Justice, and may it please the Court:

This is indeed an extraordinary case.

From the Solicitor General's arguments one would believe that it was New Jersey who had violated the basic objectives of the Title I program and now seeks the benefit of a later, more lenient standard in order to avoid the consequences of that violation.

Such is not the case before this Court.

It is not Newark or the State of New Jersey which did not conduct its Title I program in accordance with the basic objectives of that important legislation.

Rather, it was the Secretary whose inflexible, restrictive implementation of its targeting regulation... it was that application which ran counter to the basic objectives of the program.

It was not New Jersey or Newark who did not comport with its agreement to conduct a Title I program in accordance with the basic objectives of Congress, but rather the Secretary who did not--

Unidentified Justice: Are you arguing now that New Jersey, Newark and New Jersey did not violate the regulations in effect at the time, or the statute?

Mr. Burgess: --It has always been our contention in this case that New Jersey and the Newark program have been in compliance with the targeting regulations--

Unidentified Justice: That were then in effect?

Mr. Burgess: --if those targeting regulations had been applied in a manner consistent with the objectives of the Congress.

Unidentified Justice: Well, is that in issue here before us?

Mr. Burgess: It was an issue which was raised below and I believe it still is an issue in this case.

Unidentified Justice: You think it's still an issue.

You're arguing this as a Respondent.

It isn't a question that the United States raised in its petition?

Mr. Burgess: The question was whether or not the Title I program was consistent with the Congressional objectives of that important legislation.

Unidentified Justice: Well, the question the United States raised is whether the later legislation should be... furnishes the rule by which a violation should be decided.

That's the question, whether the law that was in effect in '70 and '72 should govern or the law that was in effect in later years.

That's the question that's pending, that the United States raises.

Now, are you saying that even if the United States is right the judgment should be affirmed on the ground that you never did violate the earlier law?

Mr. Burgess: It's our position that the Title I program was operated in the

"ewark district in a manner that was consistent with the program as originally intended by Congress, and that it was the Secretary's regulations--"

Unidentified Justice: So your answer is yes, your answer is yes?

Mr. Burgess: --that was inconsistent with that.

Unidentified Justice: Your answer is yes, that you never did violate any law?

Mr. Burgess: That was our position in the Third Circuit, that our program was consistent.

Those were the initial arguments that we made to the Third Circuit.

Unidentified Justice: Well, is that what you're arguing now, too?

Mr. Burgess: In the Third Circuit on remand, we asked the Third Circuit, in supplementing our arguments that we had raised initially, to judge the eligibility of those attendance areas by the later statutory enactment, which included a 25 percent standard.

Unidentified Justice: Now, isn't that the only issue that's before us now?

Mr. Burgess: I believe it is the issue before this Court.

But I think implicated in that is the Third Circuit's finding, very specific finding, that the regulations which they determined should not be applied, the restrictive targeting regulations, that those regulations frustrated the basic objectives of Title I, that those regulations worked inequities in high poverty districts and they thwarted the intent of Title I.

And it was in the context of those specific findings that the Third Circuit determined to apply the corrective 25 percent eligibility standard.

And I think that's the analysis that the Third Circuit followed in reaching the determination to apply the later standard.

So even though there's not a cross-petition from the Third Circuit's not reaching our challenge to the regulation vel non... they did not invalidate the regulation, I must concede that to this Court, but they found that that regulation was inconsistent and used that as an issue or a finding to support their determination to apply the later corrective standard.

Unidentified Justice: If that's what the Court of Appeals really did, it sounds like they did invalidate the regulation.

They said the regulation is inconsistent with the statute.

Mr. Burgess: They found that it was, Your Honor.

They found it was inconsistent, but they did not invalidate it because had they invalidated it they would have relieved New Jersey of responsibility.

What they did was they made a choice.

They were faced with a very difficult choice of evaluating the eligibility of attendance areas either by the regulation in place at the time of the program or by the later standard.

It was that choice that was before the court.

So they used the later standard to measure the eligibility of the districts.

They didn't say that... they did not address directly the validity of the regulation, but they chose not to apply it.

Unidentified Justice: Do you agree that the only issue before us is whether the law in effect in '70 and '71, or '71 and '72, whenever it was, whether that is the law that governs your obligations, rather than a later law?

Is that the only issue we have?

Mr. Burgess: I think the issue before the Court, Justice White, is whether the original intent of that law which was in effect at the time of the grant arrangement was complied with by the Newark school district.

Unidentified Justice: That isn't the question that the United States puts before us.

But you're entitled to argue, I suppose, as a Respondent some other ground for affirming.

Mr. Burgess: What we argue is that the '78 standard, the 25 percent eligibility standard, corrected an inequity in the Department's application of the original very broad standard of eligibility which was included in the Title I legislation.

Unidentified Justice: That sounds like a retroactive argument you're making now.

Mr. Burgess: Well, that is the choice that the Third Circuit based its decision.

It chose to apply the later corrective standard, finding that the earlier administrative regulation--

Unidentified Justice: Doesn't that bring us back to what Justice White just suggested, that the issue here is whether the 1970 status should be applied or the 1978?

Mr. Burgess: --In 1971 the statutory standard very simply stated that Title I funds should be used to provide projects in attendance areas with high concentrations of children from low income families.

Those standards, we suggest, were met.

The regulation at that time had no absolute threshold for eligibility of an attendance area.

Eligibility or targeting is really a preliminary step in the Title I process.

You target or identify a population of children who should be considered for participation in the Title I program, and then they're tested and determined whether they are educationally in need of specialized programs.

That--

Unidentified Justice: Counsel, could I ask, the Third Circuit applied the '78 standard, didn't it?

Mr. Burgess: --That's right.

Unidentified Justice: What standard was in effect when the Third Circuit made its decision, that one?

Mr. Burgess: The Third Circuit in my understanding or what I would suggest to this Court, the Third Circuit applied the '78 standard, holding the Secretary to that specific corrective standard which rectified or reformed the administrative regulations.

Unidentified Justice: I know, but my question is what standard was in effect when the Third Circuit decision was rendered.

Mr. Burgess: The Third Circuit's decision was rendered December 27, 1983.

It is my understanding that a modified 25 percent standard was then in effect, in the sense--

Unidentified Justice: Well, why then on your theory wasn't the Third Circuit applying the modified '78 standard?

Mr. Burgess: --I believe the Third Circuit could have applied that, but it was not briefed at that time.

Unidentified Justice: It seems to me--

Mr. Burgess: The virtue of the--

Unidentified Justice: --that your argument is not supported by the Third Circuit decision.

Mr. Burgess: --The Third Circuit decision I think did not establish any broad rule of retroactive application to preexisting grants.

I think the Third Circuit looked very closely at Newark's unique situation and the legislative history surrounding targeting, the targeting provision of Title I.

And understanding that Congress never intended by that targeting regulation to deprive children who were living in areas of high incidence of poverty, as high as 30 percent--

Unidentified Justice: Ms. Burgess, we're just talking, I take it, about what the Third Circuit decided.

Judge Adams' opinion is five pages long.

I mean, it isn't 40 pages long or 500 pages long.

The Court of Appeals did decide that the 1978 amendments, rather than the earlier legislation, would govern this case, didn't it?

Mr. Burgess: --That's right, Justice Rehnquist.

Unidentified Justice: And do you also say that it declared a Secretary's regulation invalid?

Mr. Burgess: No, Your Honor, I do not.

I say that they specifically found that that regulation worked inequities in high poverty districts and that it frustrated the intent of Title I, but it did not invalidate the regulation.

If it had invalidated it, there would have been no responsibility on New Jersey's behalf to repay any moneys.

Unidentified Justice: Is that quite correct?

May I interrupt you?

Didn't... I didn't understand the Court of Appeals itself to say the earlier regulations thwarted the program.

I didn't either.

I thought it said that Congress in 1978 determined that the Secretary's earlier regulations had thwarted the basic program, which is quite a different thing.

I think it said so in so many words.

Mr. Burgess: That's what it said, sir.

Unidentified Justice: Did the court say the 1978 amendments were designed to correct regulations that frustrated the basic objectives of the Title I program?

I guess that's the language.

Mr. Burgess: That was the language of the court.

Unidentified Justice: But what it did was to simply apply the '78 amendments retroactively.

Now, suppose we decide that was wrong as a matter of law, that it isn't supported by the legislative history or the language of the amendments.

Then what is open, do you think, on remand?

Mr. Burgess: I think on remand the question which the court below did not reach, the validity vel non of the regulation, could be addressed, as well as the two other arguments that New Jersey advanced: one, that New Jersey had in fact complied with the regulation in effect at the time, and in support of that we submitted calculations which show that a number of the districts were in compliance, a number of the attendance areas were in compliance.

And secondly, which I think is the stronger argument, that at that point in time New Jersey should have qualified for district-wide designation as a Title I area.

I think the legislative--

Unidentified Justice: Now, you disagree with the argument made by Mr. McConnell that the state would be somehow limited in what's open to it on remand?

Mr. Burgess: --Yes, Justice O'Connor, because I think the Third Circuit simply did not reach our alternate argument--

Unidentified Justice: Well, why isn't the--

Mr. Burgess: --and did not rule adversely to us on that.

Unidentified Justice: --Why isn't the validity of the old regulations an issue that you could argue here as the Respondent?

Mr. Burgess: I think--

Unidentified Justice: That's because that would change the judgment, I suppose, below that you got, or not?

Mr. Burgess: --I think... I do believe that the fact that the regulation was out of harmony with the statute is an issue before this Court, because it was an element, a very important element, in the Third Circuit's decision.

Unidentified Justice: So and that means validity.

That means validity, I suppose?

Mr. Burgess: I think its inconsistency, certainly, was found.

Unidentified Justice: Well, it's pretty hard to sustain that a regulation--

Mr. Burgess: That it's inconsistent.

Unidentified Justice: --that it's inconsistent with the statute, isn't it?

So are you submitting that, that the regulation is inconsistent... I mean, is invalid, as an alternate... as a ground for affirmance?

Mr. Burgess: We did not argue that, Justice White.

Unidentified Justice: All right.

All right.

Mr. Burgess: We pointed out that it was raised below, and that I think it was very important in the Third Circuit's decision not to apply that regulation to judge the eligibility of these districts.

I think it's very important to understand what wasn't involved for the Court as well.

As the Secretary has conceded, Newark for that year received the proper amount of Title I funds.

There is no question that there was any inflation or any effort to obtain more funds.

More importantly, those moneys were spent on eligible children.

All the children who benefited by the program had been properly tested and were eligible.

And there's no question that children in some of the higher areas of poverty received adequate programs.

There was no diversion away from those children.

All the children eligible in Newark for Title I programs received them.

They also received programs that were adequate, that were of sufficient scope and quality to be meaningful supplemental programs.

So those were not issues.

I think the only issue is this very limited one of whether a district, an attendance area in Newark, which had 33.5 percent should have received these moneys, when that attendance area, had it been in almost any other district in the United States, would have been eligible under the targeting regulations.

And I think that was the inequity that the court below saw, to deprive those children of needed programs--

Unidentified Justice: Well, what the court was saying was that Congress had passed an inequitable statute, then.

Mr. Burgess: --I don't think so, Mr. Chief Justice.

I think the statute was equitable and had the valid objective of targeting money to certain areas in high need.

But the way it was construed was not in harmony with that objective.

From the very earliest days of Title I, the legislative history shows that Congress recognized that districts of high poverty, which are most often urban districts, large urban districts, had to be treated with flexibility, so that the intent of the Title I program could be realized.

And I think it was a history of criticism of the Secretary, of not having the flexibility.

In the early reports they talk about districts with 30 to 40 percent levels of poverty, that the entire district could be a target population for Title I programs.

And in Newark this was particularly true because there was such a high mobility rate among the districts that to say an attendance area over here with 33 percent wouldn't qualify, one over here with 50 percent would, was almost meaningless because we had shifting populations.

A child in one attendance area could be in another one another.

So there was that kind of blurring of attendance lines, which made the Secretary's regulation much more inequitable in a district such as Newark.

New Jersey would submit that the decision of the Third Circuit was correct and should be affirmed, because it basically furthered the fundamental purposes of the Title I program, while basically adjusting the equities between the parties to this matter.

Chief Justice Burger: Do you have anything further, Mr. McConnell?

REBUTTAL ARGUMENT OF MICHAEL W. McCONNELL, ESQ., ON BEHALF OF PETITIONER

Mr. McConnell: Just three quick points, Mr. Chief Justice.

First of all, I would like to point out that the Court of Appeals did not just fail to reach the arguments presented by Respondents below, but entered a judgment which was inconsistent with those arguments.

The Court of Appeals did hold that New Jersey is liable for at least $249,000.

That is an implied holding rejecting Respondent's arguments that would have resulted in no liability at all.

Second, I would like to just correct a small inaccuracy when Respondent suggests that the children who were served in this case were eligible.

They were not eligible for Title I services.

There are two standards for eligibility in the statute.

The first is that they live in an eligible area.

The second is that they be educationally deprived.

They were educationally deprived, but they did not live in eligible areas and thus were not eligible for Title I services.

It also does not follow that there was no diversion of funds from actually eligible areas.

It may be, although there was no finding to that effect, that the children in the eligible areas received adequate services under the statute.

But there's also no doubt that they received something over one million dollars less in services than they were entitled to under the statute.

Finally, just one comment on the thrust of Respondent's position.

It seems to be that a state is entitled to disregard regulations that are valid and enforceable on its own opinion that those regulations are inconsistent with the statute.

But that isn't the way the legal system works.

Unidentified Justice: Well, did the Court of Appeals sustain the regulations, or did it say?

Mr. McConnell: By entering a judgment that Respondent owes at least $249,000, Your Honor, I would suggest that the Court of Appeals sustained the regulations, at least insofar as they were not inconsistent with the 1978 Act.

Unidentified Justice: Even though it said that there was some inconsistency?

Mr. McConnell: That's correct, Your Honor.

Let me point out--

Unidentified Justice: Well, would there be anything open on remand with respect to the validity of the earlier regulations?

Mr. McConnell: --I do not think so, Your Honor.

Let me just observe that whenever Congress changes the terms of a grant program, it usually does so because it thinks that the change will better effectuate the purposes of the statute.

Clearly, the '78 Act in Congress' view would better effectuate its purposes.

We don't dispute that.

But if that were the standard, then every change in a grant statute or virtually every change would be applied retroactively, and we don't believe that that is the law.

Chief Justice Burger: Thank you, counsel.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Bell v. New Jersey - Oral Argument

Wed, 18 Feb 2009 07:11:14 +0000

Case:

Bell v. New Jersey

Media File:

81-2125_19830418-argument.mp3

Related Transcript:

81-2125_19830418-argument_transcript.xml

Transcript:

ORAL ARGUMENT OF KENNETH S. GELLER, ESQ. ON BEHALF OF THE PETITIONER

Chief Justice Burger: We'll hear arguments next in Bell against New Jersey and Pennsylvania.

Mr. Geller, I think you may proceed whenever you are ready.

Mr. Geller: Thank you, Mr. Chief Justice, and may it please the Court:

In 1965, Congress passed Title I of the Elementary and Secondary Education Act for the purpose of expanding and improving programs designed to meet the special educational needs of educational deprived children in low income areas.

Congress chose to accomplish this purpose by use of grants of federal funds to state educational agencies or SEA's which in turn would distribute the money to needy local educational agencies or LEA's, generally school districts.

The respondents in this case, Pennsylvania and New Jersey, have each received over $1 billion in Title I federal funds since the start of this program.

Now, in return for obtaining these massive amounts of federal funds, states must agree to abide by certain conditions written into the Title I statute and regulations.

These conditions are designed to insure that only eligible children receive Title I services and that Title I funds are not used to provide general aid to schools or to replace state and local funds that would otherwise have been spent for participating children.

The issue in this case concerns the authority of the Secretary of Education to recoup federal funds paid to the states under the Title I program in instances where the funds were used in violation of the assurances provided by the states when they received the federal money and contrary to the conditions imposed by the statute.

The facts here can be briefly stated.

As I noted a moment ago, the respondents have participated in the Title I program since its inception in 1965.

In the early 1970's, the Department of Health, Education and Welfare, which then enforced Title I, performed audits of the New Jersey program for fiscal years 1971 through 1973 and of the Pennsylvania program for fiscal years 1968 through 1973.

In the final audit reports, which were issued in 1975, HEW found that both states had misapplied significant amounts of Title I funds.

Specifically the auditors found that New Jersey and Pennsylvania had improperly approved LEA applications for use of Title I funds in school attendance areas that didn't contain a sufficiently high percentage or number of children from low income families and that in a few instances Title I funds had been spent for general aid purposes rather than targeted to meet the special educational needs of educationally deprived children.

Both states challenged these findings by filing applications for review with the administrative boards set up in HEW to consider Title I claims and after extensive administrative hearings, the Educational Appeal Board sustained the auditors findings in large part and ordered New Jersey to repay about $1 million and Pennsylvania about $400,000.

Unidentified Justice: At least with respect to Pennsylvania the sum was substantially cut down?

Mr. Geller: Oh, yes.

The initial audit report was something like $10 million, I believe, but after Pennsylvania had pursued its rights through the various levels of review, the final recoupment decision was to recoup $422,000 and to pay that money to the Office of Education.

To put that into perspective, by the way, Justice Rehnquist, during the period of the audit here, 1968 through 1973, for Pennsylvania, Pennsylvania received $365 million in Title I funds.

Respondents then sought review of the Education Appeal Board's decision in the Court of Appeals which vacated the Board's decision.

The Third Circuit held that the Secretary lacked statutory authority to order the repayment of this misspent funds because the only express authorization to recoup was included in the 1978 amendments to Title I and relying on what the Court of Appeals called the overarching principle of this Court's decision in Pennhurst State School against Halderman; that is that the terms and conditions of a federal grant must be clearly set forth in the statute and regulations authorizing the grant, based on what it called the overarching principle, Pennhurst case.

The Court of Appeals found that the Secretary could not recoup funds misspent prior to the effective date of the 1978 amendments.

Unidentified Justice: Mr. Geller, before you get into your argument, could you help me on one thing?

How do you view the order that was entered by the Secretary here?

Was it an order to pay or an order defining the amount that was due to be paid?

Mr. Geller: It was an order essentially defining the amount that was due to be paid.

Unidentified Justice: Because they end us saying this is how much should be paid.

Mr. Geller: Yes.

The Secretary hasn't yet decided what the most appropriate way would be to collect these monies.

Whether if Pennsylvania or New Jersey didn't simply send the check or a portion of the check, a portion of the total amount over several years; whether some sort of administrative recoupment would be feasible.

That question... That is one of the questions that I think remains to be resolved on remand.

Unidentified Justice: There really isn't any order outstanding requiring anybody to pay anybody else any money, is there?

Mr. Geller: Well, there is an order requiring New Jersey and Pennsylvania to pay, but the Secretary hasn't yet--

Unidentified Justice: Well, I thought you said it did not require them to pay.

Mr. Geller: --Well, it sets the amount and obviously--

Unidentified Justice: It sets the amount, right.

Mr. Geller: --It sets the amount and obviously the Secretary would be most delighted if the states would pay that full amount, but--

Unidentified Justice: Well, what happens if they just say, well, that is very nice, we owe you that money, but--

Mr. Geller: --Well, I think that the Secretary would have the authority under the Federal Claims Collection Act either to use administrative offset, if that would be feasible, and we submit that it would be feasible under Title I, or to bring an action in District Court for suit on the prior judgment to recover that amount of money.

Unidentified Justice: --But, neither of those actions is before us now, is that correct?

Mr. Geller: That is correct.

This is an appeal from the administrative determination of liability.

Unidentified Justice: And surely the Secretary could terminate the state's participation in the program I suppose?

Mr. Geller: Well, it is not so clear under the statute.

The state can only have its application disapproved if it is currently not in compliance with the statute and not for past non-compliance.

Unidentified Justice: Part of its duty though is to repay and it refuses to repay.

Mr. Geller: Well, whether in theory that is a possibility--

Unidentified Justice: What if the state just says, well, if this is the way you are going to interpret the statute and our agreement, we just want to quit.

I suppose they could quit.

Mr. Geller: --The states can--

Unidentified Justice: And then the Secretary would have to sue.

Mr. Geller: --Would have to sue because there would be no offset possible presumably in that situation.

Unidentified Justice: I take it your position is that whether or not... whether or not the states' position is arguable in the sense that arguably and reasonably it might have believed it was not violating the statute; that you have the right to recoup if you decide retrospectively that is what the contract means or that statute means.

Mr. Geller: Well, yes.

This is not a penalty.

This is just a restitution.

But, it is not simply our decision.

There are a number of safeguards in the system to make certain that our decision is a correct one.

There is an initial audit report which the states can challenge and then there is a final audit report which the states can challenge and then there is an appeal to the Education Appeal Board which is a neutral administrative agency composed in large part by non-government personnel.

Unidentified Justice: Is this the kind of program where the state initially submits a plan and it is approved?

Mr. Geller: It submits an application simply saying that it will abide by the assurances... It will abide by the conditions in the statute and regulations.

All of the money in this program comes from the federal government.

Unidentified Justice: Another thing, would you think that, to put it crudely, would any fool have known that the state was not in compliance or is it a close case?

Is it a gray area?

Mr. Geller: Well, in this case particularly I don't think there are any gray areas as to the states' non-compliance.

Pennsylvania, for example--

Unidentified Justice: So, you say the states should have known.

Mr. Geller: --Well, there are two separate questions here.

One is should the state have known that it was violating the statute?

That is not an issue that is before the Court right now.

Pennsylvania didn't even challenge in the Court of Appeals that it had violated the statute.

The issue before this Court is should the states have known that if they were found, after administrative and judicial proceedings, to have violated the statute, should they have known that a remedy that the Secretary could have pursued was to recoup the misspent funds?

Unidentified Justice: Well, what if it just so happened that a majority of the Court thought that if the state should have known why then it should pay the money back?

But, if it was just arguable, it may not have ever participate in the program if it had known those were the conditions.

What if the majority of the Court felt that way?

I guess that issue just--

Mr. Geller: That issue is not... The substantive issue of whether the states of New Jersey and Pennsylvania violated the statute is not before the Court.

In fact--

Unidentified Justice: --I understand that.

And, neither is, I guess, whether or not the states should or should not have known that it was violating the statute.

Mr. Geller: --That is correct.

The only question as the case comes to this Court is whether if the state has, in fact, violated the statute, does the Secretary have available to him the remedy of recoupment?

Let me say that these... We are not dealing here with obscure or arcane provisions of the statute or regulations that the states couldn't possibly have known they were violating, although I understand that the states attempt to paint that picture in their brief.

We are dealing here with requirements in the statute and regulations that go to the very heart of the Title I program.

As I said, New Jersey conceded before the Education Appeals Board that it had, in fact, violated the statute by miscalculating the amount of eligible... number of eligible school attendance areas.

And, Pennsylvania didn't even challenge the finding of violation by the Court of Appeals.

Unidentified Justice: If I understand what you are arguing now, you wouldn't take it in this then if the Court... Suppose we held for you in this case--

Mr. Geller: Yes.

Unidentified Justice: --what if we reserved the question... What if we said this is the kind of a case where the state knew or should have known that it was violating the statute and they admitted they violated the statute?

Mr. Geller: They have admitted they have violated it here.

But, we think that these are issues that remain to be litigated on remand, whether the state violated the statute, if they could reraise that issue not having raised it the first time around.

Unidentified Justice: Well, is it any part of your position that the state would have a defense to repayment of the money if, in fact, they were found to have violated the statute but neither knew or should have known that they did?

Do you think there is some sort of an intent element?

Mr. Geller: No, there certainly is no intent element, but there is an element of discretion on the part of the Secretary in determining whether to pursue his recoupment remedy and there have been instances, including one that is cited in the Education Appeal Board's decision in this case, in which a state may have relied on certain program directives of the Secretary in doing certain thing.

And, even if that might have violated the statute, the Secretary would not be allowed to recoup.

But, that is--

Unidentified Justice: Do you think the Secretary's discretion in that regard is reviewable by the courts?

Mr. Geller: --I would think that the Secretary's discretion to recoup would be reviewable like any other administrative decision on an arbitrary or carpricious basis.

But, if there has been a clear statutory violation, especially if one of the conditions of the statute that goes to the heart of the whole Title I program, I can't imagine how any decision to recoup would be considered arbitrary.

Unidentified Justice: Is there anything, Mr. Geller, to prevent the states when it approaches some project involving expenditure of these funds and they think they might be in the gray zone, is there anything to prevent them from submitting the question to the secretary in charge of the grants and saying, may we spend the money for this project or this program?

Mr. Geller: No, there certainly is nothing and that is to be encouraged.

In fact, the Third Circuit, in its opinion, refers to the fact that LEA's and SEA's frequently do that and the Secretary is only too happy.

This is not a penalty program.

Everyone is trying to accomplish the same goal here.

We are not trying to catch the SEA's and LEA's in slip-ups.

We are dealing here with a situation in which it has been determined that the state and local educational agencies in the past have misapplied substantial amounts of federal funds which they received for a particular purpose but didn't use for that purpose.

The only question here is what are the Secretary's remedies?

Unidentified Justice: Well, Mr. Geller, it is a little hard to understand.

If the Secretary thinks setoff is available and if the states concede that it is available, and at least one of them has, why isn't that a solution and why are we here?

Mr. Geller: Well, we are here... I think there is some confusion on the part of one of the states at least as to what its concession is.

Pennsylvania does not concede that prior to 1978 any--

Unidentified Justice: New Jersey does.

Mr. Geller: --Well, New Jersey has in its brief a very peculiar suggestion as to what setoff is.

Let me give the Court some round numbers so we can all understand what we are talking about.

Let's assume that the state in an upcoming fiscal year was entitled to receive $1 million in Title I funds and let's assume that the Secretary has determined on the basis of substantial evidence that in the past that state has misused $10,000 of Title I funds.

What New Jersey is suggesting in its brief is that the Secretary should simply only give the state $990,000 of Title I funds for the upcoming fiscal year and that is all they would have to spend.

Well, that is not a setoff at all.

The government is simply repaying itself for misused money.

That penalizes Title I beneficiaries, the low-income children, twice.

It penalizes them once when the funds were originally misspend and it penalizes them a second time when the amount of money being provided for the program in the upcoming fiscal year is lower than it should be.

That is precisely the sort of setoff that the Third Circuit, we think quite correctly, said would be inconsistent with the goals of the Title I program.

That is not how the Secretary views his setoff authority.

What the Secretary would propose to do, if it ever came to an administrative setoff, would be to give that state $990,000, but to extract a commitment from the state to spend $1 million that year in the Title I program.

New Jersey has never conceded that that is what it is willing to do.

If it would, then we would not be here as to New Jersey.

Unidentified Justice: Thank you, that helps clarify it.

Is it your position that Section 415 of the General Education Provisions Act, which provides that there can be adjustments for overpayments, provides explicit authority for setoff?

Mr. Geller: We have argued that Section 414, which provides the audit authority, and Section 415, which is the section to which you have just referred, together do provide explicit authority.

And, in the legislative history of the 1970 amendments to the statute which put those sections into the statute.

Congress quite clearly said that this will facilitate the Secretary's use of his administrative audit and recoupment authority under the Education statutes.

Unidentified Justice: Mr. Geller, in analyzing New Jersey's setoff position a little further, what if the Secretary followed your advice and said we are going to give New Jersey $990,000 this year on the condition that New Jersey puts up $10,000 of its own and New Jersey says, no, we won't put up $10,000 of our own.

Then what does the Secretary do?

Mr. Geller: Well, first of all, let me say the situation never come to that.

Unidentified Justice: Well, but--

Mr. Geller: I understand, Justice Rehnquist.

There have been several dozen occasions in the past in which the Secretary has determined that a state has misspent past grant funds and they have always paid up, but in the situation that you posited, the Secretary would not do anything that would jeopardize the Title I program in that state.

What the Secretary would probably do in that situation is bring a suit in District Court to recover on the judgment.

It would not be a de novo action to reconsider what--

Unidentified Justice: --To recover on what judgment?

Mr. Geller: --The judgment of the Education Appeals Board which presumably would have been an appeal to a court of appeals and affirmed such as in this case.

Unidentified Justice: Well, do you think that is something that simply can be filed in a district court or registered and sued on like a judgment on other states?

Mr. Geller: Yes, I think it can.

And, in fact, that happens all the time under a great many federal programs, the Occupational Safety and Health Act, the Child Labor Act, which provide for civil penalties through an administrative process and if the defendant refuses to pay, what the government will do is bring a civil action for recovery of that judgment.

That is very common administrative procedure.

Unidentified Justice: Mr. Geller, I still am not clear in my mind why the Secretary couldn't do exactly what you suggested in answer to Justice O'Connor, namely, say you want to stay in the program we are sure and you are just going to have to pay $1 million to get $990,000.

That still is a pretty favorable offer to the state.

Why do you have to litigate it when you have got the chips in your hands?

Mr. Geller: I would assume that it would never come to that.

That is the point I was trying to make.

Unidentified Justice: Well, why doesn't that answer the whole lawsuit?

I really don't understand.

If you assert you have a right to do that--

Mr. Geller: Yes, but the Third Circuit found that prior to 1978 we had no right to do that and that is why this case is here and why this case is of tremendous importance.

Unidentified Justice: --And, Judge Higginbotham in dissent, as I understood him, said, well, that issue really isn't presented because you haven't tried it yet.

He said your future remedies are not before us.

Mr. Geller: I think that the Third Circuit misunderstood what the Secretary was trying to do.

Unidentified Justice: I think they misread the Secretary's orders.

The Secretary's orders say this amount should be paid and they read them as orders saying they must be paid.

Mr. Geller: Well, I think... The Third Circuit said that the Secretary could not use his common law recoupment authority in this class of case for two reasons.

Unidentified Justice: But, why isn't all that dicta as Judge Higginbotham said?

Mr. Geller: I think it is not dicta because Judge Higginbotham assumed that the Secretary was not proceeding under his common law recoupment authority.

Unidentified Justice: And they clearly weren't.

They weren't using the common law recoupment power before--

Mr. Geller: I believe they were, Justice Stevens.

I believe the Secretary has used his common law authority as codified in the Federal Claims Collection Act.

Unidentified Justice: --He didn't enter an order requiring any payment.

Mr. Geller: Well, that is because the Federal Claims Collection Act requires the Secretary to consider a number of options in determining how to recovery the money and that was the question that the Secretary hadn't yet decided... Hadn't yet had to reach because the states had not yet said that they were not going to pay the money if, after they had had their administrative proceedings, it was found that they owed it.

Unidentified Justice: Mr. Geller, isn't this like collecting on an I.O.U. which I always thought you couldn't collect on?

Mr. Geller: It is more than an I.O.U. I think it is like collecting on a contract that has been breached.

Unidentified Justice: I thought that the only ruling was was that you owe this money, not that you must pay it.

Mr. Geller: No, I think the Secretary--

Unidentified Justice: Am I wrong?

Mr. Geller: --The Secretary's administrative ruling obviously was a ruling that this money had to be paid.

The question that hadn't yet been reached is whether, for example, it would be paid in installments, it would be paid by administrative recoupment from the upcoming Title I funding, whether if none of those were feasible, whether it would be the subject of a lawsuit in District Court.

Unidentified Justice: That to me is an I.O.U.--

Mr. Geller: I am not certain, Justice Marshall, what you mean by an I.O.U. There has been an administrative determination here after full evidentiary proceedings that the money was owed and what the states have done is taken an appeal of that administrative ruling to the Court of Appeals under the statutory procedure that Congress set up in 1978.

And, this is a review.

This case is here on certiorari from the Third Circuit's decision that the administrative proceedings were erroneous because the Secretary had essentially no cause of action prior to 1978 to proceed either administratively, either under his statutory authority or under his common law authority administratively.

Unidentified Justice: --Mr. Geller, the order that the Secretary entered was that New Jersey should make the following payments and lists dollar amounts.

Surely they could review the accuracy of the dollar amounts, but there wasn't anything in the administrative proceeding as to how the amount should be paid, by what mechanism payment should be enforced.

Mr. Geller: I understand that, Justice Stevens, but there had been a final administrative ruling that the amounts were owed and--

Unidentified Justice: That the amounts were owed, right.

Mr. Geller: --And that is what we are reviewing here, whether, in fact, the Secretary had any power to order these states--

Unidentified Justice: To decide how much was owed.

The District Court of Appeals didn't disagree with their power to decide how much was owed.

Mr. Geller: --Well, as an audit matter, but certainly not as a matter of power to order a recoupment of that amount of money and that is what is before the Court at the moment.

Unidentified Justice: Well, Mr. Geller, the Court of Appeals' opinion certainly can be interpreted as holding that it permits that offset against perspective grants is permissible under Section 415.

And, that is a reasonable interpretation of the holding.

Mr. Geller: Yes.

The Third Circuit held that that is impermissible in the context of the Title I program.

It did, I think, on the basis of two misconceptions.

One is--

Unidentified Justice: I said that direct recoupment was impermissible, but it indicated that the offset would be all right.

Mr. Geller: --No, I believe not, Justice O'Connor.

What the Third Circuit did not reach but suggested that the Secretary might be able to do is to bring a civil action, a de novo civil action to recover this money, although even there they left the suggestion open that prior to 1978 there would be no authority, no cause of action in effect to bring such an action.

Unidentified Justice: What is the difference between direct recoupment and offset as it has been used by the various parties to these conversations?

Mr. Geller: Well, I think... There are really two questions here and they are separate.

I think the Court has to keep them separate as it analyzes this case.

The first question is prior to 1978 did the Secretary have, in effect, a cause of action to recover this money at all?

Respondents are quite adamant that prior to 1978 there was no cause of action available to the Secretary to recover this money.

The second question is if there was a cause of action to recover the money prior to 1978, how did the Secretary have to pursue his cause of action?

In other words, could he do it through administrative procedures or offset?

The Third Circuit clearly answers that question in the negative.

Unidentified Justice: What is the difference between offset and recoupment?

Mr. Geller: I think offset is just one manner of achieving a recoupment.

It is our principal submission that the federal government, when it makes a grant subject to express conditions such as those in Title I, has an inherent right to recover monies expended by the grantee in violation of the express conditions of the grant and that the government may exercise its right of recoupment by offsetting the amounts involved against sums otherwise due to the grantee.

We believe that conclusion adheres to the very nature of the grant which, as this Court said in Pennhurst, is very much like a contract.

It is well settled in cases dating back more than a century in this Court that the government may recover monies without resort to express statutory authority when it is paid for services that were never provided.

The use of grant funds for purposes not authorized by Congress constitutes precisely such an instance of non-performance of the terms of an agreement.

Unidentified Justice: Suppose a state has received all of the money, has it in hand, has spent it and has misspent some of it and then informs the Secretary that they want to withdraw from the program.

What is the remedy on the part of the federal government then?

Mr. Geller: Well, at that point, offset would not be available because no future funds would be going to the state under the program.

And, I assume that the Secretary, as I said earlier, would have to bring a civil suit to recover on the judgment, enter in the administrative proceedings.

But, that would not be a de novo review.

The court would not be reconsidering whether the statute had been violated.

Now, let me just briefly in the short time remaining explain the number of the legislative developments which we think make it quite clear that the Secretary had this authority prior to 1978.

First of all, as I alluded to a moment ago, there was a long history of administrative recoupment upheld by this Court even in the absence of express statutory authority.

But, we have much more than that here.

We have, first of all, the 1966 Federal Claims Collective Act which was passed well before any of the monies in this case were misexpended which clearly codifies the common-law principles and says that the federal government can use all means including administrative offset to recoup debts owed to it.

We have after that in 1970 the statutes that Justice O'Connor alluded to, Sections 414 and 415 of the General Education Provisions Act.

The legislative history of those provisions make it clear once again that Congress was aware that the Secretary had been exercising his audit and recoupment authority since the very outset of the program in 1965.

Two years later in 1972 the Secretary set up the Title I Audit Hearing Board to consider Title I claims.

The regulations setting up that Board, which are reprinted in the Joint Appendix beginning at page 158, quite clearly explain that the Secretary will be engaging in audit and recoupment functions.

And, on page 160 and 161, it is made quite clear that... For example, no action will be taken by the Office of Education with respect to the collection of the amounts due to be owing if there has been a claimed filed.

This is in 1972, once again a clear indication of the Secretary's audit and collection authority.

Two years after that, in 1974, Congress passes 20 USC 884, a statute of limitations for the Title I program, saying that no funds can be recovered unless they have been misspent less than five years before a final audit determination.

There would have been absolutely no reason for Congress to have passed the statute of limitations in 1974 for purposes of the Title I program if respondents were right that until 1968, 1978 the Secretary had absolutely no authority to recover any funds under the Title I program.

Respondents have never given any convincing explanation of what the 1974 statute of limitations was intended to do if they are right as to what the Secretary's powers are.

Unidentified Justice: Mr. Geller, does the Secretary audit every single program?

Mr. Geller: The Secretary audits every state.

Unidentified Justice: Every year?

Mr. Geller: Every three years.

Unidentified Justice: Every three years.

Mr. Geller: Every three years.

Unidentified Justice: So that a state may not even know that it is in violation until there is an audit which may be three years?

Mr. Geller: That may well be although the provisions of the statute and regulations are not as obscure as the respondents would have the Court believe.

Unidentified Justice: I understand in this case--

Mr. Geller: Yes.

Unidentified Justice: --But what if they really were obscure?

Mr. Geller: I don't... Well, let me say this.

Despite the impression that the respondents would give--

Unidentified Justice: And, I don't suppose every auditor has the same view as another auditor.

Mr. Geller: --I understand that Justice White, but it is important to understand, especially in light of the submission respondents have made to this Court, that there really are very, very few requirements, important requirements, imposed on the states by Title I in the statute and regulations and even as to those requirements, there are very few that the auditors are concerned about and the violation of which would lead to a recoupment.

Now, all of these obscure requirements they refer to, recordkeeping and all the rest, those are not the sort of requirements we are concerned about here.

The Title I statute is intended to supplement the regular school programs of educationally deprived children in low-income areas.

All that the auditors are concerned about are whether Title I funds are being used to supplement rather than supplant regular school programs, whether they are going to the schools that were intended by Congress and whether the programs are being targeted to educationally deprived children.

It is somewhat ludicruous in a case like this where New Jersey's errors in failing to comply with the statute were purely mathematical, miscomputations, or in a case which Pennsylvania did not even challenge in the Court of Appeals that they had violated the statute.

For the respondents to make a primary submission to this case that Title I grant recipients just have no way of knowing what the requirements of the statute here are.

Finally, in just going through this legislative history, in 1978, when Congress finally put expressed recoupment authority in the statute, in part I think because Congress was concerned that the Secretary hadn't been adamant enough in pursuing his recoupment authority, the legislative history again makes it quite clear that they were not giving the Secretary any new powers.

We quote from the House report in our brief.

They were simply reiterating what the powers were that the Secretary already had, putting in a new procedural framework in which to exercise those powers and granting certain additional due process rights to the grantees.

So, we think it is inconceivable, when one looks at the history of the entire Title I program from 1965 on, for any grantee at any point to have come to the conclusion that it was free to misspend grant funds and would not have to... would not run any risk of having to account to the federal government for the amount of the misused funds.

Unidentified Justice: Mr. Geller, I do have one more inquiry, if I may, because I still don't understand what it was that CA-3 was talking about.

In its opinion it said,

"We are at a loss to understand the department's arguments concerning the operative effect of Section 415. "

"It is clear that whatever adjustments are authorized under this provision, they are to be accomplished by means of an offset against current or perspective grant disbursements. "

"The department's actions in this case are very much different and it can't, therefore, invoke the authority. "

Mr. Geller: Yes.

I think the Third Circuit... I had trouble with that portion of the Third Circuit's opinion as well, Justice O'Connor.

I think what the Third Circuit must have meant is that Section 415 was intended for the situation where the federal government accidentally sends more money to the state in one year than they were entitled to under the Title I program.

It has nothing to do with misspending of money by the states, just in the following year the federal government might be able to make that up.

The Third Circuit gave a very bizarre interpretation of Section 414 and 415, saying that those were just informational provisions in order for the federal government to be able to gather information.

It is quite inconsistent with the legislative history of those provisions which explicitly refers to the Secretary's audit and recoupment authority from 1965 onward.

If there are no further questions, I would like to reserve--

Unidentified Justice: Mr. Geller, suppose the Third Circuit had said that you could recoup by offset?

You probably wouldn't be here, would you?

Mr. Geller: --It depends what they mean by recoup.

As long as they didn't mean what New Jersey meant.

Unidentified Justice: Suppose they had held that you could recoup by offsetting these misspent funds against future funds?

Mr. Geller: As long as the offset is what New Jersey takes the offset to mean which is simply to reduce the amount of Title I funding in the future but not requiring the states to make up the difference.

Unidentified Justice: I see.

All right.

Mr. Geller: Thank you.

Chief Justice Burger: Ms. Hunting?

ORAL ARGUMENT OF MARGARET HUNTING, ESQ. ON BEHALF OF THE RESPONDENT

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

In the briefs in this case, there has been some strong language used to characterize Pennsylvania's program in an effort to justify the severe and unauthorized penalty which is now seeks to impose.

I want to make to day only three points with respect to his challenge.

My first point is that Pennsylvania conducted its Title I program in good faith and this is not a case, as Justice White pointed out, where we should have known that we were in violation of a set of complex regulations.

Unidentified Justice: Well, isn't a state, when it receives a grant from the federal government under an explicit statute bound to know the law?

Mr. Hunting: Your Honor, we agree with that.

The state was... and this is my third point, which is that the state was under an explicit statute and that we were entitled to rely on that statute not only for our responsibilities, but also for the extent of our liabilities.

In connection with that also, I want to make one other point which is that when a Title I program is out of compliance, the statute gives the state an opportunity to correct that program before the imposition of any penalty and that penalty can be lifted upon the correction of the program.

This is part of the statute and has been ignored.

That opportunity has been denied in this case.

As to our first point, regarding our actual program, I would like to make... point out one thing, that as Mr. Geller observed, this statute envisioned a partnership between the state educational agency and the federal agency in operating and administering this grant.

Instead of a partnership which is cooperative with complimentary responsibilities and liabilities, the federal agency's policy of pursuing an unauthorized repayment authority which it claims to exist is a divisive and conflicting method of enforcing this program which is causing the states and the federal government to fall apart in confusion in battling over little petty disputes and interpretations which could be resolved and should be resolved for the benefit of the program.

Unidentified Justice: You wouldn't regard half a million dollars as petty, would you, despite--

Mr. Hunting: The amounts are not petty, Your Honor.

They are definitely not petty.

This case originally was a $10.5 million audit as was pointed out earlier.

Unidentified Justice: --It still is not petty though, is it?

Mr. Hunting: But, the disputes themselves can result in petty bickering which divides us on the question of interpretation and makes administration of the program extremely difficult.

For example... And, I wish to dispute at this point the characterization that we haven't challenged our facts with respect to this case.

We have not specifically talked about the facts before the Third Circuit, but we have challenged the procedures used to find those facts and, therefore, we do not believe that the facts have accurately been found.

In our particular case, we had a situation where the agency was demanding a... the federal agency is demanding reimbursement for a school district operated program where the Title I program was being operated at the same time as a busing for desegregation program was being operated.

In this particular circumstance, there was a lot of confusion, and this is just an example of our type of case, a lot of confusion about the eligibility of students who were being bused from an eligible area into an illegible area.

Both the federal and the state administrators were confused on this subject and when the state sought advice, which was recommended in a suggestion by this Court just a few moments ago that advice be sought from the federal officials, when the state sought this advice, the federal officials were unclear as to how to handle the situation.

They admitted that they had confusion in their own office and that there was a philosophical gulf dividing them on how to handle this particular situation.

We tried to follow what direction we could get.

We implemented a program and the panel itself declared that this program was exemplary, the panel that heard this case.

However, when the auditors came out to review the program, they found that the program was out of compliance with these regulations and, therefore, a decision was made regarding a difficult issue, which administrators and educators could not agree on, by a group of auditors who were not trained in the law or in education.

As Justice White pointed out, this is not the type of program that we should have known was in violation.

Unidentified Justice: Are these details before us?

Mr. Hunting: Your Honor, I wish to give you this characterization of our case in order to refute some of the challenges that have been made and some of the language that has been used, that we have converted funds, that we have squandered money, because this is certainly not the case.

I don't think it ever has been disputed--

Unidentified Justice: Do you have to worry us with that?

Mr. Hunting: --I will go on with my next point.

Unidentified Justice: Did you take the position you are now taking before the Court of Appeals for the Third Circuit?

Mr. Hunting: We took the same position, Your Honor.

We didn't talk about the facts in the Third Circuit because we stressed the point at that time that the procedures were unfair and that the facts were not properly arrived at.

And, I do want to point out that with respect to Title I that this is an evolving program and this kind of an example can show how it is evolving and the statute is perfectly reasonable in not assigning liability and not requiring the states to underwrite this kind of evolution of a program.

Unidentified Justice: Ms. Hunting, what in your view should the federal government do if the procedures had been fair... I know you disagree... and if you really had misspent money and clearly misspent the money?

Would there be any remedy for the federal government with the--

Mr. Hunting: Your Honor, I think the remedy is contained in the statute for the way the federal government should handle that kind of case.

Unidentified Justice: --And, what should it do?

Mr. Hunting: It should follow the statutory penalties of withholding or application disapproval.

The withholding penalty can be a very effective remedy for the federal government.

Unidentified Justice: Do you think it is a proper remedy to say you spend a million dollars and we will give you $950,000 or whatever, you know, just give you the amount less that they claim you have misspent?

Is that a proper way to do it?

Mr. Hunting: No, Your Honor, and it is particularly improper because they want to couple that with... that power to offset with an order that the state make up the difference and that the--

Unidentified Justice: Well, I still am not clear then.

How could they... In your view, is there any way... assuming a case where procedures were fair and the facts were against you, a different case.

Is there any way the government could get its misspent money back from the State of Pennsylvania?

Mr. Hunting: --No, Your Honor.

We feel--

Unidentified Justice: So the facts are really irrelevant then?

Mr. Hunting: --Well, I don't believe they are irrelevant because in this case it is a case of good faith.

Unidentified Justice: If it is a matter of law, you win no matter what the facts are under your argument?

Mr. Hunting: Under our argument, we would win no matter what the facts are, Your Honor, because there was no assignment of liability in that statute.

Even if the conduct was criminal, the state treasury was not responsible for this.

But, that does not mean that the federal government or the state could go against the individuals responsible for the criminal conduct and achieve reimbursement that way or it doesn't mean that if the penalties provided in the statute were not sufficient to enforce the statute that the federal government couldn't go and seek stronger penalties to be written into the Act as they eventually were in 1978 or, as it suggests itself in its own brief, that they could switch to a penalty... to a reimbursement system instead of having a forward paid system and, therefore, if the state continued to misspend funds they could just fail to reimburse them.

Unidentified Justice: You have left me somewhat confused as to the obligations of the state.

Let's take an extreme case.

The state gets several hundred million dollars in grants for this program, but they decide that the governor of the state needs an official residence so they spend a million dollars to provide an official residence for the governor and then because they have, as some of the seaboard states, they have got water available they buy a yacht for the governor.

Now, are you suggesting for one minute seriously that the federal government cannot make the state account for that?

Mr. Hunting: Your Honor, the state... We would dispute that the state's treasury was responsible for that misexpenditure.

Absolutely the government could pursue with criminal penalties for civil fraud, for reversionary interest in these items that were purchased.

Unidentified Justice: How about just withholding the next grant, from the next grant that they receive?

Mr. Hunting: Well, if the program continued to be misadministered, then they could withhold from the next grant.

But, we submit that the treasury has never been made liable, the state's treasury has never been made liable, has never been required to underwrite criminal conduct or fraud or any other... or just doubt as to how to administer the program or any other misexpenditure in this grant.

And, I will explain in my second point why that is a fair result.

Unidentified Justice: Ms. Hunting, before you get to another point, how is it that you think that Section 415 couple with the Claims Collection Act provided no remedy for the federal government before 1978?

Mr. Hunting: Section 415 is the--

Unidentified Justice: Of the General Education Provisions Act.

Mr. Hunting: --That is the payment provision of the--

Unidentified Justice: It expressly allows adjustments for overpayments and that coupled with the Claims Collection Act would appear to have provided some pre-1978 remedies.

Mr. Hunting: --We have to agree with the Third Circuit and with Mr. Geller's position on that, that that relates to overpayments, meaning accidental payments to the states that were in excess of what the state was entitled to or perhaps a situation where a program did not need to expend all of its funds for some reason, a teacher didn't show up or something.

This would be what we consider an overpayment.

It doesn't relate to grant misexpenditures.

Unidentified Justice: Do you think there is anything in the legislative history to put that kind of a gloss on it?

Mr. Hunting: The Third Circuit noticed that there was some confusion in the legislative history on this point as to exactly what legislative history attached to that.

We do not believe that that section applies to the kind of offset that we are talking about here.

It talks about--

Unidentified Justice: Well, is there any reason why it shouldn't?

I mean, what is the fundamental different between some kind of accidental overpayment versus the kind of thing that happened here?

Mr. Hunting: --Your Honor, I think that provision, as the Third Circuit noted, is talking in terms of adjustments of grants in a bookkeeping kind of situation like that.

It would not apply in this sort of situation because in this situation the federal government is asking for a reimbursement and to the extent that it is asking for offset, the offset is being coupled with an invasion of the state's and its localities' educational programs by the federal government to direct them how to spend their money.

Unidentified Justice: If there was an invasion as you call it that way, wasn't there an invasion by the state into the pockets of the federal taxpayers?

Mr. Hunting: Your Honor, initially I want to point out that this case is not a case of willful disregard of the regulations; that this case is a case where we attempted at all times to put on a good program and I do not believe that it is a... I believe that Congress has the right to decide and its decision should be given authority that when it assigns liability for a program, and in this case it did not assign liability to the state, that that decision should be put in effect.

The state, I believe, as the grantee is entitled to rely on the terms of the grant.

And, in this particular case, the grant guaranteed to the states an opportunity to correct its program and to lift the enforcement mechanism when its program was brought into compliance.

The statutory provision of withholding can only be applied until the grant program is brought into compliance and this is not a discretionary provision of the statute that requires the agency to notify the states of the problem and then it requires the agency to lift that enforcement provision and refund the program when the program is in compliance.

This is a benefit.

This obviously is designed to benefit the program.

It is a positive, therapeutic method of enforcing the program and it was the will of Congress that this is the method to be used.

Instead, the agency has ignored this particular remedy, has not ever used it and has ignored its obligation under the remedy which is to give timely advice and then to exercise the penalty.

This is coupled with a notice to the states that this program is out of compliance and gives it an opportunity to identify what is wrong with the program and then to correct it.

Instead, what the federal government has done has been to give the notice to the state at the same time it gives the retroactive penalty.

This is the complete opposite of the point that Congress was trying to... the scheme that Congress was trying to effect in creating a withholding remedy.

And, all of this, this imposition of this penalty, was done not only without statutory authorization but not even with regulatory powers being assigned by its own regulating power in this case.

The federal government had no regulations.

Even a hearing board was not created by regulations but was merely the subject of a notice in the Federal Register.

My third point is that the states are entitled to rely on the terms of the statute when they accept the grant.

The statute has assigned not only the responsibilities, but the liabilities that pertain to the state in administering this program.

It is not only our liability, but the federal government's responsibility which is defined in the enforcement provisions of this Act.

It is not unreasonable that Congress should have assumed that the enforcement scheme, structure, into the Act would be sufficient to manage this program.

Congress has not been proved wrong in this regard.

There has been no evidence of purchases of yachts or purchases of governors' mansions.

Unidentified Justice: Ms. Hunting, may I ask you a question about your understanding of exactly what is before us?

I notice in the petition for review filed by the State of New Jersey, they object to the order.

They ask for a review of the Secretary's order ordering New Jersey to refund certain money, whereas your petition asks them for a review of an order ruling that Pennsylvania should refund a certain amount of money.

Do you think you were ordered to pay the money or there was merely a determination of how much money was owed?

Mr. Hunting: It looks... The document that we received is a letter that compels... It states the amount that is owed.

It says we are to repay it and for every day we don't repay it interest is assessed.

Unidentified Justice: It does assess interest, does it?

Mr. Hunting: Yes.

Unidentified Justice: I see.

Mr. Hunting: So, in conclusion, I would like to make just three basic points; that when a state accepts a grant, it is entitled to rely upon the statute in effect at the time it accepts the grant to determine its liability and to determine the extent of its liabilities.

For the federal agency to go outside the statute denies the state its rights under it.

Thank you.

Chief Justice Burger: Very well.

Mr. Cole?

ORAL ARGUMENT OF MICHAEL R. COLE, ESQ. ON BEHALF OF THE RESPONDENT

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

In response to a number of questions asked of Ms. Hunting and particularly Justice Stevens' last question, we had been under the assumption in the Third Circuit that we were appealing an order to pay money.

I don't think the federal government, the Secretary ever disabused us of that notion.

Indeed, as Ms. Hunting points out, both the State of New Jersey and the State of Pennsylvania received letters with the final administrative determination saying you shall please send us your check and for each day that you delay we will tack on interest at, I think, an average annual rate of about 12 %.

It wasn't until this Court through the Solicitor General's brief the Secretary suggested that that was just an initial step.

So, I think it is important to start the analysis of the Third Circuit's decision with precisely what that court had before it.

It had before it challenges to... orders from the Secretary that we characterized as orders that state funds be used to pay deficiencies found in order determination.

And, it was in that setting that the Third Circuit looked to Title I as it was in place in the years in question.

And, for New Jersey, that is really federal fiscal years 1970, 1971, and 1972, to determine--

Unidentified Justice: Mr. Cole, are the letters enclosing the orders and which the letters said we expect you to pay interest, are they in the record?

Mr. Cole: --I believe they are, Justice.

I am quite sure they are.

Unidentified Justice: Because the orders themselves don't say that.

Mr. Cole: The orders themselves... you are quite right... say their determination is New Jersey should pay.

Unidentified Justice: Should pay so much, yes.

Mr. Cole: But, the letters that accompany them... And I think we may have quoted from the letters in our brief.

The letters accompanying them said, please remit your check and also stated that interest would be assessed.

So, the question before the Third Circuit was did Title I permit the Secretary to require an expenditure of state funds as a result of an order of determination.

Unidentified Justice: Do you think the state... the federal government could refuse to honor any future grants until the debt was satisfied?

Mr. Cole: I think you would strain the language of the statute as it existed in 1978, Chief Justice.

The statute allowed the federal government to withhold future grant loans and also to suspend payments until you brought yourself into compliance.

Now, I have always construed that to mean that you cured any past failing and that there was a recordkeeping--

Unidentified Justice: Just correct it for the future and not worry about the past?

Mr. Cole: --That is correct.

Our essential argument and that was adopted by the Third Circuit is that this statute, if it allocates any risk of mistake at all by its silence, must allocate that risk of loss by mistake to the federal government, not to the state treasury.

And, the Third Circuit found that because there is no unequivocal statement of congressional intent that the state should be underwriting this program in terms of bearing the risk of loss.

We are not dealing with a yacht case here and I understand that the facts are not before you.

But, I think the New Jersey case shows you, you know, what type of mistake we are dealing with.

Unidentified Justice: Do you think it would make any difference whether you were dealing with a yacht case or misapplying funds from one program to some other perfectly legitimate program of the state?

Do you think legally for the purposes you are here there is any difference?

Mr. Cole: Not for the purposes of our argument.

It makes no difference, because our argument says that the state treasury is not exposed.

We don't have to address the yacht hypothetical or the governor's mansion hypothetical to make a determination whether individuals may be exposed.

But, the state treasury is not exposed under the statute prior to the 1978 amendments.

And, we say that because Congress has not given a clear, unequivocal indication that the states were to assume this risk when entering into the program.

Unidentified Justice: Would it be... In your view, it would require an affirmative, explicit statute to create that and that common law or debtor/creditor standards would not apply, is that it?

Mr. Cole: That is correct, Chief Justice, because we are dealing in a grant area and we are dealing with a principle, if not directly on point, at least sufficiently analogous to the principle this Court adopted in the Pennhurst decision, that the conditions... We are dealing in an area that makes it like a contract.

You have got to set forth your conditions clearly, unequivocally, or the states are entitled to the benefit of any ambiguity there.

I would also point out under common law, the Third Circuit never reached the question of what common law rights, if any, the government had.

It merely addressed itself to the question of whether the federal government could administratively make a determination of whether or not you had spent money properly.

And, having made that determination, whether it could order you to repay it either directly... And, I suspect they would make the same determination as to Mr. Geller's proposed variance of offset which says you don't have to pay it directly but you have to pay it indirectly because you have to underwrite the cost of the Title I program.

Unidentified Justice: Mr. Cole?

Mr. Cole: Yes, sir.

Unidentified Justice: It strikes me that your analogy to the Pennhurst situation is by no means a complete one.

As I recall in Pennhurst, Congress had granted a certain amount of money and then the argument was that because of some things in the legislation the states were expected to put in a great deal more money if they accepted the grant.

But, here, all the money we are talking about comes from the federal government.

It is just a question of whether the states are expected to spend it in accordance with the terms on which they received it, isn't it?

Mr. Cole: You are quite right.

That is what I said, you know, Pennhurst is analogous.

Unidentified Justice: Not identical.

Mr. Cole: It is not directly on point, because you are talking about imposition of an affirmative obligation.

We are talking about the imposition of a risk.

But, we submit there should be no distinction between a remedy or an affirmative undertaking in the Pennhurst analysis.

Unidentified Justice: Well, if the focus is on what would the state expect in getting into this thing, don't you think it is far more likely that most people, if they accept a million dollars on certain conditions, that they do a particular thing with that million dollars, would expect to be held to it, then if they accept a million dollars and one of the conditions that they put in another $5 million of their own, but the condition is somewhat vague?

Mr. Cole: The answer to your question is I don't think that is clear, Justice, because this allocation of risk to the states, either by way of liability of a private action as the Court addressed in Rosado or in liability in order determination.

There is something that doesn't follow as night to day.

Unidentified Justice: But, you say allocation of risk as if this were kind of a joint venture and each... you participated in the employment of someone who made off with some funds.

But, here, if the government granting to New Jersey, New Jersey misspends the funds, it seems to me the risk would be 100 % on New Jersey in a normal situation.

It was New Jersey employees who did it.

Mr. Cole: If I may, Justice Rehnquist, here is where I think you should understand what is involved in the New Jersey case and why we are talking about it in terms of risk.

Title I, its basic policy was to address the needs of the educationally deprived student and because of the relationship with low income and educational privation it targeted... Title I funds were to be targeted to areas where there was a high concentration of low-income students.

Now, Newark... We were here in Newark and we were disallowed in Newark precisely because Newark is too poor.

What you had in Newark is you had a unique circumstance of an impoverished city with a high incidence throughout its district of low-income population and you had the problem of incomplete statistics.

I think everybody recognized that we didn't follow the normal federal approach to determining eligibility.

But, even the Secretary recognizes that we shouldn't have followed that approach in the case of Newark because the statistics you needed were simply not available.

So, everybody recognized you had to have an alternative approach and the dispute here is whether the alternative approach for calculation that we used is acceptable.

The Secretary found it was not.

The Secretary opted for a more conservative approach than that that had been done by the State of New Jersey on recalculation and by the district in the first instance.

Secondly, what is at dispute here is whether the entire Newark School District should have been declared a Title I district.

The areas, the attendance areas that the Secretary is disallowing in this audit, in some of them only one out of every three students on the Secretary's own numbers is a AFDC recipient.

I think that is true in five areas--

Unidentified Justice: Do we have to decide that?

Mr. Cole: --No, you don't, Justice, but what I am pointing out--

Unidentified Justice: I think there is something we do have to decide.

Assuming that everything the government says on the facts is correct, that the money was not used properly and according to law, how can I get my tax money back?

Mr. Cole: --Justice Marshall, our position on that is that the federal government made the choice initially that there should be no recoupment in the sense--

Unidentified Justice: Do you mean the federal government gave New Jersey the money to do with as they pleased?

Mr. Cole: --Without exposing the New Jersey treasury to risk, yes, that is our position.

Unidentified Justice: That is your view of the pre-1978 matter?

Mr. Cole: That is correct, Chief Justice.

Unidentified Justice: So, in your view, must this Court now decide whether you are right about that 1978 amendment and the legal rights of the two parties prior to 1978?

Mr. Cole: If the federal government is not pursuing a course of action that would affirmatively impose obligations on the state treasury, the answer is no.

But, as I understand the position on offset, they would want the state treasury to make up the difference in the loss of grant funds.

Unidentified Justice: I don't think the federal government is going after the state treasury.

I think the federal government is going after its money which the state treasury took.

Mr. Cole: With respect, Justice Marshall, that would be true if we had that money.

That money has been spent.

It has been spent on children.

So, in fact, they are going after the state treasury.

I started to say before in common law the Third Circuit never decided what, if any, common law rights the federal government had against the state government.

I would point out on that score that all the cases cited in the Solicitor General's brief involve individuals or involve situations where a particular program has a regulatory scheme in effect which imposes that liability.

I know of no case where common law rights against state government have been found other than the West Virginia case where it was a non-explained dictum.

Unidentified Justice: Well, we don't need to reach that question if we were to find that the statutory authority before 1978 authorized some kind of recovery, do we?

Mr. Cole: No, you do not, Justice O'Connor.

Unidentified Justice: And, I guess the main thrust of the Court of Appeals' reason for not finding the pre-1978 authority was its view that if it had existed the 1978 legislation would not have been necessary.

Mr. Cole: That is correct.

They could not find... I believe it is Section 185... would have served any purpose had the authority had existed as the federal government has alleged.

Unidentified Justice: And, perhaps that argument isn't correct either if there is a difference between offset and outright recovery in some other fashion.

Mr. Cole: That is true, but from our standpoint, we take the view that the Third Circuit probably concluded that there were no affirmative funding obligations on the state prior to 1978.

Under common law, I would make one last point and of course, we all know that in common law the principle of sovereign immunity extends to state governments as well as the federal government so it is somewhat anomalous to talk about the federal government being in the same position vis a vis the state as a private creditor at common law, wherein common law that private creditor would have had no rights whatsoever against the state government because of sovereign immunity.

Just very briefly in summary we say that the legislation that existed for Title I prior to 1978 did not impose any risk on state treasury.

In addition, there were no regulations adopted by the Secretary which assumed that he had this authority or intended to impose it.

The first regulations were adopted after 1978.

The Secretary's regulations prior to that time with respect to Title I referenced only the withholding and the suspension of funding as remedies for violations of any assurance given.

So, it is a case where the Secretary did not by regulation assert the power.

The statute, we say on its face, does not provide for the remedy the Secretary seeks to invoke and for that reason and as a matter of fairness this Court should not find that the state treasury is liable for any misexpenditures prior to 1978.

After 1978 the problem does not exist because Congress has affirmatively provided the authority the Secretary seeks to exercise.

Unidentified Justice: May I ask you just one more question, Mr. Cole?

Mr. Cole: Yes, Justice Stevens.

Unidentified Justice: Would you agree that if, as a condition of future grants by the federal government, they said we are not going to give you any more money unless you first repay the amount that was determined to be misspent under this audit, would they have that power?

Mr. Cole: Not prior to 1978.

I don't believe so, Justice Stevens.

Unidentified Justice: They couldn't even say we will eliminate you from future programs unless you repay?

Mr. Cole: I don't think the withholding or suspension... I think that would be an abuse of that provision.

What they could do is the change of state from a grants funding program to a reimbursement program and, therefore, really strictly police its expenditures in the future.

Unidentified Justice: But then could they subtract from the reimbursement under such a program the amount that they found due under this audit?

Mr. Cole: Well, the position that we took in our brief is that they have some offset authority.

Unidentified Justice: The answer is yes, they could do that?

Mr. Cole: Under that position, yes.

Chief Justice Burger: Do you have anything further, Mr. Geller?

Mr. Geller: Just one or two things, Mr. Chief Justice.

This case involves in many ways a very confusing array of statutes and I just want to clarify one thing that Respondent Pennsylvania may have confused in our discussion of the withholding remedy under the pre-1978 statute which is Section 241j of Title XX.

That remedy only applies to current violations of the Act.

The Secretary could not have used that remedy for past violations of the Act and it is an extremely drastic remedy, the one that New Jersey or Pennsylvania was suggesting to use, because prior to 1978 all of the funds to a SEA or a LEA and not just an amount that is equal to the amount of past misspent funds would have had to be withheld even if Section 241j were to cover past withholdings.

Now, secondly, Justice Stevens' question, there is no question that there was an order to repay the money.

The only thing that was left open was the method of collection.

The federal government has been proceeding the way the Federal Claims Collection Act expects it to proceed.

In other words, to make an initial request for repayment, but if that is not met with a check for the full amount, then to consider a number of other options as to how to collect the money.

And, we haven't reached that point yet in the collection process.

ORAL ARGUMENT OF KENNETH S. GELLER, ESQ. ON BEHALF OF THE PETITIONER -- REBUTTAL

Unidentified Justice: You say there is no question there was an order, but it is a very strangely worded order, Mr. Geller?

Mr. Geller: Well, I think even if your question were correct in assuming that this was a final order in some way, that would simply to to whether the Education Appeal Board--

Unidentified Justice: It is final in the sense of determining the amount due.

Mr. Geller: --Yes, but--

Unidentified Justice: There is nothing in there directing payment by anyone to anyone at any particular point of time.

Mr. Geller: --I think the follow-up letters make quite clear--

Unidentified Justice: Are they in the record?

Mr. Geller: --They are.

In fact, one--

Unidentified Justice: And, are they part of the order in your judgment?

Mr. Geller: --One of them is appended to--

Unidentified Justice: Are the follow-up letters part of the order in your judgment?

Mr. Geller: --I think--

Unidentified Justice: Do we have to look at those to know what the order means?

Mr. Geller: --I think to inform one's self of what the Secretary means--

Unidentified Justice: To remove any question about the meaning of the order?

Mr. Geller: --Yes.

Now, I know... I can't really resist the temptation, much as I thought I should, to rebut what the Respondent New Jersey has just said about the technicality of the violations here.

I would simply refer the Court to page 43a of the Appendix to the Petition for a description of the way that New Jersey computed the amount... the number of its eligible schools in Newark, New Jersey, including certain things in the enumerator of a fraction but not in the denominator and as a result having a great extra number of eligible schools in the New Jersey School District.

Now, finally, I would just like to refer the Court to a recent decision which just came to our attention a few days ago.

It is a decision of the Sixth Circuit decided on April 5th.

It is Commonweath of Kentucky versus Donovan.

It is a case involving the CETA program but in many ways it involves the issues presented here.

And, the Sixth Circuit, we think quite correctly, rejected a Pennhurst type argument that a state did not have to pay over essentially misspent funds because the particular remedies were not explicitly stated in the statute.

Thank you.

Chief Justice Burger: Thank you, counsel.

The case is submitted.

We will resume arguments at 1:00.

Attribution:

The OYEZ Project

Featured:

Watt v. Alaska - Oral Argument

Wed, 18 Feb 2009 06:13:17 +0000

Case:

Watt v. Alaska

Media File:

79-1890_19810113-argument.mp3

Related Transcript:

79-1890_19810113-argument_transcript.xml

Transcript:

ORAL ARGUMENT OF LOUIS F. CLAIBORNE, ESQ., ON BEHALF OF THE FEDERAL PETITIONERS, CECIL D. ANDRUS, ET AL.

Chief Justice Burger: We'll hear arguments first this morning in Andrus v. Alaska and the consolidated case.

Mr. Claiborne, you may proceed whenever you are ready.

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

We deal this morning with the Kenai Moose Range which I am told has been renamed the Kenai National Wildlife Refuge a month ago in the enacted Alaska lands bill.

That range or refuge is in south central Alaska, just south of Anchorage, and east of Cook Inlet.

It comprises approximately two million acres of lands, all within the Kenai Peninsula Borough, boroughs in Alaska being comparable to counties elsewhere.

It was established by withdrawal of public domain or public lands in the United States, some 40 years ago.

Ever since the mid-1950s oil and gas leases have been issued by the United States covering portions of that acreage and substantial revenues have been derived therefrom.

Indeed, since 1965 approximately $80 million in royalties, rents, and bonuses have accrued from those leases.

The issue presented to the Court is how those federal revenues from this refuge ought to be distributed, whether according to the formula in the Mineral Leasing Act of 1920, as Alaska maintains, which would have the result of apportioning 90 percent, in the particular case of Alaska, to the State and ten percent retained in the federal treasury; or whether the appropriate formula is that ordained by the Wildlife Refuge Revenue Sharing Act, an Act originally passed in 1935 and amended in 1964, relevant to this case.

According to that formula, the same revenues would be divided 25 percent to the county out of which these lands have been created, or this refuge has been created, and the remainder, 75 percent, would go to the Conservation Fund.

In practice, the first formula, the formula of the Mineral Leasing Act of 1920, was followed.

And indeed, until anyone thought about it, which was so far as the record indicates for the first time in 1975, that distribution formula obtained.

At that time, in 1975, the Fish and Wildlife Service in Alaska wondered to itself, and then out loud, whether the right formula was being applied.

They accordingly inquired of the Solicitor of the Department of the Interior for advice.

He gave the opinion that it was being done wrongly and that the formula of the Refuge Act, 25 percent to the county, is the one that should have obtained at least since 1964.

He, in turn, the Solicitor, asked the opinion of the Comptroller General of the United States.

The Comptroller General agreed with the Solicitor and ruled accordingly.

Alaska then asked for reconsideration of that opinion, which was duly given, but the Comptroller General adhered to his view and reaffirmed his previous ruling.

At this point the Kenai Peninsula Borough would have been the recipient under the Refuge Act and who would now become the recipient under the ruling of the Comptroller General, brought suit against the Secretary of the Interior seeking a declaration that the Comptroller was indeed correct and that his decision ought to be followed; and also asking that the Secretary of the Interior be required to recoup the monies now determined to have been erroneously paid to Alaska rather than to the county in the previous decade.

Promptly thereafter the State of Alaska initiated a separate lawsuit against the Secretary of the Interior, the Secretary of the Treasury, and the Comptroller General, seeking to set aside the ruling of the Comptroller General and to obtain a declaration and an injunction that the old formula that had been followed in practice should continue to be followed, and that Alaska should continue to receive 90 percent of these revenues.

The suits were consolidated in the district court and in the meantime the monies accruing from the time of the filing of the suits were held in suspense, where they still are.

Unidentified Justice: Mr. Claiborne, is there any attempt on the part of the Government to recover the money paid between 1964 and 1975?

Mr. Claiborne: Your Honor, the Government resisted the complaint of Kenai seeking to compel that action.

The ruling having gone against the Government in the district court and the court of appeals because there's been no occasion to consider whether, should that ruling be reversed here, it would be appropriate to seek recoupment, in our view it's a decision which the Government is free to embark upon but cannot be compelled to undertake.

No decision has been reached with respect to what I've--

Unidentified Justice: If you're right, Alaska has about $50 million that it shouldn't have, doesn't it?

Mr. Claiborne: --That is so, Mr. Justice Stevens.

It may well be that the appropriate course would be for the United States to bring an action, if necessary, to recoup that money for the benefit of the borough.

Unidentified Justice: Have there been occasions, Mr. Claiborne, where the United States had this type of a claim in broad terms and took no action to enforce the claim?

Mr. Claiborne: I think, Mr. Chief Justice, without being able to cite precedents, that one can find examples on both sides; that is, cases in which the United States for reasons of equity thought it improper to seek to redress the past; other instances in which it was thought right to recoup the money and redistribute it in accordance with what is now declared to be the correct rule.

Unidentified Justice: Well, Mr. Claiborne, both the question of Justice Stevens and the question of the Chief Justice suggest that the answer reached by the 9th Circuit is wrong in this case.

I realize there's a good deal of money turning on the issue, but when you get right down to the statutory materials and go to the presumption against implied repeals and the specific governing the general and other such maxims, on the legal issue isn't it pretty close to a coin toss?

Mr. Claiborne: I would not have thought so, Mr. Justice Rehnquist, but I own that two courts have held against our position and we cannot therefore say that it's absolutely clear cut that the Government's view as announced by the Comptroller General and as we urge here is the correct one.

I do invoke the plain meaning rule as the governing canon of construction in this case and this seems in our submission a peculiarly appropriate instance in which Congress spoke as clearly as one could hope for, much more clearly than is the usual case, and one in which one ought to accept Congress at its word.

And if one follows that analysis which we submit is the correct one, then the case is indeed plain that an error has been committed for these ten years and perhaps under those circumstances the proper remedy is to redress that past error.

We are not speaking of the individual private persons who have relied to their detriment on the error of the Administrator who is speaking of a state whose mineral revenues are so generous that they are able to repay their own citizens.

At all events, as the Court well knows, the district court ruled against the Secretary, despite finding that the plain meaning of the statute was as contended for, but holding in what can only be described as a most unusual construction of the statute that the word "minerals", though in the statute apparently applicable to both refuges made up of acquired land and those made up of public domain lands, must be construed by a judicial decree with the words of the statute so as to apply only in the one case and not in the other, the reasoning behind that being that this would accomplish no change in the law and that there was insufficient indication that Congress by adding the word "minerals" to the Revenue Sharing Act meant to accomplish any change of the law.

The court of appeals affirmed that decision, basically on the same reasoning.

Now this case reaches the courts, and at least this Court, only because of two circumstances that occurred after the relevant statute had been enacted; unfortunately, not such rare occurrences, but still unfortunate.

The first is that the Department of the Interior was very slow in implementing the change of law, if that's what it was, which had occurred in 1964.

The second was that Congress, though having a clear opportunity to indicate which was the correct view of their own statute, expressly declined that invitation in 1978 and said, since the matter is before the Court, we will let the courts decide what we meant in 1964 rather than resolving it themselves and sparing this and the other courts the need for resolution.

Now the statute on its face, everyone has agreed, at least until Alaska filed its brief in this Court, was perfectly plain.

Unidentified Justice: Mr. Claiborne, before you get into your analysis of the '64 statute, would you tell me what is the statutory authority for the Secretary to derive revenues from the sale of timber, hay, grass, and all these others, sand and gravel, the things other than minerals?

Is there some statute that authorizes the disposition of those?

Mr. Claiborne: The authority as understood by the Department and indeed as recited in rulings of the Solicitor is that the so called Wildlife Refuge Revenue Sharing Act as originally enacted in 1935 does authorize the Secretary... and, indeed, the words are reasonably clear to that end... does authorize the Secretary to grant sales or dispositions, which in this context are understood to include leases, of those products... in the case of some of the products it's an outright sale, but in other instances it's leases... with respect to both refuges made up of acquired lands and those made up of public domain lands, without distinction.

Unidentified Justice: If the Mineral Leasing Act did not apply would that statutory authority have authorized the making of the leases that are involved here?

Mr. Claiborne: We suggest that that is a possible construction of the 1935 Act, even before its amendment, and indeed that was the ruling of the Acting Solicitor of the Department of the Interior in 1946, before the Acquired Lands Act had been passed, and therefore the only authority then available with respect to mineral leases on acquired lands.

He read the word 1935 Refuge Act as including the lease for oil and gas on acquired lands.

If it applied to acquired lands, it likewise applied to public domain lands, though unnecessarily, since the Mineral Leasing Act of 1920 was already available for that purpose.

We do not deem it necessary for this Court to decide that question, that is, what the law was before 1964, because in 1964 Congress added the word "minerals" to those revenues which could be leased, those resources which could be leased, and the revenues from mineral leases as among those that ought to be distributed according to the formula of the Act.

And it was that very plain action of adding the word "minerals" that moots out the question--

Unidentified Justice: It isn't entirely mooted out, because isn't it normally true that the division of revenues would be computed according to a statute that also grants the authority to make the lease in the first place?

It's somewhat unusual in your position to have the statutory authority for everything but minerals in one statute, and the mineral leasing authority in another statute, but say that doesn't govern the way the money should be divided up.

Mr. Claiborne: --Mr. Justice Stevens, it is certainly neater, if that's an appropriate word, if the same statute both gives the authority and governs the distribution of revenues.

I would point out that all leases of public lands are distributed, or granted, under the Mineral Leasing Act of 1920 so far as the mechanics are concerned, whether they're acquired lands or not.

The Acquired Lands Act, for instance, simply says, you may apply the Mineral Leasing Act of 1920 to acquired lands as you have been doing with respect to other lands.

I have--

Unidentified Justice: Mr. Claiborne, isn't there some real basis, though, for treating acquired lands and domain lands differently with respect to how much of a share of the royalty should go to a county?

Mr. Claiborne: Mr. Justice White, that may have been the thought, but as--

Unidentified Justice: --Well, there would be a basis for doing it.

Mr. Claiborne: --There would.

Unidentified Justice: After all, acquired lands does reduce the county's tax base.

Mr. Claiborne: But, considering the revenues from all other sources, all clearly divided under the Refuge Act, whether from acquired or from public domain lands, it is difficult to see why mineral revenues, that is, oil and gas revenues, should be segregated for different treatment.

Now, there is a different formula.

It's not simply 25 percent in the case of acquired lands.

there are two other options available, more generous options potentially, and in practice seem to be more generous, than with respect to the lands that are in refuges that come from the public domain.

Unidentified Justice: Well, the '64 amendments were aimed at facilitating the acquisition of lands?

Mr. Claiborne: That was plainly the main purpose of the '64 amendment.

But quite incidentally two other things were done.

One was to authorize expressly the granting of leases of public buildings and public accommodations, and having those revenues distributed pursuant to the Refuge Act, something the Comptroller General had ruled could not be done; and then tying up this problem about minerals that was ambiguous before.

Unidentified Justice: It doesn't... perhaps the county might be entitled to share more heavily with respect to acquired lands but how about the public domain lands, that they never were taxing anyway?

Mr. Claiborne: Well, they do receive a share of all other revenues, and it's difficult to appreciate why they shouldn't receive a like share of mineral revenues.

Because one could argue that the State receives it for their benefit in any event, but why should they not receive it directly in the locality?

I am trespassing on the time of my co counsel, and will allow him to continue.

Chief Justice Burger: Mr. Cranston.

ORAL ARGUMENT OF CHARLES K. CRANSTON, ESQ., ON BEHALF OF THE PETITIONER, KENAI PENINSULA BOROUGH

Mr. Cranston: Mr. Chief Justice and may it please the Court:

My name is Charles Cranston from Anchorage, Alaska, representing the Kenai Peninsula Borough.

I think I'd like to start off by addressing the very question that Justice White asked, and that is, is there not some justification for treating differently counties with reserved land refuge from those counties which have acquired land refuges?

And my answer to that is, no, there is no difference for treating those counties differently.

And I'll explain why I believe that is the case, and perhaps with that we can understand really why this case is here.

Unidentified Justice: Just by way of definition, to clarify it for me at least, when you speak of the term "acquired lands", are those always lands which have been on the tax rolls before they were acquired?

Mr. Cranston: Presumably so, Mr. Chief Justice.

I believe that certainly under the new Act, '78 amendment, acquired lands are called fee lands, and those were lands which were previously held in fee by private individuals and reacquired by the Government.

Thus, if they were held in fee, presumably they were taxed.

The reserved lands, on the other hand, were always part of the public domain and were never taxed.

I think if you look at the Kenai Peninsula Borough itself we have a striking example of why the reserved land county should be the recipient of these wildlife refuge revenues.

In the case of Kenai there have been two million acres withdrawn from the tax roll.

Admittedly those lands were never on the tax roll, but nevertheless two million acres of land remain unavailable for the tax base of this borough.

If we apply conservative property tax estimates, that will equal anywhere from six to $10 million a year of tax revenues.

Unidentified Justice: Are you relating that to current rates of tax in that area?

Mr. Cranston: Yes, Mr. Chief Justice, I am.

I am assuming a very low appraisal of $100 an acre and a very low mill rate of from three to five mills, which is roughly within the range of the current tax rate in that borough.

Now, considering the fact that this wildlife refuge has development, oil and gas development, which requires services such as fire protection, it of course increases the population of the borough, schools, the development in essence adds to the load on the borough to provide public services.

Unidentified Justice: But, Mr. Cranston, is that any different than the situation of any other western state that was admitted to the Union, where the Federal Government started out owning 70 or 80 percent of the land in the state?

Mr. Cranston: It could be, Justice Rehnquist, in that I believe it's unusual in all of the public domain to have development of that public domain, which adds to the services which the local government must provide.

That is to say, simply, if you have grazing on BLM grazing land, that doesn't necessarily increase the type of intensive use of the land that requires additional services which normally are provided by the county's tax base.

And so I believe that in the case of oil development, albeit on a wildlife refuge, there is a legitimate reason for treating the county with a reserved refuge the same as one with an acquired refuge, because the net result is the same.

You have the development, you have the increased population, you have the need to provide the services, there is no difference in rationale as to why one should be treated differently if you look at it from the standpoint of the county and if you look at it from the revenue obligation of the county, that is the threat to the county's revenues and the threat to the county's tax base.

Unidentified Justice: But the county's tax base derives ultimately from the authority of the Alaska Legislature, does it not?

Mr. Cranston: That's correct, Your Honor.

But the Alaska Legislature has permitted counties to tax land as well as improvements, and it is certainly expected that when the land itself is taken out of the tax base, there certainly is significant reduction in available tax revenue to the county.

That is, it may only then tax the improvements, and in the case of an acquired refuge, the county, as in Plaquemines Parish, Louisiana, is a good example, may tax both the land and improvements and there is really no reason why one should be treated any differently than the other.

And I think this is what Congress recognized certainly in the 1964 amendment, when if you read the statute, if one were asked to draft a statute which gave authority to the Secretary to transmit 25 percent of reserved land refuges revenues to the counties, and 25 percent of acquired land refuge revenues, you couldn't come up with language any different from that which appears in the Act.

And I believe Congress must have recognized the similarity of result both as to acquired and as to reserved land refuges.

Thus, again going to the question with which I started this argument, there is really no basis upon which to distinguish between the two types.

And I would also like to address the question which Justice Rehnquist did ask early in this argument, is it not close to a coin toss as to how these statutes should be interpreted?

And again I would answer that question by saying, no, it is not close to a coin toss.

I think the Mineral Leasing Act of 1920 and the Wildlife Refuge Sharing Act are clearly inconsistent.

You can't have one and the other.

There has to be a choice, either the Mineral Leasing Act applies, or the Wildlife Refuge Sharing Act applies.

And this Court on numerous occasions has stated, and most recently in SEC v. Sloan, that where there is a clear inconsistency between the statutes involved, that apart from any express indication of congressional intent, there is an implied repeal of at least the inconsistent provisions.

Now, we certainly aren't saying that all of the Mineral Leasing Act goes.

That of course is not the case.

But certainly those provisions of the Mineral Leasing Act which allocate revenues between the counties and the Federal Government must apply in this case, since otherwise you have the clear inconsistency.

Unidentified Justice: You do concede that there is a general policy against implied appeal you not?

Mr. Cranston: Certainly, Your Honor, and this Court has recognized that many times, but the exception to that policy against implied repeal is certainly pointed out most strongly by this case, where there is such a clear inconsistency between those statutes, and given that inconsistency, I believe that consistent with Sloan--

Unidentified Justice: Mr. Cranston, how do you explain the fact that apparently the change was drafted by the Department of Interior as a perfecting amendment, and yet they didn't apparently realize that the change meant what you now say it means, for at least ten years?

Mr. Cranston: --Certainly Interior in its early letters, when this Act came before Congress in 1962, added the word "minerals", and called it a perfecting amendment.

I think there are probably two answers to the question, Your Honor.

One is that the amendment was simply recognizing what had been at least the idea or the concept of Interior before the 1964 amendment, and that's reflected in numerous memoranda which are in the Appendix.

I won't refer them, but I think they've been referred to in the briefs.

Secondly, I think it's fair to say that the effect of the perfecting amendment did not filter down to those individuals in the Fish and Wildlife Service, principally in Alaska, people who were responsible for administering the law.

I think my only explanation can be that there was an administrative oversight inconsistent with the statute and certainly inconsistent with the desires of Congress.

Unidentified Justice: Well, is it not correct that your basic position is that it was much more than a perfecting amendment, it made a fundamental change?

Mr. Cranston: It certainly made a change with respect to ultimately how the revenues were to be distributed.

I would not concede that it made a fundamental change in the overall statutory scheme, since before the 1964 amendment there was certainly reason to believe that mineral revenues could be distributed under the 1935 Act as provided in the 1964 Act.

That is, that simply it was... just that.

Unidentified Justice: But the people who wrote the checks didn't think that.

Mr. Cranston: I don't... well--

Unidentified Justice: And nobody complained for whenever it's... '55 or so, and if you want to add another ten years, then there's 20 years of construction of the Act.

Mr. Cranston: --Certainly the people who wrote the checks didn't follow the Act.

Now, what they thought, I don't know, because--

Unidentified Justice: I mean, I'm talking about the period before 1964.

Mr. Cranston: --Okay.

Certainly, before 1964 that's true.

They did not think, or at least give expression to what the Act could have permitted.

But again let me point out that there was never any explanation of why they did what they did until 1975, and when it was first brought to the attention of those people who could explain what was being done, the explanation was consistent with both the position taken by the Solicitor today and by the Kenai Peninsula Borough.

Unidentified Justice: This is not the first time that the Department of Interior has had a change in position from one period to another, is it?

Or, perhaps I shouldn't put that to you, since you're not responsible for the Department of Interior.

But in the oil shale case we had exactly--

Mr. Cranston: Well, Mr. Chief Justice, that's a difficult question for me to answer, but I... human nature being what it is, I assume that there may have been other instances where positions have changed.

But certainly there's nothing wrong in... yes?

Unidentified Justice: --Well, Mr. Cranston, let me ask you one you probably, won't be hard for you to answer.

What's the status of a county or a borough in Alaska?

Mr. Cranston: A borough, Justice White, is exactly the same as a county, say in Maryland or Virginia.

It has rather broad area wide--

Unidentified Justice: Well, is it a creature of the State?

It's a creature of the State, I suppose, and it has the powers... are they constitutionally granted powers or are they legislative?

Mr. Cranston: --A county, unlike... perhaps the unique thing about an Alaska borough is it is a self chosen local government.

That is all of Alaska is not divided--

Unidentified Justice: It's a home rule sort of thing?

Mr. Cranston: --into boroughs.

It's done by local option under statutory authority.

Unidentified Justice: Does it sort of have home rule authority?

Mr. Cranston: It may.

It may have home rule authority if the populace wants that.

Unidentified Justice: Well, let me ask you this.

Could the Alaska Legislature, at least prospectively, require the boroughs or counties to turn over their revenues from oil and gas leases to the State?

Mr. Cranston: That is a question that may be difficult.

I would say that if--

Unidentified Justice: If the State is ultimately responsible, if it determined to take over, say, the financing of all the schools throughout the State and decided to take all the revenues from oil and gas leases into the State treasury and then redistribute them, would there be some barrier to that?

Mr. Cranston: --There's certainly, I think, under the Alaska Constitution, nothing that grants a constitutional right for the existence of a--

Unidentified Justice: So that, if the powers that be in Alaska want to change the result of this case, either way it went, I suppose, nothing we could do about it.

Mr. Cranston: --That is conceivably possible, Your Honor, although I think that would be true in any other state as well as Alaska.

Unidentified Justice: I just wonder why we're having to settle a fight between the county and the State here when you could settle it yourself; the State Legislature could settle it.

Mr. Cranston: Again, I think the simple answer is that we have two inconsistent statutes and until that is done there is no other alternative.

Unidentified Justice: But the State Legislature could... it sounds like they control the distribution no matter what the federal law said.

Mr. Cranston: I'm not willing to concede that--

Unidentified Justice: I wouldn't if I were you.

Mr. Cranston: --the county has a right to the money under federal law.

I'm not certain that that could happen, and I certainly have not briefed that point.

Unidentified Justice: Could I ask one more question, please, Mr. Cranston?

Because if you lose, the State of Alaska gets 90 percent.

If you win the county gets 25 percent.

What part of the 90 percent would probably inure to the benefit of your county?

In other words, what part of the total State of Alaska does the Kenai Borough represent in either economic or population or some kind of terms?

Mr. Cranston: Probably the borough would get considerably less than that which it would be entitled to under the Wildlife Refuge Revenue Sharing Act.

The State of Alaska now has roughly, under the latest census, 400,000 persons.

I think the Kenai Borough might have 20,000.

So the percentage of--

Unidentified Justice: About five percent--

Mr. Cranston: --Right.

And I'd say it's a fair statement that these revenues are probably distributed on a somewhat per capita basis.

Thank you very much for your time.

Chief Justice Burger: Mr. Koester.

ORAL ARGUMENT OF G. THOMAS KOESTER, ESQ., ON BEHALF OF THE RESPONDENTS

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

My name is Tom Koester and I represent the State of Alaska in this proceeding.

Alaska's position here is really quite straightforward.

the Moose Range leases, the leases on the Moose Range with which we're dealing here, were issued under the authority of the Mineral Leasing Act of 1920, and Section 35 of that Act provides specifically that the revenues from leases issued under the authority of the Act are to be distributed in a certain fashion.

In Alaska those revenues are to be distributed 90 percent to the State and 10 percent to the Federal Government.

It is our position that the 1964 amendment to the Wildlife Refuge Revenue Sharing Act did not change the scheme set out in the Mineral Leasing Act for distribution of the revenues from the Kenai Range.

Our position is based on an analysis, first, of the policies underlying Section 35, on the legislative history of the 1964 amendment, and on the administrative practice of the Department of Interior with respect to the revenues received from the Kenai Range.

Now, the policy underlying Section 35 of the Mineral Leasing Act has been in effect since 1920, and that is a policy by which Congress has determined it is appropriate to share revenues from mineral exploitation of the public lands in this country with the states in which those lands are located.

That has been the policy since 1920.

It was recently reaffirmed in the 1976 amendments to the Mineral Leasing Act.

The policy with respect to Alaska has been that Alaska should receive a greater portion than the other states.

There are two reasons.

First, Alaska is not covered by the Reclamation Act, into which a significant portion of revenues from public lands in other states is placed.

But more importantly, as the legislative history cited in our brief with respect to the Alaska Statehood Act demonstrates, Congress was concerned when it conferred statehood on Alaska that there was a very distorted land ownership pattern in the Territory of Alaska.

The Federal Government owned 99 percent of the land.

In addition, significant portions of the public lands in Alaska were withdrawn for purposes which Congress found, withdrawals that Congress found were excessive.

As a result, Congress provided that 90 percent of the revenues from those lands would be given to the State because these withdrawals were hampering development in Alaska.

This would include public lands that were in the withdrawal status, if those lands were leased for mineral exploitation, as the Kenai Moose Range was.

In accordance with these policies underlying Section 35 of the Mineral Leasing Act, the Department of Interior distributed the oil and gas lease revenues from the Kenai Moose Range pursuant to Section 35, from the date of statehood until this question was asked by the Director of the Fish and Wildlife Service in 1975.

So we have a practice from 1959 through 1975 unbroken, of these revenues being distributed pursuant to Section 35.

The Director's 1975 question focused on an amendment 11 years earlier, in 1964, to the Wildlife Refuge Revenue Sharing Act.

Now, the purpose of the 1964 amendment, it is agreed by all parties, was to remove or eliminate opposition on the part of states to the acquisition of land by the Fish and Wildlife Service for wildlife refuges.

The problem was that once these lands were acquired, they were taken off the tax rolls, and that the existing provisions of the Wildlife Refuge Revenue Sharing Act were inadequate to compensate the local governments for the lost revenues.

Because the governor of an affected state could block acquisition, the Fish and Wildlife Service found that it was unable to acquire land because the counties were afraid they were going to lose money.

Now, it should be noted that this issue has nothing to do with public land revenues, it has nothing to do with the congressional policy in Section 35.

The public land revenues are to be shared with states.

Congress passed the amendment changing the formula for distribution of revenues from acquired lands and eliminated the obstacle to continued land acquisition.

But at the same time it gave rise to the Director's question in 1975 by adding the word "minerals" to the list of revenue sources governed by the Refuge Revenue Sharing Act.

Now, as has been mentioned, it was described in the cover letter, this proposal to add the word Mr. Justice White.

Nor is the addition of the minerals mentioned anywhere in the subsequent legislative history.

Now, in testifying on the proposed bill, we believe it is significant that the Department of the Interior witnesses stated that this bill if passed, including the word "minerals", would not affect the distribution of revenues from public lands.

In fact, they provided charts showing what the revenue distribution was under the existing law and that it would be under the amendment if passed.

It's significant, we believe, that revenues attributable to the Kenai Moose range both in 1962 and in 1964 totalled less than $10,000.

At this time the oil and gas revenues from the Kenai Moose exceeded three and a half million dollars.

And it is significant that those oil and gas revenues were not included in the charts prepared by the Department of Interior for the use of Congress addressing this amendment.

The witnesses also testified that some oil and gas revenues currently were being distributed under the Wildlife Refuge Revenue Sharing Act, but no additional oil and gas revenues would be subjected to that distribution as a result of this amendment.

Well, the Comptroller General had ruled in 1942 that the Refuge Revenue Sharing Act did not reach oil and gas revenues.

That was still the administrative interpretation by the Comptroller General, charged with overseeing expenditures of revenues received by the United States in 1964 when this amendment was passed.

Oil and gas revenues from acquired lands were subject to the formula contained in the Refuge Revenue Sharing Act but they were subjected to that formula by virtue of Section 6 of the Mineral Leasing Act for acquired lands.

Unidentified Justice: The Kenai Moose Range was established in '41, wasn't it?

Mr. Koester: Right.

And it was created out of public lands, not acquired lands.

So, under the Comptroller General's ruling, those revenues would not be governed by the Refuge Revenue Sharing Act.

If the Kenai Moose Range had been created out of acquired lands, they would have been governed by the formula in the Refuge Revenue Sharing Act, but only because Section 6 of the Mineral Leasing Act for acquired lands directed that they be distributed in the formula in the same way that non mineral revenues from those acquired lands were to be distributed.

Now, the Interior Department witnesses testified that no new revenues would be subjected to the formula in the Refuge Revenue Sharing Act by virtue of the amendment, and this was true even though Congressmen were concerned at the time they were considering this amendment that the revenues available to the Department of Interior to make these payments to counties were going to be insufficient.

It would seem that if Interior proposal to add the word $4 million a year more from the Kenai National Moose range.

Or certainly, Congress, if it had intended the word $4 million annually available, which will eliminate any concern in this regard.

Now, following the passage of the amendment, the Department of the Interior continued its pre-1964 practice of distributing the Kenai Moose Range oil and gas revenues pursuant to Section 35 of the Mineral Leasing Act.

Unidentified Justice: Is this part of your argument directed to your submission that the word "minerals" in this statute does not include oil and gas?

Mr. Koester: Well, I think perhaps--

Unidentified Justice: The argument is made in your brief.

Mr. Koester: --The argument is made in our brief.

The petitioners in this case have throughout maintained that the plain meaning of the word "minerals" compels the conclusion that the oil and gas revenues from Kenai National Moose Range are subject to distribution under the Refuge Revenue Sharing Act.

Well, Alaska's position has always been, and still is, in fact, that this is not an appropriate case for application of the plain meaning rule.

Here you have two statutes which lead to diametrically opposed results.

However--

Unidentified Justice: But you also have an argument that oil and gas are not within the plain meaning of the statute.

Mr. Koester: --Right.

I think what our argument is, is that if this case is going to turn--

Unidentified Justice: And I was wondering if you're directing yourself to that argument now, or not?

Mr. Koester: --If this... no, I'm not, except in response to your question.

Unidentified Justice: Right.

Mr. Koester: If this case is to turn on the plain meaning rule, then it must be resolved that Section 35 controls, because Section 35 and the Mineral Leasing Act in general speak specifically to oil and gas, whereas the word "minerals" in many cases is construed to include oil and gas, in some cases is construed not to include oil and gas, but in any event requires construction.

It is not a plain meaning, it is not susceptible to plain meaning construction, as including oil and gas.

It requires a process of construction.

But our basic position is that this is not an appropriate case for the application of the plain meaning rule, because we have two statutes involved, and even under a plain meaning rule interpretation of the word 35, which under its plain meaning leads to an opposite result.

So a process of construction is required here, and one must try to determine what Congress intended.

Now, after Congress passed the 1964 amendment, and added the word pre-1964 practice of distributing these revenues pursuant to Section 35 of the Mineral Leasing Act.

Now, this administrative practice was consistent, entirely consistent, with the policy underlying Section 35 of the Mineral Leasing Act, that is, to share public land revenues with states.

It also was consistent with the congressional policy with respect to public lands in Alaska, that Alaska should receive 90 percent of those revenues, because of the excessive number of withdrawals in Alaska.

And finally, it is consistent with the testimony of the Department of Interior witnesses, when testifying before Congress, that this amendment would have no effect on the distribution of public land revenues, that it would not subject additional oil and gas revenues to distribution under the Wildlife Refuge Revenue Sharing Act.

However, when the Director in 1975 asked his question, whether this amendment 11 years earlier changed the rules, the Solicitor of the Department of Interior and the Comptroller General adopted the position which is now being taken by the petitioners in this Court.

They rested their conclusion on the plain meaning rule.

Now I believe that, as we have shown, the plain meaning rule is inappropriate unless it is going to be used to find that Section 35 controls.

But what we believe is more interesting at this point is the argument which has been raised by the federal petitioners in their brief, and that is somehow that in 1964 there was a perception that the Wildlife Refuge Revenue Sharing Act controlled these revenues.

Now, under the Comptroller General's rulings it did not, but that there was somehow this perception on the part of senior Department of the Interior officials, that this perception was communicated to Congress... although they concede that it may possibly only have been communicated by inference... and that Congress may therefore have added the word "minerals" based on this perception or understanding, and the Court now should effectuate that presumed congressional understanding by construing the word "minerals" to include the oil and gas revenues from the public lands of the Kenai National Moose Range.

Well this argument requires several assumptions before you can get from Point A to Point B.

The first is that both the Interior Department officials and Congress were unaware of the Comptroller General's rulings.

The second is that they were unaware that the Kenai Moose Range was generating $4 million a year in oil and gas revenues because their testimony was, and the charts showed, the Kenai revenues were only $10,000 a year.

The third is that they were unaware that Interior was in a process of distributing these revenues under a totally different statutory scheme, under Section 35 of the Mineral Leasing Act.

And finally, as has been discussed, that Interior continued to distribute these revenues in the wrong way, or a way which was not perceived by the senior officials of the Department of the Interior as being the proper manner.

We submit that this chain of assumptions that must be made before one reaches the result sought by the petitioners simply is untenable.

It requires too much of a leap of fate.

We believe Justice Brennan's comment in the SEC v. Sloan case suggests a more appropriate assumption and that is that this continuous process by which the Department of the Interior distributed the revenues pursuant to Section 35 of the Mineral Leasing Act more accurately reflects both the Department of Interior's understanding and Congress's understanding.

If there is any doubt in this regard, one would suggest that because the Secretary of the Interior... the evidence is that that the Secretary of the Interior gave the directive to continue this practice.

So even if his senior officials were confused, the Secretary wasn't.

Unidentified Justice: Well, the Secretary doesn't ordinarily turn to the Comptroller General for legal advice, does he?

Mr. Koester: I don't believe so.

He turns to his Solicitor for legal advice.

But here, I think, the issue really is that no legal advice was necessary.

In 1964 everyone understood that public land oil and gas revenues, whether in wildlife refuges or not, were subject to distribution under Section 35 of the Mineral Leasing Act.

So no legal advice was necessary.

It was not necessary to get a formal opinion at that time.

The Secretary simply said, continue the preexisting practice, because there is no need to change it.

Now, this construction... that is, the construction adopted by the Secretary of the Interior in 1966 and continued until 1975... leaves intact without an implied amendment or repeal the congressional policy regarding the sharing of revenues under Section 35 of the Mineral Leasing Act, revenues from public lands.

It also leaves intact the specific congressional policy that revenues from public lands in Alaska should be shared on a basis of 90 percent to Alaska and ten percent to the Federal Government.

Now, in its reply brief and here today, Kenai... and briefly alluded to by Mr. Claiborne... discuss Alaska's changed economics.

And as I'm sure the Court is aware, Alaska now is enjoying rather large public revenues from state owned mineral lands.

However, this seems to me to be beside the point.

Congress in 1964 could not foresee that Alaska would enjoy this kind of bonanza.

Moreover, these revenues are from nonrenewable resources.

What is here today will be gone tomorrow.

Unidentified Justice: I suppose Congress could change the formula now, too, couldn't it?

Mr. Koester: I believe, if it is to be changed, that is, for Congress to do it--

Unidentified Justice: Oh, I know, they could do it; there would be no problem.

Mr. Koester: --Well, I think there still might be an argument here because, actually, this was one of the fundamental underpinnings which underlay the Statehood Act and while it may or may not rise to the level of a compact, and I don't believe that that issue really needs to be decided here, it is certainly an issue that that will be--

Unidentified Justice: Well, I would think, if you think it's a substantial question, your argument would be that the '64 amendments were unconstitutional, if construed to change the distribution.

Mr. Koester: --Well, I think it's sufficiently clear though, here, that Congress did not intend to change those--

Unidentified Justice: Well, what if it isn't?

What if we disagree with you?

Mr. Koester: --Well, then, I think you should consider very carefully the fact--

Unidentified Justice: Well, you haven't raised that, have you, anywhere?

Mr. Koester: --Yes.

Unidentified Justice: Have you ever resisted the Government's case on the ground that Congress has no power to change the distribution of the revenues from reserved lands?

Mr. Koester: In the lower courts we did.

Unidentified Justice: And you've mentioned in your brief here--

Mr. Koester: And here we've mentioned--

Unidentified Justice: --Today, the Alaska Statehood Act, under the quid pro quo.

Mr. Koester: --Right.

We have mentioned the fact that it is incorporated in the Statehood Act, and we've not made a definitive argument on the parameters of the statehood compact, what it would require to change that statehood compact.

And I think we recognize that there are legitimate policy concerns under which Congress can deal with revenues from public lands.

However, it is a very interesting question, and particularly, given the policy considerations that Congress gave when it enacted statehood for Alaska to the distribution of public land revenues, it certainly seems that at least if there is going to be a change, it is a change that must be made by the legislature.

Unidentified Justice: Well, what about the distribution of the revenues from non oil and gas leases, or produce from reserved lands in these refuges or--

Mr. Koester: Well, I think, as was mentioned, I believe in response to a question from Justice White, the authority for those sales of surface resources stems from the Wildlife Refuge Revenue Sharing Act.

In other words, Congress in dealing with mineral revenues in Alaska, revenues derived under the Mineral Leasing Act, provided specifically that 90 percent of them were to go to the State.

However, it did not make that provision with respect to non mineral revenues.

And therefore the non mineral revenues are subject to the provisions of the Act which allows their sale in the first place, in this case the Wildlife Refuge Revenue Sharing Act.

And as the charts in the legislative history show, the Kenai Borough was receiving some of those revenues, even at that time, albeit they were minimal compared to the oil and gas revenues which were being derived.

Now, the judgments of the district court and the court of appeals, we believe, reached an appropriate solution to the dilemma here.

That is, to construe the word "minerals" as reaching those from acquired lands, those on acquired lands but not reaching those on public lands.

Mr. Claiborne suggests that this type of narrowing construction indulged by the district court and the court of appeals is somewhat unusual... in fact, unique, I think, was the word he used.

However, this Court has done that very thing.

In United States v. American Trucking Association, it narrowed the construction of the word v. Colorado Public Interest Group in 1976 it narrowed the term "radioactive materials".

And in both cases it was persuaded by the fact that with respect to one subclass contained within the general term being construed Congress had definitively legislated there was a strong preexisting congressional scheme of regulation.

And that's precisely the case here.

There has been a policy since 1920 of distributing public land revenues under Section 35 of the Mineral Leasing Act.

Now, Mr. Cranston has suggested that there is a problem here in that counties containing reserved lands do not get these revenues while counties containing acquired lands with oil and gas development do.

In terms of the money, direct revenue sharing to the counties, as the federal petitioners point out in their brief, there were amendments in 1978 to the Refuge Revenue Sharing Act which authorized additional payments to counties containing reserved lands.

Those payments can be as much as 75 cents per acre.

Or, in the event that timber sales, material sales, gravel sales and so on, exceed that amount, then they would get the higher figure.

So they get the largest amount available either under the provisions of the Refuge Revenue Sharing Act or the 75 cents per acre.

But I think, more significant is that in 1964 when Interior was proposing that this word "minerals" be included, the Interior Department felt that these oil and gas revenues being shared with counties resulted in windfalls to the counties.

Interior was not at all pleased that counties were receiving oil and gas revenues.

And yet what is now suggested is that by adding the word 1964.

Finally, the policy of the 1964 amendment, as I mentioned, was to eliminate objection to the acquisition of additional lands for wildlife refuges.

If this statute, the amendment, is construed as changing the distribution formula for oil and gas revenues from public lands, the very evil sought to be remedied by that amendment would result in that, certainly in the case of Alaska, the State would object to the creation of additional wildlife ranges if in fact that would change the revenue distribution from those lands.

And yet that is what is asserted here.

We believe that this Court should not construe the 1964 amendment in a fashion which could result in the very evil which was sought to be remedied by Congress, and yet that would happen here.

Unidentified Justice: --Mr. Koester, may I ask one question?

You refer in your brief to some charts or material in the 1964 legislative history which I have not locked at myself, which suggest a breakdown of what revenues were being generated and were not to be changed.

Was there any source of revenue in that record that could be classified as a mineral revenue such as, say, it was stone or... something like that, other than oil and gas on the one hand, or things like sand and gravel, which were previously mentioned in the statutes specifically?

Mr. Koester: The only things that I can recall are in fact sand and gravel, and those were explicitly mentioned in the Wildlife Refuge Revenue Sharing Act.

There is nothing else that I can conceive of although I suppose... and purely speculating... but if a wildlife refuge had a tourist shop and they sold gold trinkets or something, perhaps that would be included.

But again, that would be material not specifically subject already to governance by a specific statute.

In other words, the Mineral Leasing Act of 1920 does not authorize the leasing of land for gold extraction.

And so, to the extent that the Department of Interior could sell gold trinkets or nuggets that it found, or stones, or pebbles, or shells, that authorization would come out of the Wildlife Refuge Revenue Sharing Act, and the terms of that Act would then apply.

But we're not dealing with that here, we're dealing with oil and gas, which was already governed by Section 35 of the Mineral Leasing Act.

For the policy reasons underlying Section 35 of the Mineral Leasing Act and the legislative history underlying the 1964 amendment, as well as the administrative practice of the Department of Interior for 11 years following that amendment, we believe this Court should affirm the decisions of the district court and the court of appeals.

Chief Justice Burger: Mr. Claiborne, you have about two minutes left.

Mr. Claiborne: Thank you, Mr. Chief Justice.

First, in answer to the question asked by Mr. Justice Stevens, I draw the Justice's attention to the Appendix to our brief at page 2a.

This is a part of the affidavit of the Director of the Fish and Wildlife Service Paragraph 3 of that affidavit indicates that the mineral revenues generated by all wildlife refuges consists entirely of oil and gas revenues.

That apparently has always been true and is true as of the date of this affidavit.

ORAL ARGUMENT OF LOUIS F. CLAIBORNE, ESQ., ON BEHALF OF THE FEDERAL PETITIONERS, CECIL D. ANDRUS, ET AL. -- REBUTTAL

Unidentified Justice: That can't be entirely true because weren't there sand and gravel sales?

Mr. Claiborne: I take it the word "mineral" here is used as meaning mineral other than sand and gravel specified in the Wildlife Revenue Sharing Act, though I don't for a fact know that there was any such revenue even though it's specified.

Unidentified Justice: You mean, that there was any sand and gravel revenue?

Mr. Claiborne: Indeed.

Mr. Justice White suggested that the Alaska Legislature could resolve this case.

Unidentified Justice: Well, I didn't suggest that they could change the distribution between the United States and Alaska.

Mr. Claiborne: It would be enormous--

Unidentified Justice: I think it would be your interest.

Mr. Claiborne: --The enormous difference is it goes between the 90 percent and the 25 percent, whoever it goes to in Alaska.

I would add that it is a case which is entirely appropriate for Congress, the national Congress, to resolve, but it has declined the invitation to do so when the matter was very clearly put before it in--

Unidentified Justice: Well, you wouldn't suggest that the Alaska Legislature would be disentitled if you won this case to take the 25 percent that would go to the county?

Mr. Claiborne: --I suppose the duty of the Secretary would be to pay to the county.

Whether the county was then required by Alaska law to turn it over--

Unidentified Justice: You probably don't even have an opinion on that.

Mr. Claiborne: --It would not be our concern; that is so.

But I do think the Secretary must first obey the federal law and pay it to the county--

Unidentified Justice: Yes.

Mr. Claiborne: --whatever the county is then required to do.

But, it seems to me that the approach this Court ought to take is that Congress ought to be held to its word if the consequences of what it wrote or not, as it intended it, and we think they probably are, then Congress has an easy opportunity to amend the Act.

But this Court ought not torture the text to guess what Congress may or may not have been doing in changing or not changing the law in 1964.

Unidentified Justice: Does the word "mineral" or does the addition of the word... would the addition of the word "mineral" have any meaning whatsoever if the State wins this case?

Mr. Claiborne: It would accomplish precisely nothing because it would simply confirm the formula already enacted by the Mineral Leasing Act--

Unidentified Justice: Would it affect, would it add something, would it change the distribution of any other?

Mr. Claiborne: --Nothing whatever, Mr. Justice White.

Unidentified Justice: Mineral besides oil and gas?

Mr. Claiborne: It would be entirely surplusage, unless it applies to reserved lands.

Because at least all minerals covered by the Minerals Leasing Act for acquired lands in 1947, or by that Act, required to be distributed under the Refuge Act formula... now... gold and silver night present a separate question.

Unidentified Justice: Well, so you answer yes, if there were gold and silver discovered, the word "minerals" would have some meaning besides oil and gas?

Mr. Claiborne: Yes.

Though no one, in the '64... or '62 debates, ever suggested that there was gold and silver to be found on this refuge.

The only mineral ever spoken of was oil and gas, and everyone knew that the word "mineral" in that context meant oil and gas.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

State Land Board v. Corvallis Sand & Gravel Co. - Oral Argument

Sun, 08 Aug 2010 17:08:24 +0000

Case:

State Land Board v. Corvallis Sand & Gravel Co.

Media File:

75-567_19761004-argument.mp3

Related Transcript:

75-567_19761004-argument.xml

Transcript:

Argument of Robert Mix

Chief Justice Warren E. Burger: We will hear arguments next in 75-567 and 577, Oregon v. Corvallis Sand & Gravel and the related case.

Mr. Mix may you proceed.

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

Gentlemen, I am Robert Mix appearing here on behalf of Corvallis Sand & Gravel Company.

The issues in the case are essentially the following.

Those made by the State are: Was the change in channel of the Willamette River from a loop approximately three miles in length to a basically straight channel across the neck of the loop avulsive.

In that connection, it should be pointed out that the land involved in this case is not only the changed channel but a portion of the river as it had historically flowed in its natural pit.

The other issue made by the State is whether or not the change of channel transferred private dry land to the State is fee simple, by virtue of the presence of the water, which had submerged the private land.

The issues made by Corvallis Sand are the following.

Does the State has sufficient title to maintain ejectment, to recover the bed of the river when its title is based on sovereignty and when there is no issue in the case as to interference with the public right of navigation and fishery by Corvallis Sand?

In this connection, the Sand & Gravel materials that were removed from the river, were removed under permits issued by the Core of Engineers.

The second issue made by Corvallis Sand, does the State by virtue of its sovereignty has sufficient title to recover money damages for removal by Corvallis Sand of Sand and gravel materials from the bed of the stream.

Again, there being no issue as to interference with navigation or fishery by Corvallis Sand.

In support of its position --

Justice William H. Rehnquist: Mr. Mix, isn’t one of the underlying issues in the case at least if you take some of the amicus briefs that a question of what law governs on this issue of title whether it is Oregon law or Federal Common law?

Mr. Robert Mix: Yes, Your Honor, it is my understanding of the Bonelli decision that we are now in an area to be controlled by Federal Common Law and that decision is at the core of the courts receiving this case, and the Court is expelled out as a matter of Common Law the extent of the State’s title.

Justice William H. Rehnquist: Well, of course, Bonelli is distinguished below its fact, isn’t it?

There you were dealing with what had been an interstate boundary and the Court in its original jurisdiction cases had always treated that as a matter of Federal Common Law.

But, the Willamette River at Corvallis has never been an interstate boundary.

Mr. Robert Mix: That is correct, Your Honor.

As to the Willamette River, it is my understanding of Bonelli that the Court said that first the State’s title to the bed is a limited title, that the State’s interest in the bed must be related to navigation.

Third, that that title is determinable if the navigable aspect of the use of the bed ceases.

Fourthly, that the State’s interest in the bed is “as a bed”, and in that connection, the court sighted that the case of State v. Gill from Alabama, in which the Alabama court held that the State holds title to the bed “as a bed” and not to the individual grains of sand or lumps of mud.

The first basis on which Corvallis Sand claims that the State cannot maintain the ejectment, is that the Common Law concept of the ownership of the beds of navigable fresh water streams controls in this situation.

That doctrine was announced by this Court in the case of Jones v. Soulard, decided in 1860.

Oregon was admitted to the Union in 1859, and it is submitted that as of the time Oregon became a State, the Common Law controlled the ownership of the beds of navigable streams and under the Common Law, the State interest did not extend above tide water.

Unknown Speaker: How is the basis of the Federal Court jurisdiction in Jones v. Soulard do you remember?

Mr. Robert Mix: Your Honor, it is not made clear in the decision.

As to jurisdiction, we take the position there is jurisdiction here.

All the property that has been involved in this case originally was patented out by the Federal Government.

Secondly, on the basis of the equal-footing doctrine, which was a basis for jurisdiction also as I understand it in the Bonelli case.

Also on the basis of the fact that the Willamette River is navigable, and I hope to talk about that later at least until the Bonelli decision.

Also on the basis that the Oregon Courts ruling, which in effect said that the State has a fee simple title to the bed is contrary to Bonelli.

Justice William H. Rehnquist: If your first basis for jurisdiction were federal jurisdiction, the idea that the land was originally patented by the Federal Government were adequate to sustain it.

Any real property dispute that a role is west of the Appellation Mountains you could bring in Federal Court, could you not?

Mr. Robert Mix: Yes, Your Honor, and the Court has stated this as a basis for jurisdiction.

Unknown Speaker: Hughes v. Washington, that was --

Mr. Robert Mix: In Hughes v. Washington and also in Borax Limited.

And also as I -- well, not in Bonelli.

No I do not think the federal aspect.

The federal patent aspect is mentioned in Bonelli.

Now, Your Honor, my recollection maybe in errand -- apparently, it is.

It was not my understanding that Bonelli involved a boundary between two states.

Another basis for jurisdiction is the problem of due process.

This again, I hope to discuss later, but it is on the basis that the riparians became vested with certain rights that they were granted under the Common Law and that those rights have been divested and particularly in this situation, and it should be pointed out that the states -- at least I have not questioned jurisdiction in previous cases.

Continuing with the basis of Corvallis or the Common Law as being controlling here, under the Common Law, the State had no interest in the beds of navigable fresh water streams.

Again, Oregon became a State in 1859 and the Common Law was controlling, in my view, until at least 1876.

When the court gave the opinion in Barney v. Keokuk, the patents involved in this case are dated approximately 1853, 1859, 1865, and one of them involving one small government lot is dated 1883.

However, that was a homestead, not a donation land claim and the entryman had made his entry in his filing in 1875.

We took the position in the Oregon Courts that his riparian rights related back to 1875, which would be before Barney v. Keokuk.

The Oregon Court rejected that position.

The Oregon Court did not, to the best of my knowledge until 1908, in the case of Hume v. Rogue River Packing Company make a ruling that the beds of navigable fresh water streams belong to the State.

And, by that time, all of these rights had been vested.

The Oregon Legislature did not until 1967 pass a statute claiming that the State owned the beds of navigable fresh water rivers.

Now the second and alternative ground for ownership by Corvallis Sand is as follows.

Accepting the line of decisions of the court which began with Barney v. Keokuk in 1876 that the State owns the bed of navigable fresh water streams, but that the State has the right to grant to the riparian, whatever portion of that title it wishes.

In applying that line of decisions, it is our position that in 1859, when Oregon became a State by constitutional provision yet adopted the Common Law.

This was accomplished by continuing enforce of the statutes of the territory and, one of those statutes made the Common Law controlling in Oregon.

Then it is our position that in 1859 Oregon, even though it owned the beds of the navigable fresh water streams, made an election to apply the Common Law and that the riparian received his traditional rights and that it is a denial of due process to now try to take those rights away from him.

Justice William H. Rehnquist: Would you analogize that situation to a case where Oregon had received lands from the Federal Government at the time of Statehood, which were unrestricted (Inaudible) and turned around and conveyed them to private individuals?

Mr. Robert Mix: Yes, Your Honor.

In that situation, I assume we are talking about lieu lands, and in that situation, the State of Oregon would be in the position of a private land owner.

When it granted, if it gave land that was riparian, and did not reserve any rights from the deed.

The entire title would pass including the traditional Common Law of riparian rights.

The third basis for the position that the State cannot maintain the ejectment is based on Bonelli, which approaches in many ways, at least in my view, the Common Law and again, Bonelli held the State’s title is limited.

It must be related to navigation, it is determinable, the State’s interest in the bed is as a bed and my interpretation of that is that as part of the navigational servitude.

The public would have the right to anchor on the bed as part of the fishing servitude for example, it would have the right to way down the bed, to have used the bed for spawning salmon and so on.

But, that it is not proprietary.

On the basis of the --

Chief Justice Warren E. Burger: did I ot understand you say that at no time as Sand & Gravel Company every interfered or conducted activities that would interfere with these various rights?

Mr. Robert Mix: Yes, Your Honor, and my basis for saying them is this.

The Core of Engineers, under the commerce clause issued permits for removal of Sand & Gravel materials and it is our position those permits would not be if -- that the court would not issue those permits if navigation were being interfered with.

And the second basis is that the State at no time pleaded or offered any evidence that there was any interference with navigation or fishery, throughout the case we have maintained there was no interference, and to the best of my knowledge a State has never said there was any interference.

The fourth ground relates solely to the judgment for money damages recovered by the State and the State recovered a judgment based on the number of cubic yards of material removed from the river.

At Common Law the riparian had the right to remove Sand & Gravel so long as he did not interfere with the public rights.

Bonelli, holds again, the State owns the bed as a bed citing State v. Gill, and then Gill, the Alabama Court said, “The title to the State does not extend to the individual grains of sand or lumps of mud”.

And on that basis, we submit that the proprietary right of removing Sand & Gravel is not owned by the State, but belongs to the riparian and the State cannot recover damages.

Chief Justice Warren E. Burger: Your argument is that the bed is still the bed even if some of the surface material is taken off of it.

Mr. Robert Mix: Yes, Your Honor, and as a matter of river hydraulics, the river normally replaces the Sand & Gravel you remove it in the next spring or in the next high water, it washes more material though.

There is a related matter, it is not an issue directly but it is important and that is the definition of navigable or navigability.

There is no question, but that in 1971 when this case was tried, that the definition of navigable applied to any stream which had historically been navigated irrespective of subsequent events.

The Willamette River was used in the early days as the main artery of commerce in the Willamette River, and again, I am referring to the area above Corvallis, which is the disputed part.

Justice William H. Rehnquist: When you say ‘above’, do you mean upstream from or downstream from?

Mr. Robert Mix: Upstream from Corvallis, Your Honor.

But at the end of the rail road and the truck, commerce disappeared.

Today the stream is used, fishermen floating down or people floating down canoes and inner tubes and such.

The historical definitions of navigable are derived from two sources.

First, in the Genesee Chief in 1851, the court for purposes of admiralty jurisdiction held that admiralty jurisdiction does extend to navigable fresh water.

In 1870, in the case of Daniel Ball, the Court held it for purposes of the commerce clause.

Navigable is to be defined as far as fresh water is concerned, as all streams or bodies, which are capably of being used commercially for trade and travel.

Now, the law has been undisputed until Bonelli that if a stream was historically navigable the State’s ownership continued.

It is submitted that definitions of navigability, for purposes of the commerce clause and for purposes of admiralty jurisdiction should be brought for protection of the public.

However, when we come to define navigable, for the purpose of taking from the riparian his rights and giving those to the State, the definition should be restrictive, and a suggested definition is that a stream will be considered navigable for purposes of the State’s interest in the stream.

So long as it continues to be usable for commercial purposes of trade and travel, and the lament at this time, in my judgment at least is not suitable for that purpose.

Now Bonelli --

Unknown Speaker: Is that kind of a new definition of navigability?

Mr. Robert Mix: The idea of the continuing navigability is new Your Honor, that is correct.

The Bonelli --

Unknown Speaker: You defined in here, do we not to the contrary, at least on a different -- maybe you would say a different kind of a definition?

Mr. Robert Mix: Let me make it very clear, the last thing Corvallis Sand wants to do is to try to defeat the jurisdiction of the Court.

The stream was navigable, the Court found it was navigable, our Trial Court, and I stipulated that it was navigable and it was navigable.

My concern is this.

The states have liberalized this definition of navigable for the purpose of claiming ownership to additional land.

And Bonelli, at least implies that the states’ interest ceases if the land ceases to be necessary for purposes of navigation.

Justice William H. Rehnquist: Even if we were to adopt your restricted definition of navigability, so that Bonelli would not apply, the Supreme Court of Oregon could still develop its own body of law, could it not as to whether or not you, your client, or the State own this particular land?

Mr. Robert Mix: That is not my understanding, Your Honor.

The definition of navigability or navigable as for the federal courts, and it is along the line of decisions holding this.

Secondly, again, and I only state my understanding of Bonelli.

My understanding of Bonelli is that it said that this area of the law in the future is to be the subject of Federal Common Law.

The situation there was a very limited situation involving some dry land, which had been artificially accreted.

Again, it is my understanding that here we are seeking to explore what law should be applicable on a broader scale --

Justice William H. Rehnquist: You are trying to avoid the application of Bonelli, as I understand your argument by limiting the definition of navigability, is that correct?

Mr. Robert Mix: No, Your Honor, that is not my position.

Justice William H. Rehnquist: What is your reason and for wanting a narrow definition of navigability?

Mr. Robert Mix: For this reason, Your Honor, again the states have taken upon themselves to liberalize the definition to take on more property.

And again, if my understanding of Bonelli is correct, the implication at least is that the State’s interest only continues so long as the water is usable for purposes of navigation.

Justice William H. Rehnquist: So doesn’t that prove what I just asked you that you a want a narrow definition of navigability so that Bonelli will have less application?

Mr. Robert Mix: Well, it would limit the -- shall we say the land area under water in that sense?

Yes, Your Honor.

Justice William H. Rehnquist: Yeah, okay then, supposing we were to conclude for one reason under that Bonelli did not govern this case, then wouldn’t it be up to the Supreme Court of Oregon to decide by Oregon law who got the proper that is in conflict here?

Mr. Robert Mix: Not, if my understanding is correct Your Honor that we also have a problem of due process here, in the sense that these rights became vested.

Justice William H. Rehnquist: Well, subject to constitutional limitations but to what body of real property law would you look if Bonelli were not applicable to this case?

Mr. Robert Mix: Your Honor, prior to Bonelli the states had free reigned to decide what they chose.

Excuse me! I have requested to reserve ten minutes, Your Honor.

Chief Justice Warren E. Burger: Very well Mr. Mix.

Mr. Yurinick.

Argument of Russell Iungerich

Mr. Russell Iungerich: Mr. Chief justice, may it please the Court.

I might begin by thanking the State of Oregon for permitting State of California and the 29 other states, which joint it advancing the position expressed in our Amici briefs in this case.

An opportunity to present our position to the Court had oral argument.

Our position is it neither this case nor the earlier decision of Bonelli Cattle Company v. Arizona, presented a federal question arising under Federal Common Law.

And I submit that this is a very critical question to the states.

Until Bonelli, the nature and extent of the rights of each state and it is land, navigable waters within each State’s boundaries, were questions of State Law exclusively confided to State courts --

Unknown Speaker: How about Hughes v. Washington?

Mr. Russell Iungerich: Hughes v. Washington, Your Honor I submit, relied upon a construction of a federal patent and it is a question there, it involved the federal patent and the boundary that we were talking about.

We are talking about actually defining one of the boundaries of a federal patent where you have a federal patent and the construction of that patent and its scope and giving a force and effect such as in use or in Borax question, we concede that there is a federal question.

However, the normal rule is under Joy v. City of St. Louis, which is mentioned in one of the Amici briefs, is that the mere fact that a federal patent was the source of title does not conferred jurisdiction on any court.

There has to be an issue about construction.

In this case there was no issue of construction of the patent; the issue here is the effect of a change brought about by a flood on the Willamette River.

We submit that, that is a question purely and simply of State Law, what the effect of that change was?

Now, effectively what we are arguing for is with regard, we submit it first under the equal-footing doctrine.

The equal-footing doctrine is properly interpreted, leaves to the State courts the right to determine under their own rules of property and in their own forum, all questions with regard to the beds of navigable rivers and all questions with regard to the changes in those beds that occurred later.

Simply stated that means that all these questions are State Law questions as we see them.

An alternative view, we believe essentially that, that construction is the proper.

An alternative, and perhaps equally acceptable construction to the states that argue is Amici, is about if the equal-footing doctrine does confer jurisdiction under the Federal Constitution on this Court, it confers it to define what the incidence of sovereignty are and no more.

It does not confer a basis for determining questions under Federal Common Law, and to explain that point and what I mean by that is this.

The Court could say that as of the date of admission to the Union, the states involved by under the equal-footing doctrine were vested with the fee simple title in the beds of all navigable rivers as to wherever those beds might move in the future.

However, relying on the analysis of Bonelli, the effect of that decision would be that it would quite title to the beds of navigable rivers in all States.

In the State, in full proprietary and all other sovereign aspects and would do so as a matter constitutional law no longer bringing cases like this before this Court.

Because any effect of where the river happened to be flowing and change by a flood would live those cases out of Court.

However, if Bonelli is applied under those circumstances it would mean; State cannot rely upon the equal-footing doctrine as a source of title for relicted beds or reemerged land.

But we submit that still does not present a federal question.

What it creates is a title vacuum, and that is really what the issue was in Bonelli.

In other words, the Court as we see it should have gone no further than to decide in Bonelli that equal-footing did not confer title on the State?

It should not then have gone and created a Federal Common Law rule, which disposed of the relicted bed of the river and granted it to Bonelli Cattle Company.

Because the question there presented is really a question of State Law as the cases of this Court indicate.

The effects of accretion, the effects of avulsion, the effects of reliction, all of those questions have always been held by this Court to be questions for the State courts, not questions for the federal courts to determine.

And we submit that the basis for this second alternative is essentially that when you decide that equal-footing determines that there was no claim in Bonelli.

That equal-footing could be a basis for the State’s title.

Really it should be up to the State Court to decide the disposition of the property in question at that point, because the third section of the Bonelli opinion begins by stating the question that remains is asked to who owns the subject land under the applicable Federal Common Law.

I submit however, that the parties in Bonelli, and having read the briefs, I submit this, indicated that there was no difference between State and Federal Law in this case and they did not bring out any source of federal jurisdiction for creating a Federal Common Law or principle.

We are told in Erie Railroad v. Tompkins that there is no longer any general Federal Common Law.

So we must look to one of the several sources of specialized common law.

None of them, which our brief points out are applicable in the case of the Federal Common Law rules created in the Bonelli decision and I think --

Justice William H. Rehnquist: What about interstate boundaries?

Mr. Russell Iungerich: Well, the Court did not rely on the interstate boundary in Bonelli, and I would point out that we were only talking about land that was wholly within Arizona and Bonelli.

Another words, we were talking about Arizona owned from the middle of the river to the new high water mark.

Justice William H. Rehnquist: But the river had been at one time the interstate boundary had it not?

Mr. Russell Iungerich: It had at one time, well, it is still is the interstate boundary.

Justice William H. Rehnquist: The channeling?

Mr. Russell Iungerich: The channel, the river.

I do not know exactly the effect of the compact between Arizona and California on that point.

At this precise location, which of course affects that, but the interstate boundary was not the critical question.

If it were, we would not be here because I would submit if there is an interstate boundary and you are talking about a conflict between two states over an interstate boundary that is one of the areas where specialized Federal Common Law does apply.

And we would agree under those circumstances.

But it was land wholly within Arizona; it was the land between the new high water mark and the old high water mark.

And, there was a question purely and simply of State Law that should have been applied.

Unknown Speaker: Do you think State Law has forced in that one to hear a court to the case -- over to the case to give the State title to the land under a river, which has changed -- a navigable river which has changed its course noticeably by an ablution rather than accretion?

Mr. Russell Iungerich: I think the State could so hope, yes.

Unknown Speaker: At the time of the statehood, the rivers in a certain place on the equal-footing doctrine the State gets the title to the riverbed as it been is.

Then the river changes course, mark at least, saya, a quarter of a mile and the person over whose land the river now flows losses title to the riverbed.

Mr. Russell Iungerich: That is right.

Unknown Speaker: Do you think the State could have that sort of a rule?

Mr. Russell Iungerich: Yes, I do believe.

Unknown Speaker: Without any reliance on any equal-footing doctrine.

Mr. Russell Iungerich: Yes, I do, Your Honor.

I think the reason for that is the whole --

Unknown Speaker: You have to say deposition?

Mr. Russell Iungerich: Yes, Your Honor because the whole purpose of protecting the public’s rights, the commerce, navigation and fisheries depends as the cases of this board teaches upon the ownership of the bed.

The two are related, and so the State holds that bed in trust to protect those public purposes and it really makes no sense to talk about the State not owning the bed of a major artery such as the Willamette River, a major navigable river which is so important to commerce and to a State and to its public.

So that you have some portions that are held in private ownership and other portions that are held in public ownership.

Justice William H. Rehnquist: Would you deny that the Oregon courts could conclude as a matter of Oregon Law that the State of Oregon did not have title to this river or to the bed of the river?

Mr. Russell Iungerich: I think the State of Oregon could so decide, and under those circumstances many states such as I believe Wisconsin and Illinois have taken the position that the riparian land owner owns to the.

Unknown Speaker: Middle of the stream.

Mr. Russell Iungerich: Middle of the stream and if the State decides to do that, I submit that is within the State’s prerogative.

But the problem here is whether or not a Federal Common Law rule should compel that result that the State gave up title to the bed of the river, and that is I think the critical issue of State sovereignty that is presented in this case.

Unknown Speaker: Of course, the State got the part of this land and the bed of a new river in this case.

Mr. Russell Iungerich: They got part of the land, yes.

The question is the remainder.

Thank you.

Chief Justice Warren E. Burger: Mr. Herman.

Argument of Petern S. Herman

Mr. Petern S. Herman: Mr. Chief Justice, and may it please the Court.

My name is Peter Herman, I represent the Attorney General’s office, State of Oregon and I am here on behalf of the State Land Board.

I feel some clarifying statements here on order in terms of stating the case, I would like to call the Court’s attention to pages 40 and 41 of the joint appendix, the brown document.

The chart on the left shows the river as it was in 1890, and the Court will note two points A and B.

This is the neck of the Peninsula, and the overflow channel that was discovered on that date.

The photograph or the channel on the right, page 41 it shows an enlarged overflow channel and the smaller channel going around the Oxbow.

That was a river as an existed in 1911 after the change took place.

Now, the holding of the Bonelli Cattle Company, as we interpreted the decision, was that public title follows the river and its change is to guarantee full public use and enjoyment.

That when the river recedes from riparian property, the exposed land is no longer needed by the State for public purpose, and therefore title goes to the riparian owner, and whether the change is sudden or artificial, acceptable or not, makes no difference.

We submit that the rationale should be applied in this case to the fact involving Fischer Cut and in any event, even if traditional avulsion doctrine is to be applied, we submit as a matter of law that no avulsion did in fact occur.

And in effect what the court is being called upon to do here is to review the legal conclusions the Oregon courts drew and then essentially agreed upon factual setting.

Now, what happened here was --

Unknown Speaker: Precisely, what are the issues that State raised in its petition for Certiorari?

I take it that you have got title to three of these parcels.

Mr. Petern S. Herman: Well, as far as this --

Unknown Speaker: And beyond those parcels -- what issues here, you aren’t raising any issues to those parcels?

Mr. Petern S. Herman: We are not raising any issues as to parcels that the State was awarded title.

Unknown Speaker: All right now then, what are the --

Mr. Petern S. Herman: The issues we are talking about are sensibly parcels 2A, 2B and a portion of parcel three, which are called Fischer Cut.

That is the overflow channel that the Court sees on page 40 and the enlarged channel that the Court sees on page 41 with the word ‘Fischer’ in it.

Over a 20-year period, there is much flooding, recurrent storms, some major storms.

In 1890 this channel current water and in the intermediate stage of five feet.

By 1906, one-fourth of the river was flowing through this channel at the four-foot stage, which is again an intermediate stage.

There were some more major storms, and by November -- sometime after November 25 of 1909, the main flow of the river was found coursing through this overflow channel.

Now, the Trial Court held that this constitute an avulsion that the change was sudden and violent.

The Oregon Court of Appeals and the Supreme Court essentially agreed, and ruled that the State had no title to the bed in this portion of the river.

Now this section of the river is approximately 2,500 feet long, but the Court sent the case back to the Trial Court to determine the precise limits of the avulsion.

Now the issue we raised in our petition is whether under these facts, it was proper for the Court to conclude that an avulsion did occur, and that the public did not have a title in this bed.

Stated in other way, we are contending that this was not an avulsion that the public’s title to the river followed the river as it enlarged over the years this overflow channel.

Essentially, what you had here was a river flow and around an island at an intermediate stage --

Justice John Paul Stevens: Mr. Herman, if it isn’t an avulsion, do you concede that the State does not have title to the bed, the Fischer’s Cut?

Mr. Petern S. Herman: Well, if avulsion doctrine applies, Your Honor, that would have to be the concession, yes.

Our position on that is several points.

First, is a matter of law there was no avulsion here.

There was no sudden change of channel, you had an existence two channels.

Justice John Paul Stevens: Yes, but let us assume it is.

I want to be sure about this.

If it were an avulsion then, you are contempt to have a situation or the State of Oregon does not own that portion of the bed of the river.

Mr. Petern S. Herman: If avulsion -- if this Court is to continue holding an avulsion doctrine applies then that ends the case.

We submit that --

Justice John Paul Stevens: I thought the Supreme Court -- State Supreme Court awarded you three tracks of land, 2A, 2B and 2C.

Mr. Petern S. Herman: Your Honor -- those are the track sovereign issues.

Justice John Paul Stevens: All right, what did they award you?

Mr. Petern S. Herman: They awarded us tracks one, five, six, and four --

Justice John Paul Stevens: Oh I see and are they under the old channel?

Mr. Petern S. Herman: Well, actually, you have got a combination here of old channel and new channel.

The river falling in Oxbow prior to 1890 and part of the property and dispute here is that same river.

What happened was there was an overflow channel across the neck of the Oxbow and that is the area of the river that is in issue here in this Court today, because we are saying that the State has titled to the bed or under that former overflow channel, which is now the main bed of the river.

There is no contention from us concerning the parcels that the --

Unknown Speaker: Oh no, I take it that -- I do not see any claim in your brief, perhaps it is there, and asking us to overrule Bonelli?

Mr. Petern S. Herman: No, we are not asking to Court to overrule Bonelli providing that the Court applies what we think is the logical rationality.

Unknown Speaker: Let us just assume for the moment that State Law would apply in this case, and Oregon Law would apply the avulsion and accretion law.

I think that you would come out about the same way under this --

Mr. Petern S. Herman: No, we would not come out the same way, Your Honor, because of the State -- I assume if the State court applied avulsion doctrine they withhold that we did not have title for the bed in this overflow channel, which is now the main channel on the river.

Unknown Speaker: Well, they held that you did not have title.

Mr. Petern S. Herman: That is correct, but they held it on the basis of Bonelli, they applied --

Unknown Speaker: I understand, but under State Law, you would come out about the same way at least as of these three tracks, if there was an avulsion.

Mr. Petern S. Herman: Come out the same way as federal law, is that --

Unknown Speaker: No, as the court -- as the result here, you would have the same result as to ownership with respect --

Mr. Petern S. Herman: That is correct.

If a State Law was applied -- well, I am going to have to recede from that.

I do not think there has been another case in the State of Oregon in which the principle of avulsion has been applied against the sovereign.

It is been applied in boundary disputes to claim riparian owners, where a river was a monument or a boundary between two riparian owners.

It has not to my knowledge, has been applied to say the State does not have title in the case of an avulsion, and that of course is our principle contention here that avulsion doctrine has no place in the case such as this?

Unknown Speaker: This is why you surprised me in your possession about avulsion.

Mr. Petern S. Herman: Well, maybe I misunderstood the courts.

I caught myself, because if the court of course the Oregon Court applies avulsion doctrine relying on Bonelli, I assume that it would apply the same doctrine even if Bonelli was not relied upon.

However, we would in argue in the Court, if we remanded back that avulsion is not appropriately applied to a situation like this, because avulsion is a boundary concept to mark the boundaries between riparian owners.

It is inappropriately applied in a situation where the sovereign title is an issue and if you are going to have an avulsion doctrine, you are always going to have uncertainty as to ownership of the riverbed.

Because you are always in the situation of trying to evaluate changes of the river and there has been hundreds of changes of the Willamette River since 1859.

And you might just as well say that public does not have a title, there is no for public use and enjoyment because you are in the position of always having to litigate, was this or was this not an avulsion.

We like the Bonelli rationale, which says, that the public title follows the river.

There was some language in the opinion that indicates that it only follows the river as to gradual changes.

We think this ‘word’ gradual raises the same problem again.

The Court was relying upon boundary cases, where the issue is, where the land is between two states when the river changes and those cases where there is a sudden change you can observe where the river was, and the former channel of the river remains the boundary.

But that rationale is inappropriately applied to a case like this.

Justice William H. Rehnquist: Well, but according to the findings that the Supreme Court of Oregon you could certainly tell the day that Fischer’s Cut began to carry the majority of the stream.

Mr. Petern S. Herman: Well, I do not know whether you could or not, Your Honor, nobody was there to see it, the witness isn’t there.

Justice William H. Rehnquist: Well, nobody has been there in the case of most things it has been found to be avulsion, it is all a bunch of early settlers or Indians testifying about boats going up and down the river and that sort of things, isn’t it?

Mr. Petern S. Herman: Yes, well, Your Honor, I would answer your question this way.

You have an avulsion if you are going to apply the traditional doctrine whether it is a channel change, but I submit there is no channel change when you have got both channels there and it is just a question of the water in one channel changing from the major flow to that channel to the major to the other channel and even if it is sub, it is not really --

Justice William H. Rehnquist: No, but there is a respectable authority contrary to your position.

As in the various State courts would you treat my questions in one of the State Law in certain case.

Mr. Petern S. Herman: I am not sure, which court -- the case the court, what do you mean, referring to.

There are actually very few cases that have dealt with this issue it is mostly boundary disputes.

The Commissioner’s case was the closest case that I know of, and that involved a none-navigable stream and a boundary dispute between two riparian owners.

The Court relied on that to come up with the result it did in this case.

I would like to make one comment about the business of the rights of riparian owners under Oregon Law.

Oregon Law grants the riparian owner no rights below high water, unless by affirmative statute or deed it has been the Common Law of our State that the riparian owner owns only the high water.

And that what rights he has is by grant of the State, and that has been a sovereign law in our State.

And going back at least for Bowlby v. Shively in 1892, which was in this Court on Appeal.

Our suggestion to this Court is that, if federal law is to be applied and, we do agree with Amici California to this extent that the State should have title and the State Court should have the right to decide title in all cases of river changes, and that the fact there has been is so called avulsion change does not deprive the public of title.

And, the State can decide whether the public is to have title on that case or the riparian owner.

Justice William H. Rehnquist: Well, then you are asking for a change in the Bonelli doctrine, aren’t you?

Mr. Petern S. Herman: You mean change as to what Court decide -- is to decide the issue?

Justice William H. Rehnquist: Yeah.

Mr. Petern S. Herman: We have not asked for that, no, because we got -- what we considered to be an unsatisfactory result in the Oregon Court and we were happy to petition this Court to have that result corrected.

It would help the State if the Court agrees with our contention and rules that it has jurisdiction.

It would also help the State of this Court rules that it is up to the State to decide under these circumstances whether the riparian or the State has a title.

Justice William H. Rehnquist: But we cannot do that and leave Bonelli completely intact, can we?

Mr. Petern S. Herman: The Court would have to modify Bonelli, I presume as to the comments of Federal Common Law, yes.

Unknown Speaker: How would you assess the satisfaction up here with Bonelli?

Mr. Petern S. Herman: Assess the satisfaction nationwide with Bonelli, Your Honor.

Unknown Speaker: I wonder why you do not want to hit it head-off?

Mr. Petern S. Herman: Well, I like the result of Bonelli or we like the result of Bonelli.

If the Court had stopped at the point of saying that Arizona has no title under the equal-footing doctrine to this bare land and the rest of the opinions stood the implication would be very clear that the State would still have title no matter how the river change.

Chief Justice Warren E. Burger: And are you suggesting that we modify or reexamine at least to merely the dicta in Bonelli?

Mr. Petern S. Herman: Yes, although I think the Federal Common law is more than a dicta; because the Court relive on that to say that Arizona did not have titled to the bare land, although the Court could have said it did not have titled of the bare land just based on the equal-footing doctrine.

I think it is appropriate here to sum up what our position is.

If the Bonelli case is to apply, we submit that it should apply on this case and the Oregon Court would have to be reversed, because the rationale of Bonelli is that title follows the river.

And, the character of the change is immaterial, both is to the riparian and is to the public.

We feel that same rationale should apply to both sides.

If the Court is to modify Bonelli, it seems to us that part of the opinion that in effect rules the State has title under the Constitution or under the equal-footing doctrine as to the river wherever it lies.

That would require remand back to the case to the Oregon courts to deal with the fact that their decision is inconsistent with the way this Court would interpret Bonelli under those circumstances and leave to the Oregon courts and legislature to decide how the title should be apportioned between the riparian owner and the State.

Unknown Speaker: Do, you understand your State towards Bonelli that there was an avulsion in this case?

Mr. Petern S. Herman: They held there was an avulsion in this case, yes.

Unknown Speaker: And now, do you think that if Federal Law applies that we should not necessarily accept their finding as to avulsion?

Mr. Petern S. Herman: They should not accept it, because we submit both as a matter of law, whether you are looking at traditional avulsion doctrine or looking at the equal-footing doctrine under Bonelli, this was not an avulsion, and it was not an avulsion because it was a 20-year process in fact.

One-fourth of the river was going through this channel in 1906 and it did not change until November of 1909.

So I submit that this is a matter of classic avulsion; that is not an avulsion.

Unknown Speaker: If you accept the finding of avulsion, I take it so much you have said before would anticipate the same result under Oregon law as under federal law, if this was an avulsion.

Mr. Petern S. Herman: Well, if it is in the Court rules it is still up to the State to decide, to --

Unknown Speaker: Let us assume that we decided that Federal Law governs, the federal law does not cover but State Law does.

Would you think that Oregon courts would come out with the same result?

Mr. Petern S. Herman: Well, I think I would rather not predict that, because I would want to argue to the point that this really is not an appropriate doctrine to apply when the State is the sovereign and the owner of the bed and the issue is whether the State has title to where the river now flows.

I would want to argue that, we would want to argue that point again and get the Court to reexamine its thinking.

Particularly since this is a first case that where the State was involved in this manner that’s come up in the State of Oregon that I am aware of.

Unknown Speaker: So the Oregon Court here got around saying that they did not think the State really needed the ownership of these tracks under this navigable stream.

The State’s total sovereign interest could be served by in other ways.

Mr. Petern S. Herman: The State was answering our contention or it interpreted our argument to mean that we should get title because we needed it, even though, it was avulsive and our argument of course was that we needed title and it was not an avulsion and that our argument had substance to it, it was just a technical contention that we should have titled because it was nice to have title.

Chief Justice Warren E. Burger: Under Oregon Law, Mr. Herman, is the determination of an avulsive change of mixed question of the law in fact.

Mr. Petern S. Herman: I think that states purposing Mr. Justice Burger because the facts in this case really are not in dispute, it is the conclusions of the Court drew from those facts that we are arguing about.

Chief Justice Warren E. Burger: Do you think we have any authority to draw different inferences and conclusions?

Mr. Petern S. Herman: I submit you do Your Honor, and agreed upon setting the facts.

You are not really making a different finding of fact, because what the Oregon courts did was draw a legal conclusion that from these facts we hold an avulsion occurred.

It really was more of a legal conclusion because the facts are essentially an agreement.

Chief Justice Warren E. Burger: Well, but when -- does this Court ordinarily reexamine the highest courts of the State on the determination of the State Law?

Mr. Petern S. Herman: Well, this was not a determination of State Law --

Chief Justice Warren E. Burger: I am just taking one-step at a time.

On State Law we do not reexamine, do we?

Mr. Petern S. Herman: If there is a federal question involved, the Court will reexamine the inferences or conclusions that are drawn from the agreed upon facts.

Chief Justice Warren E. Burger: That is what you are suggesting now, is that because the federal question is at least hovering here --

Mr. Petern S. Herman: Yes.

Chief Justice Warren E. Burger: Not yet, then we can say that this was not an impulsive change, because it took at least three years for it to occur.

Mr. Petern S. Herman: Actually, it took about 20.

Chief Justice Warren E. Burger: Yes, but at least three.

Mr. Petern S. Herman: Yes, the federal question aspect of it is critical of course, if there is no federal question here, if the states not ascertain to write under a federal law, then we have no basis to ask the court.

Chief Justice Warren E. Burger: We are not here at all.

Mr. Petern S. Herman: Right.

Justice William H. Rehnquist: Mr. Herman, you say this was not a classical avulsion, it is certainly was not a classical accretion neither was it?

Mr. Petern S. Herman: It falls for almost precisely within the case of Commissioner’s -- I think the United States, Your Honor, which has cited in the brief.

The classified is an exception to the accretion doctrine, because what the river did was to fall around and create a new channel and how long that took we do not know?

But we know it took 20 years after the channel was discovered before it became the main channel of the river.

Justice William H. Rehnquist: But we also know there was a precise point in time at which one channel seize to bare the main part of the current than the other one did from the findings to the Court doing that.

Mr. Petern S. Herman: That is correct, Your Honor, sometime after November 25 of 1909.

Chief Justice Warren E. Burger: Thank you, Mr. Herman.

Mr. Mix you have about nine minutes left.

Rebuttal of Robert Mix

Mr. Robert Mix: Thank you, Your Honor.

Clearing up one basis fact matter, the land in dispute can be divided into two types.

A comparably small portion of it was under the channel that is being disputed as to whether or not it was revolted.

The balance of it, upstream was in the original bed of the river and I submit this creates two different problems.

My concern here is apply to the riparian.

Being very candid, if the Court had not starting with Barney v. Keokuk, handed down a line of decisions under federal authority taking the ownership of the bed from the riparian and giving it to the State.

We would not be here today, because all States except Louisiana adopted the Common Law, and there was no question as to what the Common Law meant.

It was only when the Court said the States own the beds but they may decide what disposition are going make of them, that we found ourselves in the situation we are in today.

On that basis, Bonelli becomes very important because it points the way to a return to what was the law of the land and it should be pointed out that in 1876 when Barney was decided, 38 states had already been admitted to the Union and in the territories not yet granted Statehood.

It is safe to assume that the principle riparian land had been occupied.

Justice William H. Rehnquist: Did the Court in Barney say what its authority was for deciding the matter as a federal question?

Mr. Robert Mix: It did not, Your Honor.

Justice William H. Rehnquist: Was it a diversity case?

Mr. Robert Mix: It was not as my understanding -- it could have been, it was a railroad case and the railroad might not have been a resident but the case does not say that.

Justice William H. Rehnquist: It conceivably it could have been in this Swift v. Tyson days, isn’t it?

Mr. Robert Mix: I am not familiar with the case, Your Honor.

Again, by 1876 most of the important riparian land in this country was occupied by riparians; and then Barney v. Keokuk was handed down and the riparian started to have his rights taken away from him.

And again, emphasizing the due process aspect, there is even more than that.

There is the problem of the Court taking jurisdiction a hundred years ago and if it is now are going to be declared that the Court does not have jurisdiction, the riparian is left at the mercy of the states.

And there is a very practical aspect of this.

Stating this hypothetically, but it is very real.

We take a riparian in State A, and State A Supreme Court has decided as Oregon has and as Mr. Herman says that the riparian has no right to below high water.

Immediately across this navigable river is State B, and State B is ruled that the riparian owns the middle of the stream.

They are both under the Common Law; they are both under applicable constitutions.

How in that situation do we explain to A the State can actually come in and take the portion of the bed in front of your river or of your property.

Sell it off so as long as it does not interfere with navigation and let us take between high and low of the water for example.

Someone can sell it in, build a building and you A have no rights left.

Now there at least, while Bonelli is in dispute here, there is certainly one thing said in Bonelli that should not in my judgment be in dispute.

And that is that riparian thus is important, and there is no reason under our jurisprudence pursuing to a riparian, you do not occupy the same status as other property owners in this country.

There is no reason to discriminate against the riparian when the courts are dedicated to protecting the property rights in other types of situations.

The common law as it applied until at least 1876 would resolve all of these problems.

We would not have argue -- yes Your Honor.

Justice John Paul Stevens: Mr. Mix, could you help me a little bit on the federal question?

You argue that a uniform role is desirable, but your theory in federal jurisdiction as I understand it is that there was their patents involved and the equal-footing doctrine matter of fact the river is navigable.

Those are your three bases for federal jurisdiction.

Would you explain to me what is the relevance of the fact that patented land involved?

Mr. Robert Mix: Referring to at least two decisions of this Court, the Borax Limited case and the Hughes case.

Justice John Paul Stevens: The Hughes they are construing the patent of the prior owner I believe, are they not?

Mr. Robert Mix: Yes, Your Honor.

Justice John Paul Stevens: But you are not arguing any basis of construction on it prior owner of this Fischer Cut, are you?

Mr. Robert Mix: We are contending Your Honor, yes.

We are the owners by mean conveyances of the property, which was originally patented out by the Federal Government.

And it is our position that when that property was received from the Federal Government as part of it the riparian rights passed, and that we have succeeded to those rights by the mean conveyances.

And that this a matter of Federal Law in interpreting that patent that the State cannot come along and say, “Now even though you have a federal patent, you have got nothing beyond the high water mark”.

Again, very briefly, the Common Law if it is applied we will not have these problems of avulsion, what is navigable, it is a very simple matter to determine the head of tide water.

Turning briefly to the State the matters of the State has raised.

The law goes back to the Romans, that if a river changes its channel and flows over private property, the private land owner does not lose his title.

We are not talking about riparian rights, we are talking about the law of submergence.

And the riparian continues to maintain title subject to the public navigational servitude and disagreeing with California’s position, the State does not need fee title to the bed to protect the public and we know this is true, because approximately 20 states within this country the State has declared or has adopted the Common Law and the riparian owns the bed.

And there is no record to my knowledge of the riparian successfully interfering with the public rights.

Unknown Speaker: And the Oregon courts decided likewise in this case, with respect to the avulsive channel.

Mr. Robert Mix: Yes, to the avulsive channel, yes Your Honor, that is correct.

And this is an illustration of the lack of need of fee title in the State and what we are disputing here really is proprietary rights of the riparian on the one hand versus the right of the public to use the water on the other.

And there is no real conflict except that one is created hypothetically by saying, well, we hold it in trust but I submit that is a misapplication of the trust doctrine.

Thank you.

Chief Justice Warren E. Burger: Thank you gentlemen.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Cousins v. Wigoda - Oral Argument, Part argument

Fri, 17 Sep 2010 18:22:21 +0000

Case:

Cousins v. Wigoda

Related Transcript:

73-1106_19741111-incomplete-argument.xml

Transcript:

Argument of Wayne W. Whalen

Mr. Wayne W. Whalen: 72, in which 59 respondents were elected as delegates to the 1972 Convention.

On March 31, 1972, 10 petitioners filed the challenge in accordance with the rules of the Democratic National Party contending that respondents have violated National Party rules.

And that they've discriminated invidiously and substantially on the basis of race against women and young people and that they had held secret and close slate making meetings, all in express violation of the National Party rules.

On April 19, 1972, the respondents filed the complaint in the Circuit Court of Cook County, alleging that respondents because they were elected in accordance with state law, were the only delegates who could be seated at the 1972 Convention.

Petitioners sought to remove that case to the Northern District of Illinois federal court.

The motion to remand the case was granted on the grounds that no constitutional or federal question was presented by the case.

Petitioners also sought to enjoin the action in the state court pursuant to Section 1983, an injunction was issued for time but was subsequently vacated by the Seventh Circuit Court of Appeals and stay of the Seventh Circuit Court was denied by Mr. Justice Rehnquist in Chambers.

Pursuant to the National Party rules, on May 31, June 1, and June 8, 1972, hearings were held in Chicago at which both respondents and petitioners participated presenting argument, filing motions, presenting witnesses and documentary evidence all before a hearing examiner appointed by the Democratic National Committee, Mr. Cecil F. Poole.

On June 25, 1972, Mr. Poole issued a report in which he upheld the allegations of petitioners and that is that respondents had discriminated invidiously and substantially on a basis of race and against women and young people.

He also found that respondents had conducted closed and secret slate meetings in violation of National Party rules and he also found that respondents had no rules for governing their procedures, although, that too was required by Democratic National Party rules.

Justice Potter Stewart: Who are the respondents?

Mr. Wayne W. Whalen: The respondents are the 59 delegates selected in accordance with the Illinois Election Code.

Justice Potter Stewart: The delegates themselves?

Mr. Wayne W. Whalen: They were the delegates that were elected according to the Illinois law.

That's correct.

Justice Potter Stewart: Right.

Thank you.

Mr. Wayne W. Whalen: In late June 1972, petitioners held caucuses throughout the City of Chicago in which they selected an alternative delegation.

The delegates -- the candidates for delegate who had been on the ballot on March 17th but which had not violated the National Democratic Party rules selected an alternative delegation, 59 -- essentially, the 59 petitioners in this case.

On June 30, 1972, --

Justice William J. Brennan: Are the 59 petitioners include any of the 59 respondents who elect?

Mr. Wayne W. Whalen: No, they do not.

All the 59 respondents were found to have violated the National Party rules, Your Honor.

On June 30, 1972, after a highly publicized and intense debate before the Credentials Committee of the Democratic National Party, the Credentials Committee ruled to seek petitioners and not to grant respondents' credentials to the 1972 Convention.

The Credentials Committee expressly rejected respondents' claim that state law exclusively governs the selection of delegates to the 1972 Convention.

In minority report of the Credential's Committee favoring respondents' position was filed with the 1972 Democratic National Convention.

On Monday, July 3, 1972, respondents filed and action in the Federal District Court for the District of Columbia in which they sought to reverse the decision of the Credentials Committee.

They alleged that they have been exclusive -- they have been elected in accordance with state law and therefore were entitled to be seated.

They also alleged violation of constitutional rights under the First and Fourteenth Amendments.

On the same day, July 3rd, the Federal District Court Judge Hart dismissed respondents' complaint.

Now, the Credentials Committee had also voted to unseat the part of the delegates which had been elected in accordance with the California primary law and to seat in it instead that delegation selected by appointment of the presidential contenders other than Mr. McGovern.

That delegation, the unseated California delegates also brought an action in Federal District Court and their complaint was also dismissed by Judge Hart.

On the 4th of July, the day after the dismissal by Judge Hart, the Court of Appeals for the District of Columbia combined both the California and the Illinois cases for oral argument.

Oral argument was heard on the 4th of July.And on July 5th, the Court of Appeals issued its ruling.

The Court said and expressly approved the resolution of the Credentials Committee seating petitioners and unseating our respondents.

To protect this jurisdiction, the Court of Appeals also granted an injunction to prohibit the Illinois respondents from proceeding in any other Court.

On the same day the respondents' petitioned this Court for writ of certiorari and for a stay of the elec -- of the Court of Appeals of the District of Columbia decision.

On the evening of July 7, 1972, this Court's opinion issued granting a stay of both the Illinois and the California decisions of the Court of Appeals but also expressly denying -- expressly refusing to act on respondents' petition for writ of certiorari.

The following evening, July 8th, respondents petitioned the Circuit Court of Cook County for an injunction to enjoin the petitioners from participating as the delegates from the Chicago districts in the 1972 Convention.

Petitioners did participate in that convention and after a hard fought political battle, after which numerous comprises were offered and rejected by various parties, the 1972 Convention upheld the ruling of a hearing examiner and the holding of its Credentials Committee that respondents had violated National Party rules and that National Credential should be awarded to petitioners and not to respondents.

On August 2, 1972, briefly after the convention was over, respondents again went to the Circuit Court of Cook County and sought an injunction against petitioners from participating from in the selection of National Committee Men and Committee Women from Illinois.

On October 10, 1972, this Court remanded the case of Keane v. National Democratic Party to the Court of Appeals for the District of Columbia.

And on February 16, 1973, the Court of Appeals for the District of Columbia found that the National Convention had acted within its confidence in granting its credentials to petitioners and refusing the credentials to respondents.

The Court of Appeals found the case moot but nonetheless affirmed the decision of Judge Hart dismissing respondents' complaint.

On September 12, 1973, the Illinois' appellate court affirmed the two injunction orders of the Circuit Court of Cook County.

The Illinois appellate court found that Illinois law was exclusive and convention rules and national rules were of no effect and that the Illinois law exclusively govern the election of delegates to the convention and the convention was without power or authority to refuse the seat them.

The Supreme Court of Illinois declined to review the Illinois appellate court decision.

Chief Justice Warren E. Burger: In the -- under Illinois law do that delegation at that stage have any authority or power other than the election of the members of the National Party Committee?

Mr. Wayne W. Whalen: That was the --

Chief Justice Warren E. Burger: Or have all of their other functions expired?

Mr. Wayne W. Whalen: All of their functions had expired with the exception of the power to select the National Committee Men and Committee Women.

Chief Justice Warren E. Burger: Is the -- are the delegates then discharged once that function is performed?

Mr. Wayne W. Whalen: No, they're not.

They still continue to hold office as delegates to --

Chief Justice Warren E. Burger: Until the next convention?

Mr. Wayne W. Whalen: Until the next convention.

Justice William J. Brennan: Or the next file reading?

If the Illinois law is cooperative, I'll take it that it would be another primary for the selection of the delegates?

Mr. Wayne W. Whalen: There will be another primary Your Honor.

But our position is that a person is not a delegate until he's been granted the credentials by the appropriate authority of the National Party.

Justice William J. Brennan: Well, what I'm trying to get at is if the Illinois appellate court is correct and then under Illinois law there would be another election where they're not a delegate?

Mr. Wayne W. Whalen: The Illinois appellate court simply sustained the injunction of the Cook County Court which prohibited petitioners from acting in anyway its delegates, for holding themselves out as delegates.

Justice William J. Brennan: But the respondents act as delegates only until they're replace under Illinois law by another election, isn't that true?

Mr. Wayne W. Whalen: That's correct.

Justice William J. Brennan: And that will be when?

Mr. Wayne W. Whalen: The next primary election will be in March of 1976.

Chief Justice Warren E. Burger: I thought you said, until another election and until that election had been acknowledged and approve by the National Party Convention.

Mr. Wayne W. Whalen: If I didn't say that I certainly meant to imply that Mr. Chief Justice.

Chief Justice Warren E. Burger: In the meantime the people elected are merely delegate designates --

Mr. Wayne W. Whalen: By the state of Illinois.

Chief Justice Warren E. Burger: And they remain in that posture until their credentials are accepted by the convention?

Mr. Wayne W. Whalen: On the other hand, the petitioners are the certified delegates to the convention and have the credentials which have been granted by the National Party.

Justice William H. Rehnquist: Mr. Whalen, we've certainly taken jurisdiction of some cases where there's been an appeal from an injunction without any contempt citation where the party has yet to disobey the injunction.

And we've taken jurisdiction of cases where a party has disobeyed an injunction and had a contempt citation or contempt penalty imposed on it.

But I know the trouble about the posture of your case.

You have had an injunction issued against your client.

Your clients have disobeyed the injunction, so the injunction didn't frustrate anything they wanted to do and there's a possibility of contempt proceedings against them.

But as I understand it, no actual contempt penalties have been imposed on them.

Mr. Wayne W. Whalen: There are two injunctions involved, Your Honor.

One injunction is the August 2nd order which currently restrains petitioners from acting as delegates in selecting National Committee Men and Committee Women, that's the August 2nd order.

Justice William H. Rehnquist: Now, what practical effect does that injunction have in your clients at this time?

Mr. Wayne W. Whalen: It is preventing the clients from holding a meeting, selecting a National Committee Man and Committee Women -- woman from Chicago --from Illinois and presenting them to the Democratic National Committee.

Justice William H. Rehnquist: What -- does that come every two years?

Mr. Wayne W. Whalen: That comes up under National Party rules as a duty and responsibility of the certified delegates from each state.

Justice William H. Rehnquist: Would the National Committee Man or Committee Woman and doesn't have any particular term?

Mr. Wayne W. Whalen: It's a four-year term.

Justice William H. Rehnquist: Well, when was the -- when were they elected last in Illinois?

Mr. Wayne W. Whalen: Respondents participated in an election because petitioners were enjoined on August 5, 1972.

So, the term of National Committee Man and Committee Woman from Illinois will run from the National Convention in 1972 until the end of the National Convention in 1976.

Justice William H. Rehnquist: And by that time there'll be new delegates by anybody's rule?

Mr. Wayne W. Whalen: That's correct.

Justice William J. Brennan: I get it then at the National Committee Men suppose is filled now --

Mr. Wayne W. Whalen: It is Your Honor.

Justice William J. Brennan: And Committee Woman?

Mr. Wayne W. Whalen: It is -- it is filled --

Justice William J. Brennan: And then did the -- did the National Committee accept those --

Mr. Wayne W. Whalen: It accepted --

Justice William J. Brennan: Those elections by respondents?

Mr. Wayne W. Whalen: It accepted them subject to challenge.

We -- the petitioners were unable to challenge because there enjoined by the Cook County Court.

Justice William J. Brennan: Let's assume that you win this case, what will happen with respect to the National Committee Man and Woman?

Mr. Wayne W. Whalen: The petitioners will hold a meeting which they were enjoined from holding by the August 2nd Order.

They will select nominees for National Committee Men and Committee Women and present them to the Democratic National Committee.

I might say that the July 8th Order of 1972 is in our judgment that still has some force and that the trial judge in Cook County has deferred any action on the contempt proceedings until such a time as this Court has had an opportunity to rule.

Petitioners respectfully submit that all the proceedings in the Cook County Court after the July 5, 1972 judgment of the Court of Appeals for the District of Columbia were barred by clear and unambiguous principles of res judicata.

The Court of Appeals for the District of Columbia expressly held: first, that all the parties in the federal form were the same as all the parties in the state form; secondly, the Court of Appeals for the District of Columbia expressly approved the resolution of the Credentials Committee seating petitioners and unseating respondents and granting petitioners National Convention delegates.

Justice William J. Brennan: Mr. Whalen, may I just interrupt you.

Mr. Wayne W. Whalen: Yes.

Justice William J. Brennan: If I may get back to you about a matter of the Committee Men and Committee Women.

You say they were elected by the 59 respondents, when?

Mr. Wayne W. Whalen: On July 5, 1972.

Justice William J. Brennan: And that what was before the National Convention was?

Mr. Wayne W. Whalen: And that was after the --

Justice William J. Brennan: Well, that was --

Mr. Wayne W. Whalen: It was August 5, 1972?

Justice William J. Brennan: But after the National Convention.

Mr. Wayne W. Whalen: After the National Convention.

And that was -- the National Party --

Justice William J. Brennan: Are they now seated by the National Committee or in office?

Mr. Wayne W. Whalen: They are seated subject to challenge.

Justice William J. Brennan: Subject to challenge before whom?

Mr. Wayne W. Whalen: The Democratic National Committee.

Justice William J. Brennan: Well, has the National Committee permitted them to participate in National Committee?

Mr. Wayne W. Whalen: Yes, they have.

Justice William J. Brennan: Subject to challenge?

Mr. Wayne W. Whalen: Yes.

Justice William J. Brennan: And what is the Committee going to rule on the challenge?

Mr. Wayne W. Whalen: The committee can't rule on the challenge because the petitioners are currently enjoined from bringing it.

Justice William J. Brennan: I see.

Chief Justice Warren E. Burger: The state court.

Justice William J. Brennan: I thought this case was moot.

Maybe, I hope so?

Mr. Wayne W. Whalen: I might say, Your Honor that it's a continuing reoccurring question which is inevitably will arise at the last minute just as this case.

Justice Potter Stewart: With Democrats, its sure will.

Mr. Wayne W. Whalen: I said before that the Court of Appeals for the District of Columbia expressly held that all the parties were the same.

It also expressly approved the resolution granting respon -- granting petitioners' credentials and denying respondents' credentials.

It further held that respondents state court claim was to be rejected and if it were to be considered that there would be an impairment of the First Amendment rights of association.

This Court expressly refused to grant respondents' petition for writ of certiorari and under unambiguous law, a stayed but unreversed judgment is res judicata in an absolute bar to subsequent proceedings.

For this reason, we respectfully request that the judgments below should be dismissed.

For over a 100 --

Justice William H. Rehnquist: It was a subsequent vacation of by the Court of Appeals of its judgment?

Mr. Wayne W. Whalen: The Court of Appeals did not vacate its judgment, Justice Rehnquist.

On October 10, 1972, this Court vacated the judgment of the Court of Appeals and remanded the case to the Court of Appeals for a determination of whether the case was moot.

So, at the time that both orders were entered by the Cook County Court, July 8th and August 2nd, the judgment of the Court of Appeals was outstanding but stayed.

Justice William H. Rehnquist: Would you concede that after the vacation of the judgment in the Court of Appeals by this Court that that judgment was no longer in effect?

That judgment was no longer in effect at that time.

But then on February 16th, the Court of Appeals acted again on remand from this Court and at that time, the Court said that the convention had acted within its competence in seating petitioners and refusing credentials to respondents, and further it affirmed Judge Hart.

Under the Munsingwear decision, the affirmance is important because it is a -- that that decision holds that eventhough the case was found to be moot that Keane v. National Democratic Party continued to have a res judicata bar.

For over 150 years, the National Parties have met in quadrennial conventions to select their nominees and citizens from the states have brought credentials challenges to assert principles ranging from party loyalty, racial discrimination, basic principles, silver or gold, are often times just to established a true National Republican Party or a true National Democratic Party.

And credential's challenges are the proven and historic means for citizens in exercise of this First Amendment activity to uphold party principles and to assert of the rights of the National Party.

Chief Justice Warren E. Burger: Are there any cases in the state courts other than the two that you've mentioned in this period in which the power of the National Convention to seek their own delegates' passed on credentials have been questioned?

Mr. Wayne W. Whalen: The two reported cases where the McQueen case and the Houser case which are in our brief --

Chief Justice Warren E. Burger: Any, any beside those --

Mr. Wayne W. Whalen: You --

Chief Justice Warren E. Burger: Beside those two.

Mr. Wayne W. Whalen: Mr. Chief Justice, you're aware of a lower court decision in the State of Georgia which purported to pass on the credentials of the -- which was lawfully elected delegation from Georgia.

Chief Justice Warren E. Burger: Did that go to the Supreme Court of Georgia or was that in the intermediate and lower court?

Mr. Wayne W. Whalen: That was in the intermediate and lower courts.

That same year, there was a decision by the trial court in Mississippi, on a Mississippi challenge to the republican nation -- in the Republican National Committee.

In 1972, in the Riddell case, there's a decision in which the Federal District Court in Mississippi held that the loyal democrats not selected in accordance with state law could be seated at the National Convention and the regular democrats elected in accordance with state law were properly excluded.

The interests of a state are in large part at odds or could be at odds with the interest of the National Democratic Party.

This is certainly been true in the area of party loyalty.

It's been true in the area of racial discrimination.

Justice Potter Stewart: Mr. Whalen, what is the -- what's the federal question here?

What's the question of federal law?

Mr. Wayne W. Whalen: Your Honor, the complaint by its terms does not raise a federal question and indeed that was established by Judge Will in the Seventh Circuit on respondent's motion to remand.

The federal question from the point of view of petitioners is at least three-fold.

First of all, our basic rights of association had been violated by the injunction --

Justice Potter Stewart: By the State of Illinois.

Mr. Wayne W. Whalen: By the State of Illinois.

Secondly, we think that the Privileges and Immunities Clause guarantees us as citizens of the United States the right to participate in a national process.

So, we believe that our rights under the Fourteenth Amendment had been breached by the injunction.

And thirdly, we think that this process is inherently national in nature and if any state could abridge the rights to participate in a National Convention.

The National Party would lose its effectiveness.

Justice Potter Stewart: Well, that the same as your first point and your first and second.

Mr. Wayne W. Whalen: I think that's right.

Justice Potter Stewart: I mean the National Chamber of Commerce is national in nature and the state presumably can interfere with the right of those people to associate.

Mr. Wayne W. Whalen: That's right.

What we had in mind there were the interest which this Court has expressed in cases such as Shapiro against Thompson, Nelson against Pennsylvania where the City of Burbank where there's a national interest at stake.

And therefore, a --

Justice Potter Stewart: Not a federal governmental interest that is there, is there?

Their private associational interest, is it not?

Mr. Wayne W. Whalen: It is a private associational interest but to the --

Justice Potter Stewart: Of course the Court of Appeals, I know it held it was governmental.

Mr. Wayne W. Whalen: But if there's to be any regulation, it certainly has to be federal, it couldn't be stayed.

Justice William H. Rehnquist: Do you feel you have a fundamental right to travel to the National Convention?

Mr. Wayne W. Whalen: We certainly do but I don't think that's what it -- what's at stake here because the injunction order did not prohibit us from traveling by its terms.

It simply prohibited the petitioners from presenting themselves as delegates.

Justice Potter Stewart: Your basic claim is that the State of Illinois through this injunction has interfered with your First and Fourteenth Amendment right of association.

Mr. Wayne W. Whalen: That is correct, Your Honor.

Justice Thurgood Marshall: Outside of the State of Illinois?

Mr. Wayne W. Whalen: Yes.

If the law were any different on the 11th hour of every convention, state courts of general jurisdiction would be issuing injunction orders in accordance with state law which would affect the outcome of the National Conventions as Judge Will pointed in his decision, this is obviously intolerable result.

Justice Byron R. White: What if the -- what you're suggesting also I suppose that conventions have no business or political parties do have the business of saying how delegates to their convention could be elected if they're going to be given credentials?

Mr. Wayne W. Whalen: Yes.

And as a matter --

Justice Byron R. White: You could say, I suppose according to you that the party could say delegates must be chosen in the convention process rather than by election?

Mr. Wayne W. Whalen: That is correct.

Justice Byron R. White: And the state has no -- would have no business insisting that delegates be elected rather than chosen on convention?

Mr. Wayne W. Whalen: That is correct.

Justice William O. Douglas: Well, as a matter fact I gather you go so far as to say the states have absolutely no role to play.

It's a national -- if the convention sets up --

Mr. Wayne W. Whalen: I, I--

Justice William O. Douglas: The procedures and methods by which these delegates will be elected?

Mr. Wayne W. Whalen: I don't think -- I don't think we need to reach that decision here.

The National Conventions as a practical matter and indeed in most cases differ to the state's process --

Justice William O. Douglas: Well, that's alright.

If you say that's the business of the National Convention to differ or not?

Mr. Wayne W. Whalen: It might not be if a constitutional questions were presented which are not involved in this case or if there were federal regulation which is not involved --

Justice Byron R. White: On the other hand the convention has no business interfering with the state's constitutional prerogatives with respect to the selection of electors?

Mr. Wayne W. Whalen: That is correct, other than --

Justice Byron R. White: They're not involved here, are they?

Mr. Wayne W. Whalen: Electors are not involved and other than, to the extent --

Justice Byron R. White: And the state needed I suppose except the parties -- the results of the parties work at the National Convention?

Mr. Wayne W. Whalen: And as you know Your Honor that has repeatedly happened.

Justice Byron R. White: Yes.

Mr. Wayne W. Whalen: In -- to support the injunction in this case, the respondents had argued that there's a compelling state interest.

While they don't argue that there are any constitutional rights at stake, they say that the state has an interest in protecting its election process and to achieve this protection, they would have that injunction be issued.

But the effect of that injunction is one of two things.

First, it would force the National Party to seat respondents.

That's what the Illinois appellate court said.

Individuals who the National Party has expressly found violated their most fundamental principles and with whom the National Party did not want to associate.

Or the second thing would be that there would be no persons from Illinois as seated at the National Convention.

It's not conceivable what state interest is protected by having no citizens from the State of Illinois and that was certainly the interest which persuaded the Court of Appeals for the District of Columbia and the Riddell Court.

Also, that argument ignores the strong national interest of the party to associate so it can rally its members for its nominee to win the November election.

The argument ignores that.

For these reasons, we would respectfully request that the judgments below be reversed.

Chief Justice Warren E. Burger: The only impact of decision here, am I correct, as to the immediate situation would be the identity of the members of the National Committee from state.

Is that not the only remaining question?

I'm not talking about what's going to happen in 1976, but presently the only impact to what we would decide.

Mr. Wayne W. Whalen: There's that -- there's also the problem that if persons wanting to participate in a National Convention can have injunctions issued against them and if the judgments are subsequently reversed but those individuals have to stand for contempt, that's certainly will chill in the future any First Amendment rights or incentive to bring this kind of --

Chief Justice Warren E. Burger: I was excluding the consequences just the present ones.Decision of this Court now would decide who which body is going to elect the National Committee members from the State of Illinois.

Mr. Wayne W. Whalen: It will decide that.

The tri -- the Cook County judge has also deferred any further action pending review of this case.

Justice Potter Stewart: He will also decide whether or not your clients are going to jail?

Mr. Wayne W. Whalen: That's correct.

Chief Justice Warren E. Burger: It's also a future.

Thank you, Mr. Whalen.

Mr. Torshen.

Argument of Jerome H. Torshen

Mr. Jerome H. Torshen: Mr. Chief Justice and may it please the Court.

The issue in this case is whether the state's interest is insufficient to enable it to enforce voting and associational rights of its citizens through injunction proceedings against certain of its citizens from assuming party officers to which they were not elected, and from representing a particular electorate which did not choose them.

The facts underlying this issue have been largely, totally ignored by petitioners and have not been properly heard in any Court until they were heard in the Circuit Court of Cook County.

Those underlying facts which give rise to the injunction and which were not heard are the Illinois election law.

The nature of the election itself, the voter and associational rights of Illinois citizens to choose their representatives, and to associate with each other in political parties, and the findings that were made concerning the nature of the petitioner's slate of delegates itself and the manner in which they were chosen by the State.

With regard to all these things, we are here on a record which is largely uncontested and in which the findings of fact which came after two evidentiary hearings which all persons who participated were not objected to.

I would like to dispose, if I may, of the res judicata argument because that has taken up a large part of the petitioner's brief and in the context of these cases, it creates a cloud which has to be dispelled.

If anything, res judicata requires an identity of issues in opportunity to litigate those issues.

The issues before the District of Columbia Courts, both the District Court and the Circuit Court, were the constitutionality of certain guidelines of the Democratic Party.

These included two guidelines concerning the imposition of quotas and two guidelines which dealt with slate-making in the endorsement of candidates.

When this came before the District Court, Judge Hart specifically refused to hear any questions concerning the legality of the slate's chosen in Illinois but concern himself only with the questions of constitutionality of the guidelines holding three constitutional and one unconstitutional and he refused to issue an injunction sought by the Democratic National Committee against state court proceedings.

It should be noted that the original litigants in that case were the duly elected delegates in Illinois through a representative -- the demo -- and the Democratic National Committee.

When the case went before the Court of Appeals for the District of Columbia unreviewed, the Court sustained Judge Hart's finding with regard to the one particular guideline which he held unconstitutional.

The Court stated specifically in part two of its opinion which dealt with the Illinois challenge to the guidelines that the issue before the court below was the constitutionality of the guidelines.

The Court then went on in part three which dealt with the Illinois counterclaim and said, “Because the convention is heard upon us, the issue must be decided, not heard but decided.”

And thereupon issue its injunction against the proceedings in the Illinois Court.

The Court made clear in its opinion that Judge Hart stated that the legality of the slate -- of petitioners here was not for him but nevertheless issued its injunction which was subsequently stayed by this Court.

So that when the case went that to Illinois with all parties present by counsel for evidentiary hearing, there had been no finding concerning the legality of petitioner's slate, and this was the only and precise question presented to the Illinois Court.

So, in these circumstances where there were no identity of issues, no opportunity to litigate, no pleadings or proof, and no finding concerning legality of that slate.

It seems difficult to us to concede or assume that there was some res judicata or collateral estoppel effect leftover after the injunction had been stayed by this Court at the time this Court criticized the District of Columbia -- the Court of Appeals decision.

Justice Potter Stewart: The point is I guess that the federal litigation culminating in this Court's stay was not concerned with the legality under Illinois law of your slate and on the other side of the coin, that this case is not concerned with the constitutional legitimacy of the Democratic Party's guidelines.

Mr. Jerome H. Torshen: That's correct Your Honor.

They're not at issue in the slate --

Justice Potter Stewart: Into the --

Mr. Jerome H. Torshen: In this case and in fact at the outset of the hearing before District Judge Hart.

And I should say there were two hearings.

The first hearing was held about 10 days prior to that which gave rise to the case which reach your Court.

Judge Hart's ruling was held to be premature at that time.

Judge Hart specifically instructed the litigants that he would not hear any questions concerning the Illinois election law or the legality of these slates but would concern himself solely with the constitutionality of the guidelines.

Justice William J. Brennan: Was it open to respondents to raise the question of the legality of the petitioner's slate before Judge Hart in that proceeding?

Mr. Jerome H. Torshen: No one raised it.

Justice William J. Brennan: Was it -- No, that wasn't my question.

Mr. Jerome H. Torshen: No, no, sir.

Justice William J. Brennan: Was it open to you to raise it?

Mr. Jerome H. Torshen: No sir, Your Honor.

It was not open.

Justice William J. Brennan: Why not?

Mr. Jerome H. Torshen: Judge Hart specifically precluded that question.

Justice William J. Brennan: Did you attempt to open it, to raise it?

Mr. Jerome H. Torshen: Well, when we came in Your Honor.

We alleged the bona fides of the respondent group.

In other words, the duly elected delegate and we --

Justice William J. Brennan: Does that imply the lack of bona fides of the petitioner's brief?

Mr. Jerome H. Torshen: No.

No, sir and we were even precluded from putting in evidence concerning the nature of the election in the manner which we were chosen.

So, we were held in the District Court to very narrow issues and these were the issues went up to the Court of Appeals and then were suddenly expanded upon in part three of the opinion of that Court which issued the injunction.

I should state the injunction, the complaint for injunction was, again, not based upon the bona fides of either of the slates but only upon the rights of association of the --

Justice Potter Stewart: Alright.

Mr. Jerome H. Torshen: National Party.

Justice Potter Stewart: Now in the present case, at least as I understand it, it's virtually conceded that your clients were the delegates chosen in accordance with Illinois law.

Mr. Jerome H. Torshen: Not only --

Justice Potter Stewart: I don't think there's a -- as I understand it, there's no dispute about that.

Mr. Jerome H. Torshen: There's --

Justice Potter Stewart: The question is -- the basic question in this case is whether the injunction of the Illinois state court violated the petitioners' constitutional rights of free association --

Mr. Jerome H. Torshen: Correct.

Justice Potter Stewart: Is that about it?

Mr. Jerome H. Torshen: Yes, sir.

Yes, sir.

Justice Potter Stewart: And that was an issue that was not really of -- was not the issue in the previous federal litigation.

Mr. Jerome H. Torshen: That's correct.

Justice Potter Stewart: That's your point.

Mr. Jerome H. Torshen: It was not an issue nor with defense which might give rise to a decision before the Court.

In that regard, Your Honor, it should be noted that the Illinois Court found that the Illinois elections was free, equal, open, and non-discriminatory.

That challenge was never -- that finding was never challenged.

Secondly, with regard to the particular election with which we're concerned, it should be noted that prior to the fight over the guidelines, there was certainly a great deal of federal intervention into the Illinois procedures.

For example, the delegates were chosen from single member from districts, congressional districts.

These districts had been recently reapportioned by a plan approved by the United States District Court in the Northern District of Illinois which enjoins state agencies from acting in any way to put forth their own plan.

So, the districts from which the delegates where chosen, the congressional districts, were established by the federal Court, one man one vote and no invidious discrimination.

Secondly, the persons who could choose the representatives for Democratic Party were also determine by the federal courts in Kusper versus Pontikes which voided the Illinois anti-rating statute which provided then that anyone could vote in a democratic primary.

This Court Kusper versus Pontikes subsequently affirm that finding and said, that the citizens of Illinois had to have the right to associate with other members of the party to choose their representatives.

Thirdly, the federal courts three years earlier, Court of Appeals for the Seventh Circuit in Weisberg versus Powell determined the method in which persons were to be place on the ballot in situations such as this.

It was to be by luck or half draw if you will base upon the day that your application was received by the Secretary of State.

So, here we have a situation in which many aspects of this particular election including the district, the electorate from which the choice was to be made and ballot position was determined by the federal Court, and it now appears to be petitioners position here that having done all these, the vote should not be counted.

Especially, after they concede that the election was free, open and non-discriminatory.

We think, Your Honor, that there can be no such result as they are but that the votes were entitled to be counted and that the election was not a charade.

The Illinois rules were very clear, anyone could run.

There were minimal requirements.

Anyone could vote and in fact they did vote.

There were challenged procedures at all phases of the election process and yet not one of the 180 candidates for the 62 delegate positions were challenged by anyone throughout the election process.

In it's this particular election, this popular election, held under these safeguards that petitioners here say must be totally ignored.

We don't think that that's the result that can be reached.

And what was the state interest here that they were protecting?

We have to look to that, Your Honor, again to the hearings that were held in the state court because it's the only place that such hearings were held and this concerns the manner in which the respond -- the petitioners, I'm sorry.

The petitioners were chosen to represent the Illinois democratic election.

They were chosen in private caucuses.

The rules provided that only the losers in the general election could vote.

Secondly, strict quotas and race, sex, and age were applied.

Third, as stated in the appendix by one of the District Coordinators, one of the counsels for petitioners, the rights of the individual voters were to be ignored.

And lastly again is in the record, developed on cross examination from the co-leader of petitioners' slate.

The voters who voted for those persons who won were disenfranchised because their candidates were tainted as were candidates themselves.

So, all of these people were excluded from the election process and yet, sought to represent the democratic electorate of Illinois and in it's against this group that the state issued its injunction.

Now, when I talked about quotas, the evidence is very clear on that.

For example, the first congressional district of Illinois which encompasses the Hyde Park area is in large measure black, part white and at the caucus meeting held in private home, it was stated, all of the delegate selected could -- must be black based upon the population or there could be at the very most one white.

Now, anyone who lives in Hyde Park in Chicago shops at the Hyde Park Co-Op, it's a large supermarket.

And if you walked down the aisle there pass the produce sections, it's quite obvious that there are a large number of Orientals who live in Hyde Park, persons of oriental descent and one of them asked at the caucus, “May I be elected?”

The answer was, “No, you can't be elected.

You're neither black nor white.”

In the Eight District where only four persons came to attend, it took two votes to determine who the delegates would be because the quotas weren't met.

So, these were people and this was the selection process that was to be foisted upon the people of Illinois in connection with the convention.

Now, --

Justice Thurgood Marshall: Foisted upon the people of Illinois or upon the Democratic Convention?

Mr. Jerome H. Torshen: It was upon the nine, I believe its nine congressional districts involved, Your Honor.

Justice Thurgood Marshall: But the question is as to whether they shall be seated not as to whether they shall be or how they should be elected in Illinois?

Mr. Jerome H. Torshen: I think your --

Justice Thurgood Marshall: Well, may I finish.

Mr. Jerome H. Torshen: I'm sorry Your Honor.

Justice Thurgood Marshall: Or whether they shall be seated at the Democratic Convention.

Now, if understand, am I correct, that the State of Illinois can elect a representative to Congress and Congress can refuse to sit them?

Mr. Jerome H. Torshen: No, sir

Justice Thurgood Marshall: Am I right?

Mr. Jerome H. Torshen: They cannot refuse to sit them.

Justice Thurgood Marshall: Oh, they can't.

Mr. Jerome H. Torshen: I believe that was Powell versus McCormack.

Justice Thurgood Marshall: Powell no, that was no seating.

Chief Justice Warren E. Burger: Have there not been a number of occasions in history when Congress refused to seat a member elected by a particular district in a particular state?

Mr. Jerome H. Torshen: My recollection, Your Honor --

Chief Justice Warren E. Burger: And it does not in more such cases.

For example, one that was recently referred to in one of our opinions, the man elected was a General and he was refused to seat because he wouldn't resign his commission and another case, he was the United States Attorney.

And he was refused to seat because he would not give up his position as United States Attorney.

Mr. Jerome H. Torshen: He may have been refused his seat, Your Honor but I don't think people were chosen in his place by Congress.

But the submission went back to the process established by the states for the election.

So, that I don't think Congress reached out to choose a delegate.

Justice Thurgood Marshall: I didn't say that.

Mr. Jerome H. Torshen: I'm sorry.

Justice Thurgood Marshall: I've said that there were instance where the --

Mr. Jerome H. Torshen: Yes, sir.

Justice Thurgood Marshall: The State had exercise its rights at all, is it?

Mr. Jerome H. Torshen: Correct.

Justice Thurgood Marshall: And in this case the State exercised its rights and I thought convention was asserting its rights.

Mr. Jerome H. Torshen: Correct Your Honor and I don't --

Justice Thurgood Marshall: And if that's what happened.

Mr. Jerome H. Torshen: Yes, sir.

Justice Thurgood Marshall: That a convention refuse to sit him.

Mr. Jerome H. Torshen: Correct!

And we're not arguing that issue before this Court.

I think the issue here Your Honor, is whether the Illinois state court had the power to enjoin certain person from acting as delegates from specific Illinois congressional districts.

Justice Thurgood Marshall: Even if the democratic convention recognizes this as such.

Mr. Jerome H. Torshen: Yes, sir.

Justice Potter Stewart: Your point is?

Justice Thurgood Marshall: With the long arm statute really is it?

Mr. Jerome H. Torshen: Well, it maybe a long arm statute, Your Honor, but to say anything else of course, would be to negate the idea of popular elections of delegates nor do I think, Your Honor that is consistent with any great interest of the convention.

And I think Your Honor that that brings us to this problem of the associational rights that have been raised here.

Justice Potter Stewart: Your point, I gather with the respect to the reported congressional analogy is that it is not an analogy that's your not complaining at all here of the convention's refusal to sit the Illinois -- your clients.

Mr. Jerome H. Torshen: Correct.

Justice Potter Stewart: At all, that's not an issue here at all?

Mr. Jerome H. Torshen: No, sir.

That is not before the Court.

We think whether Illinois has an interest in its own election laws which govern the selection of party officials to prevent its citizens from usurping those laws and acting for representatives of Illinois citizens who did not elect them.

With regard to that, if I might Your Honor, the right of association here is not the right of a few individuals to associate at the convention with the Democratic National Convention.

I think the associational rights here, as this Court pointed out in Pontikes versus Kusper, are the rights of the voters to associate with other members of the party in selecting their representatives.

And secondly, to associate with other members in an election process that here is concededly free, equal, open and non-discriminatory to select those representatives.

And third, if we must, the right of the state parties themselves to associate through their duly elected representatives with the representatives of other state parties in the convention, so that they can choose the nominees for one of our major parties.

Justice William H. Rehnquist: What about the question that Mr. Justice White put to Mr. Whalen, Mr. Torshen?

What if the Democratic National Party decides, we don't want popular elected delegates to our convention.

We want one just chosen by state conventions, is it free to go ahead on that basis even though Illinois law says that delegates to National Convention shall be chosen in an election?

Mr. Jerome H. Torshen: I think they could say that Your Honor.

But I think it would have a serious -- that would cause serious change in the nature of the convention process itself and I think what it would do Your Honor, --

Justice William J. Brennan: But then, what about the answer to this question?

Is it --

Mr. Jerome H. Torshen: They could say that.

They could --

Justice William J. Brennan: And make it stick?

Mr. Jerome H. Torshen: Well, they could --

Justice William J. Brennan: They wouldn't seat the delegate?

Mr. Jerome H. Torshen: Sure.

Justice Byron R. White: But your point is I guess that they can't seat anybody else either?

Mr. Jerome H. Torshen: I suppose --

Justice Byron R. White: Is that, is that your point?

Mr. Jerome H. Torshen: Yes, sir.

Justice Byron R. White: So that if you concede divided the convention that they must concede the state's right?

Mr. Jerome H. Torshen: We concede the right of the convention.

I suppose the state would not have to recognized the nominee of the convention --

Justice William H. Rehnquist: That would be its remedy.

Mr. Jerome H. Torshen: Right.

Justice William H. Rehnquist: So you don't get a spot on that --

Mr. Jerome H. Torshen: Right.

But I also think Your Honor, that if that question were to arise, and it isn't before the Court, we would some other questions to consider.

First the nature of state action, whether the convention itself is state action and whether its exclusion in its method of selection of delegates who will choose the nominee of one of our great party for President is a proper method.

In other words, the convention isn't a voluntary association.

We don't have to reach the question here of state action but it certainly is a great quasi-public body performing a very, very important function.

And for all practical purposes, the only way in which --

Justice Byron R. White: Together if that it is -- we sustain your view here what or if your view would have been followed in 1972, Illinois would not have had delegates at the convention.

Mr. Jerome H. Torshen: That's conceivable Your Honor.

Well, I think conceivable --

Justice Byron R. White: Sure.

You say that the convention had no business seating anybody else?

Mr. Jerome H. Torshen: Right.

That's correct.

Illinois might not have had delegates and we would submit Your Honor that that result would be preferable to the result which did occur, in which the party sought to construct itself from the top-up rather than the bottom-down by picking out the people who would represent the Illinois electorate.

Justice Byron R. White: So you say the state has a -- the party hasn't got the right to say who is going to represent the --

Mr. Jerome H. Torshen: Correct.

Justice Byron R. White: They can reject your delegates but they can't do anything else.

Mr. Jerome H. Torshen: Correct.

I think Your Honor --

Justice Thurgood Marshall: So that if you have a convention under the proposed party rules in the state you'd have the injunction and stop them from going to the National Convention?

Mr. Jerome H. Torshen: If the state selection system has not been referred to a state party as it has been in some states and if the state selection system is it was in Illinois, a popular election which is free and open to all.

And I think Your Honor, the --

Justice Thurgood Marshall: My question is, they have a state convention with the State of Illinois says is not lawful under the state law and they elect delegates to the National Convention in the Pudong, outside the State Illinois.

The State of Illinois could enjoin them from going to the convention.

Mr. Jerome H. Torshen: Yes, sir.

Justice Thurgood Marshall: How under what rule or law do you get that?

Mr. Jerome H. Torshen: Not enjoin them from going there, not enjoin them from participating, not enjoining them from serving on convention committees by enjoining them from representing the electorate as delegates, Your Honor.

Justice Thurgood Marshall: Well, what does that mean?

Mr. Jerome H. Torshen: Well --

Justice Thurgood Marshall: They go to the convention.

They vote in a convention.

But if they say, they vote as a delegate of Illinois, they violate the injunction.

If they say I voted Joe Jones, I don't violate it?

Mr. Jerome H. Torshen: In the Mississippi challenges earlier Your Honor, what the convention did was create positions of delegate at large for certain of the members of the Mississippi delegation and I suppose here, if the convention really wanted this particular group, they could have created offices for them.

Justice Thurgood Marshall: But is it right as the State of Illinois has to control the internal affairs of a National Party Convention held outside of the State of Illinois?

Mr. Jerome H. Torshen: The State of Illinois, we would submit Your Honor, has a right to protect its own election laws and its own electorate which participated in an election held under the offices of the State of Illinois.

And it could protect that by issuing injunctions which would prevent Illinois citizens within the jurisdiction of its Court from subverting those laws.

Chief Justice Warren E. Burger: Well, these men could go down to the convention?

Mr. Jerome H. Torshen: Yes, sir.

Oh, sure.

Chief Justice Warren E. Burger: And vote and do everything they wanted to but when they get back to Illinois, they might have a little problem with being in contempt to Court --

Mr. Jerome H. Torshen: That's correct.

They would have the problem of facing up to the consequences in Illinois and in this particular instance Your Honors, so that the contempt -- the status of the contempt proceeding is known, petitions for rule of the show cause have been issued.

The trial judge has held the case pending the resolution on appeal of the various issues raised, so that that case, although not formally stayed by order is in fact stayed really awaiting the decision of the ultimate reviewing Court, in this instance, this particular Court.

Chief Justice Warren E. Burger: If this hypothetical situation that we were just talking about that is these delegates go to the convention in violation of the state court injunctions, take their seats, perform all their functions, come back or cited for and found him in contempt, would the traditional remedies of federal habeas corpus be open to them?

Mr. Jerome H. Torshen: I haven't considered that question Your Honor.

But I would assume first --

Chief Justice Warren E. Burger: I suppose, they would at the time, wouldn't they?

Mr. Jerome H. Torshen: The -- I would think Your Honor that not only with habeas corpus be available but of course there would be an appeal route from the contempt conviction itself, if there were such a conviction and a penalty imposed.

The normal appeal procedures would be in effect through the Illinois courts and I suppose ultimately on certiorari by this Court, if the Court shows to take or if it went that far.

So, certainly the trial judge will not be the ultimate -- will make -- will not make the ultimate disposition in this case.

But the trial judge in this case was concerned because the issue was raised in the Illinois appellate court that he had no jurisdiction to act it all and it's come up to this case.

Your Honor, we think that in this particular matter, the delegates were elected by the people of the state in a proper and fair election.

There is no fraud alleged in this election.

There were no challenges.

They had bonafide credentials to represent the democratic electorates.

We do not think that the petitioners had such credentials and we think in the circumstances of this case, the Illinois Court was entitled to protect not only those people who voted in the Illinois primary but those who took office and also to protect the Illinois election structure itself.

Now, I should conclude Your Honors by stating in the appendix at page 106, there's a transcript of what happened at one of the caucuses held by the petitioners wherein their delegates where their slate were elected and in answer to complaints raised by the assembled citizenry, they said, “Raise this question in the state courts.”

And this is precisely what was done Your Honor, and we think it would be reversing the trend of history to say that the state courts did not held a sufficient interest to enable it to protect its own election laws in its electorate.

Chief Justice Warren E. Burger: Did you say 106 of appendix or the transcript?

Mr. Jerome H. Torshen: Of the appendix, Your Honor.

Justice Potter Stewart: This was also raised in the credentials committee --

Mr. Jerome H. Torshen: Right.

Justice Potter Stewart: -- is the same.

Mr. Jerome H. Torshen: That's correct.

Chief Justice Warren E. Burger: Thank you.

Do you have anything further, Mr. Whalen?

You have one minute left.

Rebuttal of Wayne W. Whalen

Mr. Wayne W. Whalen: Thank you, Mr. Chief Justice.

I wanted to address the question of whether the exclusivity of Illinois law was raised in Keane against National Democratic Party.

It was raised indeed at all three levels.

In their complaint before Judge Hart, respondents asked that the Court declare a judge in decree that the plaintiff and delegates, respondents --

Justice Lewis F. Powell: What page is that, Mr. Whalen?

Mr. Wayne W. Whalen: Its on page 9 of our brief.

Had been duly elected in accordance with the provisions of the Illinois election mode -- code and that therefore they'll be entitled to take their seats as delegates.

Justice Potter Stewart: You told us early I thought of no point laboring this thing very long that the Judge Hart precluded consideration of that issue.

Mr. Wayne W. Whalen: Yes, he did but then it came up again in the Court of Appeals.

Justice Potter Stewart: And the Court of Appeals said no question of Illinois laws there involved in other words?

Mr. Wayne W. Whalen: No.

Your Honor, Court of Appeals said that the challenge delegates claim if the National Party could not abridge their rights under Illinois law to have the delegate seats for which they've been elected.

The relationship in this case between the Illinois law and the party regulations offers no ground for relief.

And on page 5 of our reply brief, we quote the Court of Appeals which states, “The resolution of the committee which we have here approved, provides that the 59 plaintiffs in this suit are not to be seated as the delegates to the National Convention from which -- from their districts in Illinois.”

It also provides that 59 other person shall be seated as the delegates from those districts.

And in their motion for this -- a stay in this Court following July 5th, the same arguments were raised and the Illinois election law pleaded.

Justice Potter Stewart: Because as I understand it, it's not even an argument.

It's been conceded or at least virtually conceded all the way through, all of this litigation that your adversary's clients are the delegates who were elected in accord with Illinois law.

Mr. Wayne W. Whalen: That's correct.

Justice Potter Stewart: Is that correct?

Mr. Wayne W. Whalen: Yes, it is.

Justice Potter Stewart: There's no argument.

Mr. Wayne W. Whalen: There's no argument on that point.

Thank you.

Chief Justice Warren E. Burger: Thank you gentlemen.

The case is submitted.

We'll hear argument --

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