Cases by Issue - Private or Implied Cause of Action

Alexander v. Sandoval - Oral Argument

Fri, 09 Jan 2009 14:50:31 +0000

Case:

Alexander v. Sandoval

Media File:

99-1908_20010116-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Jeffrey S. Sutton

Chief Justice Rehnquist: We'll hear argument first this morning in Number 99-1908, James Alexander v. Martha Sandoval.

Mr. Sutton.

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

There are two points that I would like to make this morning.

The first is that it is never appropriate for a branch of the Federal Government to imply the creation of a private right of action under the spending power.

The second is that, regardless of the participation of the State as a defendant in this case, the Court's implied right-of-action doctrine does not extend to these disparate effect regulations.

Let me start with the first point.

In case after case over the last two to three decades the Court has made clear that States are not run-of-the-mill civil defendants.

They are not mere interest groups.

They are coequal sovereigns and, as a result, the Court has not lightly inferred that Congress means to regulate the States as States, to regulate in core areas of local sovereignty, or, as here, to expose the States to a private right of action.

Those principles are particularly critical when it comes to the spending--

Justice O'Connor: Well, we're not dealing with a damages action here, are we?

Mr. Sutton: --That's true, Your Honor.

That's exactly--

Justice O'Connor: We're dealing with prospective relief.

Mr. Sutton: --That's true, Your Honor.

Justice O'Connor: Declaratory and prospective.

Mr. Sutton: Exactly, Your Honor and, of course, the Eleventh Amendment applies even to injunctive relief and even, as this particular case reveals, you can still alter the Federal-State balance by allowing private rights of action.

Indeed, in Cannon, the Court distinguished a case not unlike this one on just this ground.

In Cannon, in footnote 13, the Court reviewed many of the implied right-of-action cases it had decided, and it looked at a case called Santa Clara Pueblo, a case in which the Court had not implied a right of action against a tribe, and for that... and the reason it did not imply a right of action was because tribes are sovereigns.

Now, they're statutory sovereigns, whereas States are constitutional sovereigns.

Justice Ginsburg: Mr. Sutton, do I understand what you just told us to mean that if the Cannon case had been against the State medical school instead of against a private university there would have been no claim?

Mr. Sutton: I think that's right, Your Honor.

I think that's right, and it would have been... of course, it's an even harder claim here, because this claim is under regulations, which is something the Court has never inferred before from congressional actions.

Justice Ginsburg: That's a different point, but I wanted to know how sweeping your position is, and you are saying that if Cannon had been against the University of Illinois instead of the Medical School of the University of Chicago, it would have been thrown out?

Mr. Sutton: That's exactly what I'm saying, Your Honor, and I think that's true, and that is our first principal point.

And I think, Your Honor, it follows from all of the cases... I mean, whether you look at Gregory v. Ashcroft, Atascadero, or South Dakota v. Dole, Pennhurst, all of those cases made clear, when you alter the Federal-State balance Congress has to be unmistakable in what it's doing, and in this case it was anything but unmistakable.

Everyone agrees--

Justice Ginsburg: Cannon itself said that's... as far as implied rights of action it said, we come from a past when Congress was reacting to the courts' activity and knew that the courts were implying private rights of action.

I thought Cannon said, this much but no further.

Congress, we're now putting you on notice that henceforth we are not going to imply private rights of action, but we understand that Cannon comes from a different milieu, and we're going to... not going to change that.

Mr. Sutton: --But, Your Honor, States are different.

The Court... the only case that's been identified so far by respondents involving what seems to be an oxymoron, implied right of action against the State, is the Allen case from 1969.

That was not a Spending Clause case, point number 1, but point number 2, more importantly, that's a case that falls under this case's... this Court's decisions, specifically Atascadero, where you can have an overwhelming implication in the statute that a right of action was created.

In Allen, had there not been a right of action, the individuals would not have been able to enforce other parts of section 5 of the Voting Rights Act.

That case is not a classic implied right-of-action case where there's no suggestion in the statute that Congress meant to create a right of action.

In this case, it's just the opposite.

Here, Congress did create a right of action, just not by private individuals, by agencies, so you said my first proposition is a sweeping one, and perhaps it is, but there are not a lot of cases recognizing the implied right-of-action doctrine against States.

I mean, that's not something the Court has been doing.

Justice Breyer: That's true, but you do... in your view, is this... do I have your argument correct that there'll be a certain number of civil rights statutes where, in respect to an implied right of action, there is basically silence, and do you think there could be a number of those statutes where you would imply from that silence a private right of action against an individual but not against a State?

That's your view?

Mr. Sutton: That may be true, Your Honor, but I did--

Justice Breyer: It is your view?

Mr. Sutton: --It is my view, Your Honor.

Justice Breyer: All right.

If that's your view, then you're reading a lot of complication into the silence.

Mr. Sutton: The reason you're saying that is because States will be treated differently from other litigants in the statutes?

Justice Breyer: Yes.

You're reading all that into a silence, so if you're going to read that much complication into the silence, why not read into it that you could bring injunctive actions but not damage actions, given the Eleventh Amendment?

Mr. Sutton: Well, Your Honor, first of all, as Justice Powell said in Atascadero, States are different.

I mean, to quote him at page 246, given their constitutional role, the States are not like any other class of recipients of Federal aid.

That's exactly the premise for the Court's clear statement decisions.

Justice Breyer: Is there any authority for that kind of interpretation of a silence that we get out of the silence actions against a private person but not actions against the State?

Mr. Sutton: That's exactly Atascadero, where you could get money damages actions against private individuals under Section 504, but not against States, so there is authority for that exact point.

But I do want to go back to, I think a premise in your question, which is that this argument is somehow sweeping because there are lots of other civil rights statutes where somehow there would not now be a right of action against the State, and we're concerned about that.

I don't think that's true, however.

I don't know what those statutes are.

No one's pointed them out.

The Civil Rights Act of 1964 itself, Congress was very explicit when it wanted either private rights of action, as in Title II or Title VII, or AG enforcement actions, as in Title III and Title IV.

Title VI--

Justice Scalia: Atascadero, which you put so much reliance on, is distinguishable in that it did involve a money damage action, and it explicitly involved the Eleventh Amendment.

That's not the issue here, is it?

Mr. Sutton: --That's true, Your Honor, but as I pointed out, in Cannon, in footnote 13, the Court has already dealt with this very issue.

Santa Clara Pueblo was a case that was an ex parte Young action against a tribe.

What the statute in that case said is, we create an express right of action for habeas corpus relief.

It said nothing else under the Indian Civil Rights Act.

That was the statute at issue.

The Court said, in light of the silence, in light of the express creation of one cause of action, silence about any other one, and in light of the sovereignty of the... the statutory sovereignty of tribes, we're not going to imply a right of action.

That's Cannon itself, and that is this case.

If you don't imply rights of action casually against statutory sovereigns, you surely don't do it against constitutional sovereigns.

Justice Ginsburg: Would you explain, Mr. Sutton, the impact in the civil rights remedies, Equalization Act that I thought waived the Eleventh Amendment immunity for Title VI, Title IX... and 504 cases, no?

Mr. Sutton: You're referring to the 1986 Rehabilitation Act amendments?

Justice Ginsburg: Right.

Mr. Sutton: Your Honor, that's a very good point, and we're very sympathetic to it, but I just want to clarify one thing.

That point goes to the application of the standard I'm advocating.

It does not contest the standard, because what happens in 1986 is, Congress shows it understands this dialogue between the Court and Congress as to what is required before you regulate the States in these areas, and I think there's a very good argument that Congress was express in 1986 that there were causes of action against States, but conspicuously missing from those amendments is any indication that they were causes of action under regulations, as opposed to the statutory antidiscrimination--

Justice Ginsburg: I thought you were stating sweepingly that when you answered my question, Cannon was under the basic prohibition, not against--

Mr. Sutton: --Title IX.

Justice Ginsburg: --Right.

Mr. Sutton: Under 901, yes.

Justice Ginsburg: Right, and you said there would be no such claim, but now I think you're amending that, because you said after the '86 act there would be.

Mr. Sutton: Well then, I misunderstood your question.

I thought you were referring to all other cases.

I mean, in other words, all statutes that are silent about creating a private right of action, and I'm acknowledging the argument is sweeping in that respect.

It applies to all statutes.

You are right, after 1986, when it comes to Section 504, Title IX and Title VI, the argument's not sweeping at all when it comes to the antidiscrimination mandate, because, as respondents have argued, in 1986 Congress picked up on the dialogue and said, we are going to create an express right of action, so when it comes to intentional discrimination, that which is barred by Title VI or Title IX, there is a right of action.

But the critical failing with that particular argument, and I think that's why it's really not being relied upon by respondents, is Congress says nothing at all about rights of action under regulations, which you know, after all, is an extraordinary concept.

Justice O'Connor: What if it were a city who was the... which was the defendant in the case?

Mr. Sutton: In this particular case?

Justice O'Connor: Uh-huh.

Mr. Sutton: Well, I think, as this Court has said, cities are different from States.

I mean, in my view, cities are... they're statutory sovereigns.

They're State--

Justice O'Connor: Do you acknowledge there would be a private right of action for enforcement of the regulations against a city?

Mr. Sutton: --There would be with respect to the first argument I'm making, but let me switch now to the second argument we're making, where I do not think there would be a right of action against a city, county, or for that matter, a private person.

When one looks at all of the Court's implied right-of-action cases whether it's 1964 in the Borak decision, or Cannon, or more recent decisions, they all start with and agree that the most important point is congressional intent, congressional meaning and design.

There are several indicators in Title VI that Congress did not mean to imply the creation of a private right of action under the section 602 regulations.

The first is that as this case comes to the Court there's no doubt what the antidiscrimination mandate means.

Everyone agrees.

No one's contesting Bakke, Fordice, for the view that 601 only prescribes what the Equal Protection Clause prescribes, so first of all it's a very unusual way for Congress to work, to prescribe one type of State action or city, county action and then somehow implicitly create a cause of action with an entirely different standard of review.

The second indicator of congressional intent, it may be helpful to look at the statute itself, and if you look at... if you're interested, if you look at page 1 and 2 of the blue brief, our opening brief, I'd like to point out some language that I think is... well, we're obviously a little biased, but close to dispositive on this particular point.

If you're relying on Section 602 to implicitly create this cause of action, you've got to read all of Section 602.

Granted, it does create rulemaking authority for the agencies, but if you look on page 2... it's about eight or nine lines down, the beginning of a new sentence... you have the sentence that says, compliance with any requirement adopted pursuant to this section may be affected, so once again, compliance with any requirement adopted in accordance with this section.

In other words, Section 602 does give rulemaking authority to agencies, but it then says, if you want to enforce those rules, here's how you do it, and the here's how you do it creates special rules when it comes to termination of funding--

Justice O'Connor: Well, it also says, or by any other means authorized by law, so isn't that the issue?

Mr. Sutton: --Exactly, Your Honor, and this is critical.

The second possibility for getting compliance with these rules is by any other means authorized by law and, as the Federal Government acknowledged in its brief, I think at page 11, that includes, for example, injunctive relief so, for example, under that, at a minimum all agree an agency could come in and enjoin the State conduct, for example, the way Alabama is administering its driver's licenses.

But here's now the critical second statutory point.

You then have this proviso, exactly after the line that Justice O'Connor has quoted, that now says that no such action... the such is obviously referring to everything they've discussed so far... says, shall be taken until the department or agency concerned has advised the appropriate persons, here the Alabama Department of Public Safety, of the failure to comply with a requirement, has determined that compliance cannot be secured by voluntary means.

How in the world could a private individual establish that a State is in compliance with a Federal agency rule?

That's not something they have--

Justice Souter: Well, one way the two could be reconciled, and I'm not suggesting that it's the best way, but one way to reconcile them would be to say that the private right of action is contingent upon the States having taken the steps in the proviso, so that until the State had notified, and until there had been some conclusion drawn that voluntary compliance would not be reached in the absence of action, the private party could not seek the injunction.

Mr. Sutton: --But Your Honor, let's take the most virtuous and earnest State Attorney General.

They're faced with one of these private enforcement actions, and the private litigant does what you're suggesting.

They first put them on notice.

They send a letter, listen, we don't think what you're doing is permissible under this rule--

Justice Souter: Well, I was suggesting something perhaps even more awkward.

I was suggesting that the private litigant couldn't go ahead until the State agency had said, you know, you're out of compliance, and the State agency had come to some conclusion that voluntary compliance was in fact not feasible.

At that point the individual could then go ahead with the suit, and one of the predicates for the private injunctive suit would be, the State has tried to get voluntary compliance and it can't.

Mr. Sutton: --And the point... I guess the point I'm making is that, take the ideal State Attorney General.

They get this lawsuit, and the private individual says, listen, we'd like to give you an opportunity to voluntarily comply, and here's how we suggest you do it.

What assurance, what guarantee is there that the State is now in compliance with a Federal agency's rules that this--

Chief Justice Rehnquist: Mr. Sutton, look at the sentence, provided, however, that no such action shall be taken until the department or agency concerned.

Does the phrase department or agency there refer to the Federal department or agency in question?

Mr. Sutton: --It does, Your Honor, and you're... this is a better point than the one I'm making in response to Justice Souter.

That language makes it clear who is the one that's doing the advising, and if we're going to draw any inferences from this statutory scheme, it's an inference that whatever could be done under Section 601, under Section 602, that was an enforcement provision for agencies, enforcement provision in the sense that they could promulgate rules to effectuate Section 601, and then they could go about enforcing them, but as the Chief Justice's question points out, it is the Federal department or agency that they're referring to.

Justice Souter: Oh, I... actually, as I guess my question implied, I think that is certainly the easier reading, but I guess I also think that if we felt otherwise impelled to recognize the private action here based on other principles, I don't suppose this would necessarily stand in the way of that.

Justice Stevens: Mr. Sutton, do you think the word compliance talks about private actions as well as actions by the Federal Government?

I always thought that sentence referred to compliance may be effected, as by the Federal Government may be effecting this, but that isn't talking about private actions, is it?

Do you think--

Mr. Sutton: Oh, Your Honor, but--

Justice Stevens: --Do you read it that way?

Mr. Sutton: --Well, I do, Your Honor.

Justice Stevens: Even though... do you think there's an express cause of action, rather than an implied cause of action under Title VI?

Mr. Sutton: Here's the reason I read it this way, and I want to make sure I'm answering your question--

Justice Stevens: Do you think there's an express cause of action under Title VI?

Mr. Sutton: --I think there's a very good argument that there's an overwhelming implication after 1986 that there is a cause of action under Section 601.

Justice Stevens: No, that's not my question.

The question is, do you think there's an express cause of action, as opposed to one that we found in Cannon that Congress intended to imply a cause of action?

Mr. Sutton: Are you referring to 602, or 601?

Justice Stevens: 602.

Mr. Sutton: I think there's a very good argument that there is an express cause of action for all of Title VI.

Justice Stevens: I see.

Mr. Sutton: After 1986, so post Cannon.

I think that there is a very good argument for that.

Again, it requires implications, but I think that falls under the Atascadero point that it has to, if it's a sufficiently overwhelming implication, then we're going to recognize it.

After all, in 1986 they didn't create a right of action.

All they did is, they said, we're abrogating the State immunity.

But I want to make sure I'm understanding a point that I'm not sure I addressed, and this goes back to the compliance sentence about nine lines down on page 2.

It says, compliance with any requirement adopted according to this section, and I don't know how one can read that to say, you don't follow these rules when you try to obtain compliance.

Justice Stevens: Well, one could read it to say, that sentence just refers to actions instituted by the Federal Government--

Mr. Sutton: But it's--

Justice Stevens: --compliance actions, which is a fairly normal way to refer to the--

Mr. Sutton: --Well, maybe this is my confusion.

When it says, any requirement adopted according to this section, the requirement's referring to the rules.

Section 602 does two things.

It says, you can promulgate rules, number 1, and number 2 you can go out and enforce them, and it does seem to me that that requirement language is referring to the requirements promulgated under the section, and so--

Justice Stevens: --Well, why do you--

Mr. Sutton: --I may be wrong.

I may be wrong, but that is the way we think we read it, and we certainly think, given the requirement of clarity, at a minimum it's not ambiguous the other way.

I mean, that seems to me quite striking.

If I could shift to a few other points, there are some other indicators--

Justice O'Connor: --Do you concede that Congress has authorized the regulations at issue here?

Mr. Sutton: --No, Your Honor, we do not, and we think the better reading is that these regulations are invalid, but as we indicated in our opening brief and our reply, we don't think the Court needs to address the validity of the regulations.

Justice Kennedy: Well, let's assume that the regulations are permitted.

Make that assumption.

That, then, is simply an implementation of 601.

I mean, it has to be or we have a delegation problem.

Mr. Sutton: Well, Your Honor, and that's a possibility, but you still have the problem of rules of the language in Section 602 that I just referred to that suggest indicates that all of those rules were rules that agencies were to enforce, not private individuals, so even if you decided... and I don't think you need to decide this, but even if you decide the rules were valid, it would still be rules that could be enforced by the agencies.

In other words, if you thought--

Justice Kennedy: But the substantive obligation that the State must meet is a 601 obligation, as interpreted by the agency under 602.

Mr. Sutton: --Absolutely.

Justice Kennedy: Why can't you say the suit is under 601?

Mr. Sutton: Well, I don't think anyone agrees... I mean, I want to be clear but I don't think anyone agrees that this suit can be characterized as being under 601.

Justice Kennedy: I understand that, but I want to know why.

Mr. Sutton: And the reason, the reason is that the Court has already made clear that Section 601 does not cover disparate-effect legislation and, as Justice O'Connor and Justice Powell indicated in Guardians, one does not effectuate a statutory antidiscrimination mandate by redefining it.

Justice Kennedy: But once the regulation is in place, doesn't the statute then have a new meaning, as interpreted by the agency?

Mr. Sutton: No.

Justice Kennedy: Or else why does the agency have authority to do this at all?

Mr. Sutton: Respectfully, no, Your Honor.

Justice Kennedy: As a preventative measure?

Mr. Sutton: The most that can be said is that you would be enforcing at that point Section 602, and Section 602 is the part of the statute that gives the agencies rulemaking authority.

I mean, that's the way respondents have characterized their action, that's the way the lower court characterized their action.

Justice Scalia: Would the agency not have had any rulemaking authority without Section 602?

Wouldn't it have had the ability to promulgate interpretive regulations--

Mr. Sutton: That is possible.

In other words--

Justice Scalia: --setting forth what its own view of the anti-intentional discrimination provision of 601 was?

Mr. Sutton: --That's true, and that's not the way the case has been argued, but if that were true, then I think it's fair you would need to look at whether that's a legitimate interpretation of Section 601.

Justice Scalia: Right, and under our case law it wouldn't be?

Mr. Sutton: Absolutely not, because Chevron deference--

Justice Scalia: So the only way the regulation here is valid is on the assumption that it is not an interpretive regulation, but rather is a regulation that goes beyond the meaning of 601 in a prophylactic way to, as 601 puts it, to effectuate the provisions of 601?

Mr. Sutton: --That's exactly right, and there's some guidance in the Court's cases.

In fact, it even comes from the line of authority in which respondents are relying, and that's the securities cases.

There have been many cases under Section 10(b) and under Rule 10(b)(5) where plaintiffs have attempted to bring a cause of action that broadens Section 10(b).

The most notable of them is Central Bank from six terms ago.

Another one, Ernst & Ernst v. Hockhelder in 1976 were both situations in which the private litigants attempted to create a cause of action to Rule 10(b)(5), which actually has an even broader source of statutory authority, and the Court rejected them because they created a cause of action that contained fewer elements than the statutory right of action, and I think that's a good analogy here.

Justice Ginsburg: Is the same true of Rule 14?

Mr. Sutton: Excuse me?

Justice Ginsburg: The proxy rules, the statute and the proxy rules, is the same... what you're saying now true--

Mr. Sutton: Well, Your Honor, that, of course, is the Hagen case that you wrote for the Court in 1997--

Justice Ginsburg: --Where I thought I--

Mr. Sutton: --Under Rule... I want to make sure I'm answering your question.

Justice Ginsburg: --Yes.

Mr. Sutton: Under Rule 14(e)(3) you've got a different statutory authorization of rulemaking power.

There, the operative language is that the agency can promulgate rules that, quote, prevent the underlying prohibition.

Justice Ginsburg: But the rule, the regulation there, the rule went beyond the statute.

It was kind of like a prophylactic, and I don't know... perhaps you can tell me if there is any other instance of splitting the regulation from the statute.

I mean, the private right of action, the 10(b)(5) action, the Rule 14 action, they're all wedded to a statutory text, and as far as I know there's no distinction between, oh, I'm bringing it under Rule 10(b) and not... rather than the statute, or Rule 14 rather than the statute.

Mr. Sutton: Your Honor, I couldn't agree more, and I don't think there is precedent for that point.

I mean, that, I think, is our main point, that if the case comes to court, we all know what Section 601 means, and that's why they have to characterize--

Justice Ginsburg: But that's on your argument that the regulation is invalid.

If the regulation is valid, then it seems to me we just decide Rule 14.

Mr. Sutton: --But Your Honor, the implied right of action inquiry is an inquiry that goes really to the same question that you ask when you decide whether an agency rule is valid, and that's what did Congress mean, what did Congress authorize here, so it's true, if there's not an implied right of action it may make these regulations of dubious validity, but that's not necessarily true.

The Federal Government--

Justice Stevens: If I understand your argument, you're saying even the Federal Government couldn't bring this argument.

Mr. Sutton: --If the regulations are invalid, that's true.

Justice Stevens: Well, your position is, they are invalid, therefore the Government couldn't bring this action, either.

Mr. Sutton: That... it is our... we do think they're not valid, but I want to make clear, we think that's a harder--

Justice Stevens: You wouldn't need to worry about all the argument about implied cause of action and all the rest if the regulation's invalid.

Mr. Sutton: --Well, that is one way to proceed, and we've argued that they're not valid.

That is an easier way to proceed.

Justice Scalia: But that's not the question for which we took the case, and I'm assuming and will assume that the regulations are valid.

Now, are... is it your position... is it your position that if the agency promulgated a regulation that was an interpretive regulation which was not precluded by our prior case law, namely, it didn't say that you don't have to have intentional discrimination but it said, this is what intentional discrimination consists of, and that regulation is within the bounds of reasonableness that would satisfy Chevron, is it your position that that regulation also would not be able to be vindicated by a private right of action?

Mr. Sutton: That's a harder case, Your Honor, but the reason... I think the way to look at it is, does the text unambiguously create this right.

If the text doesn't do it, I don't know how a rule can do it by--

Justice Scalia: Well, a text cannot... you're... a text cannot unambiguously create a right for the agency to issue a Chevron-based rule which is premised upon an ambiguity in the statute.

I mean--

Mr. Sutton: --Your Honor, you're right.

Let me--

Justice Scalia: --The agency has no Chevron power unless there's an ambiguity in the statute, right?

Mr. Sutton: --This question gets to the distinction between my first argument and my second.

When it comes to the creation of an implied right of action against the State, the Court has always said it's about what's in the text, so if the State is a defendant, then I stick with what I just said.

Justice Scalia: Okay.

Mr. Sutton: If it's a private party, city, or county, then I do not.

Justice Scalia: It doesn't matter to you whether it's an interpretive rule or a substantive rule, you can't imply it against the State in a private right of action?

Mr. Sutton: That's exactly right.

If I could reserve the rest of my time for rebuttal.

Argument of Eric Schnapper

Chief Justice Rehnquist: Very well, Mr. Sutton.

Mr. Schnapper, we'll hear from you.

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

The petitioners in this case are proposing substantial changes in the law in a number of distinct areas.

First, they characterize this case as involving a fundamental change in Federal-State relations requiring a particularly clear and explicit statement that Congress intends to do that.

This is a classic Ex parte Young injunction.

It's an injunction against Mr. Alexander in his official capacity to restrain future violations of the law.

This Court held in Will that is precisely the kind of remedy that is not--

Chief Justice Rehnquist: In what case, Mr. Schnapper?

Mr. Schnapper: --In Will v. Department of Corrections, that that is precisely the kind of legislation that does not fundamentally disturb Federal-State relations, and I think the whole line of cases since Ex parte Young simply could not survive if that were the law.

Secondly--

Justice Scalia: Well, that handles the Eleventh Amendment argument, but it doesn't handle the Spending Clause argument, you know, the argument that any conditions you're imposing upon the States under the Spending Clause have to be clear.

Mr. Schnapper: --I... to which I'm about to turn.

They... Mr. Sutton next suggests that there cannot be an implied cause of action in Spending Clause legislation, that any cause of action in Spending Clause legislation has to be explicit.

If that is right, Cannon and Guardians were wrongly decided.

They are Spending Clause legislation, Guardians is this very statute.

They both recognize an implied cause of action, and that whole line of cases would have to be overruled.

Chief Justice Rehnquist: What was Cannon?

I thought that was Title VII.

Mr. Schnapper: Title IX.

Chief Justice Rehnquist: Title IX?

Mr. Schnapper: Title IX.

Chief Justice Rehnquist: So that's strictly Spending Clause?

Mr. Schnapper: Strictly Spending Clause.

Justice Souter: In Cannon, Cannon did not involve the regulation, right?

It involved... that was a claim under the substantive standard itself, whether... I think it was a statute.

Mr. Schnapper: The specific claim in Cannon was actually an effect claim.

The plaintiff was a woman who asserted that the university's practice of rejecting medical school applicants over a particular age had a discriminatory effect.

Justice Scalia: Right, but the university wasn't a State university, it was a private university.

Mr. Schnapper: Yes, I understand.

I understand.

Justice Scalia: Well, that's sort of crucial to your Spending Clause argument, isn't it?

Mr. Schnapper: It's not--

Justice Scalia: I don't think our cases say that even when you're using your Spending Clause power to give private individuals the rights to some Federal money you have to be clear.

I thought we only have said that when you're giving money to the States under the Spending Clause you have to be clear.

Mr. Schnapper: --I'm about to turn to the State issue, but I think a fair reading of the... I think the Spending Clause argument is, as they make it, would encompass private defendants.

Chief Justice Rehnquist: Well, but the Spending Clause argument is, as I understand it, goes to the fact that you're trying to make a State a defendant, so Cannon can't be dispositive of that.

Mr. Schnapper: If the Spending Clause rules are limited in that fashion, then that would be correct.

I'm not... but then there--

Chief Justice Rehnquist: But I thought you said to accept the Spending Clause argument meant that Cannon had been wrongly decided.

Mr. Schnapper: --Well, if you conclude, were to conclude that the Spending Clause limitations don't apply to private parties or to cities at all, then you... then that problem would be solved, but the next problem would not, because this Court has been applying this implied cause of action to State defendants.

It did so in Bazemore v. Friday, and in Alexander v. Choate.

Those were classic Ex parte Young injunctions against State officials, and the Court had no hesitation in applying it.

Chief Justice Rehnquist: Did it explicitly decide the question, or did it just assume it in those cases?

Mr. Schnapper: I think it's fair to say that it assumed it, as have the lower courts for years.

I mean, this is an established part of the fabric of the law, and it has been for many years.

Justice Souter: Did either of those cases involve regulations as the immediate premise for the suit?

Mr. Schnapper: Both.

Justice Souter: Both did?

Mr. Schnapper: In Bazemore we relied on a Title VI regulation, and in Alexander we relied on a Section 504 regulation.

Justice Breyer: So in other words, you're saying that if you take the silence... this is... I'm trying to follow the complicated... if you take the silence, and if you... you either read the silence as a whole, just private rights of action against States and individuals for damages and injunctions, or you try to create epicycles, or split the atom, if you're going to split that atom of silence, and if you split it to distinguish between State and private defendants, then you should also split the State defendants to distinguish between injunctive actions and damage actions.

At least, that's what you'd have authority for under case law, because you have some cases, injunctions versus States, and you have other cases, damages versus private.

Mr. Schnapper: Right.

Justice Breyer: Is that right?

Mr. Schnapper: That is right.

In our view, the provisions of the Eleventh Amendment and the sort of penumbra of the Eleventh Amendment issue in Will exhaust the federalism problems that are applicable in a situation like this, and when you get to an Ex parte Young injunction that problem no longer exists.

Justice Scalia: Mr. Schnapper, the two cases that you said did involve regulations, Bazemore and Alexander, were they?

Mr. Schnapper: Yes.

Justice Scalia: Did they involve a regulation that could not possibly have been an interpretive regulation?

You see, I mean that's what's distinctive about this--

Mr. Schnapper: I--

Justice Scalia: --That's what's distinctive about this case.

Mr. Schnapper: --Yes.

Justice Scalia: Here we have a regulation that cannot possibly represent the agency's view of what the statute, 601, requires, because we've said what 601 requires, and it doesn't require this.

Now, did those, either of those two cases involve that kind of a regulation?

Mr. Schnapper: They did not.

They did not.

I mean, there was an authoritative determination of what the scope of the statute was in the context in which those regulations were invoked.

Petitioners have suggested that there can never be an implied cause of action to enforce a regulation, or I would have to say here as well a rule, because that's really where this has come up, that contains a prohibition not contained in the statute itself.

This Court has done that on two occasions.

In Borak v. J.I. Case, which was decided shortly before the announcement of the adoption of this statute, the Court recognized an implied cause of action to enforce rule, part of Rule 14.

And then in the Superintendent of Insurance case 7 years later, the Court did the same thing with regard to Rule 10(b)(5).

Those were implied cause of actions to enforce--

Chief Justice Rehnquist: Those were a long time ago, weren't they, Mr. Schnapper?

Mr. Schnapper: --Yes, but the Court has continued to recognize that cause of action.

In any event, those decisions reflected the standard for implying causes of actions that were prevailing at the time the 1964 Civil Rights Act was adopted and it's been the practice of this Court, in addressing the question of whether it would imply a cause of action, to look at the law that existed when the statute was adopted, on the presumption that Congress would have intended whatever result would follow from the then-prevailing law.

Justice Scalia: Well, it would be '64 to '86.

I mean, you're relying to some extent on much later amendments to the Act.

I mean, that's a substantial part of your case, isn't it?

Mr. Schnapper: We have... we think--

Justice Scalia: And at least by the time those amendments were adopted, those earlier cases were subject to considerable doubt.

Mr. Schnapper: --Right, but we think that an implied cause of action was appropriate under the '64 act as written.

Chief Justice Rehnquist: Without resort to the '86?

Mr. Schnapper: Without resort to the '86 act.

Finally, with regard to the suggestion of the petitioners, they urge quite specifically that a regulation cannot forbid action not forbidden by the statute itself.

The Court has addressed that question on several occasions, in Morning v. Family Publications Service with regard to the truth-in-lending law, and in Gemsco v. Walling, a 1946 decision with regard to the minimum wage.

Both cases involved prohibitions containing regulations which clearly went beyond the language of the statutes.

Both cases, they were upheld by this Court, and Gemsco again was the prevailing law at the time the Congress authorized regulations in 602, so it seems to me that's appropriate to look to here.

With regard to the argument regarding the limitations on the preconditions for certain actions under Section 602, this Court has addressed that question already in Cannon.

It's important to note here that Congress clearly intended that the limitations in Section 602 on an agency action would apply in a discriminatory intent case.

Indeed, the... that was a particular focus... intentional commission was a particular focus in 1964.

The one thing that's certain is that Congress didn't intend to permit an agency to cut off a State agency or a city agency or a private entity from Federal funding without going through all the loops set up in Section 602.

That is to say, Section 602 applies even where we're dealing with a Section 601 violation.

So the Court had that problem before it in Cannon, and this very argument was made.

It was made in Justice White's dissent in Cannon.

It was made in Justice White's opinion in Bakke.

It was made in Justice Powell's dissent in Guardians.

It was made by the defendants--

Justice O'Connor: Which argument do you say was made?

Mr. Schnapper: --That... I'm sorry.

That the notice and predetermination clause of Section 602 would be evaded if you allowed a private cause of action, because private parties don't make those... you know, can't, or don't do those things.

That very argument was made in all three cases and it's never been accepted by the Court, indeed, specifically was rejected by this Court.

Chief Justice Rehnquist: Well, but when you start talking about Guardians, to suggest that it hasn't been accepted, really nothing was accepted, nothing much was accepted in Guardians, there were so many different opinions.

Mr. Schnapper: Well, with all... am I answering?

Chief Justice Rehnquist: Yes.

Mr. Schnapper: With all respect, there were three different issues in Guardians, two of which were clearly resolved, one of which was opaque.

The question of whether there was an implied cause of action was clearly resolved.

There were six members of the Court who ruled that there was.

The question of the validity of the regs was expressly resolved.

Five members of the Court addressed it and resolved it.

What was unresolved was the scope of the remedy in one of those cases.

That was the issue.

Chief Justice Rehnquist: Yes, but the reasoning of the various opinions was not identical.

In the cases where... in those cases where they did... where there was a holding, there was not any majority-accepted reasoning.

Mr. Schnapper: I think the reasoning with regard to the first two issues I mentioned was perfectly consistent.

Chief Justice Rehnquist: Well then, why were there different opinions?

Mr. Schnapper: Because the... because there were differing views as to the... as to subsidiary... as to other issues.

There was a difference about Section 601 covered intent, which separated Justice White and Justice Marshall from Justices Stevens, Brennan, and Black, so they had to write different opinions.

Thank you.

Argument of Seth P. Waxman

Chief Justice Rehnquist: Thank you, Mr. Schnapper.

General Waxman, we'll hear from you.

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

For over 25 years, courts have afforded injunctive relief against violations of Title VI regulations against State officials as well as other public officials and private officials.

That practice is consistent with the expectations of the Congress that enacted Title VI, particularly considering the legal and social contexts that existed in 1964, and successive Congresses have validated the private right of action.

Chief Justice Rehnquist: What social context existed in 1964?

Mr. Waxman: Well, among other things, Mr. Chief Justice, the persistent practice of many local jurisdictions in evading the dictates of this Court and of Congress with respect to a variety of civil rights issues, the most prominent one being--

Chief Justice Rehnquist: You're referring to what was... what various local jurisdictions were doing at the time?

Mr. Waxman: --Yes, local and State jurisdictions.

For example, the kind of thing that prompted the Voting Rights Act of '65.

Justice Breyer: Can you say anything about... it's 35 years, and you said in 35 years everyone has assumed that there is a private right of action for injunctive relief based on a regulation under Title VI, but have there only been like one or two in 35 years, or have there been a lot, or is this the first time it's come up, or the second time, or--

Mr. Waxman: Are you talking about against--

Justice Breyer: --You can say anything--

Mr. Waxman: --Against States, or generally speaking, because the answer is yes--

Justice Breyer: --Well, let's say against a governmental body, however you want to answer it.

I'm just trying to get an empirical idea of whether people really... this really is embedded in the public mind or not.

Mr. Waxman: --I think that it is utterly embedded.

The cases, the decided cases are collected in Mr.... in two appendices to Mr. Schnapper's brief, but with respect to States in particular... I mean, let me speak first to the regulations issue and then to the States issue, which I take to be the State of Alabama's principal points.

There is no case of which I am aware in which this Court has ever even suggested, much less held, that in determining the scope of a right of action, whether expressed or implied, that a distinction should be made between rights articulated in a statute itself, and rights articulated in substantive regulations that the statute mandates that the agency promulgate.

Justice Souter: Well, one--

Mr. Waxman: This is a separation of powers issue.

Justice Souter: --General, I may... I think I agree with the proposition you start with, but one reason to look at it differently now would be this.

We have... since the statute was passed, we have taken a different and at least in the minds of some of us a more realistic view of the circumstances in which you really can in fact infer a congressional intent to provide... to recognize a private right of action, so we're trying to preserve Congress' expectations with respect to the law that was passed under the earlier regime, but it's also sensible for us not to expand that earlier regime any further than it necessarily has to go based upon the precedent that the Congress might have assumed.

Mr. Waxman: That's--

Justice Souter: And therefore there may be a good reason simply because this is no longer the world of Case and Borak, to draw just the kind of distinction which you point out we never have drawn before, but which we have never recognized, which we have never precluded drawing before.

Mr. Waxman: --I would like to make two points, Justice Souter, in response to that observation, with which I agree.

First of all, the implication of drawing the kind of distinction that's been suggested here has very, very broad ramifications beyond enforcement of civil rights statutes.

If you look at the cases, either implied or under 1983, in which private parties have sought to enforce against State agencies obligations under the medicare and medicaid statutes, those are regulatory obligations.

The contemporary legal context in which Title VI and the other civil rights provisions of the '64 act were enacted, as this Court recognized in Cannon and, in particular, in then-Justice Rehnquist's separate opinion in Cannon, were enacted in a regime in which it was understood that legislative silence with respect to a statute that created substantive rights for the benefit of individuals would be enforced by the courts in an implied right of action, and that existed in regulatory cases.

We've talked about Borak.

Merrill Lynch was decided somewhat later in 1982.

The--

Chief Justice Rehnquist: None of those, though, were against States.

Mr. Waxman: --Well... no, no, no.

It's quite right that those weren't against States, and Mr. Schnapper has cited some of the Title VI and Title IX cases that have operated against States.

My only point on distinguishing between regulations and statutes for purpose of implying a right of action is that you will run into this Court's decided case law under the medicare and medicaid statutes whether under implied rights of action or under 1983, the Wright, Wilder, Blessing--

Justice Scalia: Were those regulations that you're concerned about regulations that plainly went beyond an interpretation of the statute?

Mr. Waxman: --They were--

Justice Scalia: You see, I mean, that's what's distinct about this case.

In addition to the fact that it involves a State, you have a regulation that cannot possibly be characterized as simply an agency interpretation of the statute.

Now, are the medicare regulations that you're talking about of that genre?

Mr. Waxman: --I wish I were more expert in medicare and medicaid regulations.

My understanding--

Justice Scalia: I wish I were, too.

Mr. Waxman: --If--

[Laughter]

I will gladly take guidance from you, Justice Scalia, on this, but I believe that those statutes, like others in 1983 actions against State officials, involved both substantive and interpretive regulations and, of course, if you were going to draw a distinction here, it would drive a wedge right through the heart of this Court's cases, including Chrysler Corporation v. Brown and Chevron, that hold that substantive regulations that are mandated by statute have the force of law.

Let me go to the State point, the notion that States--

Justice Souter: My only thought, they may have the force of law, but they may not have the force of the unequivocal for purposes of the Spending Clause.

Mr. Waxman: --Well, I don't think I can do better than simply to repeat what I... the point I hope that I had made, which is, there is no case suggesting that for purposes of enforcing a Spending Clause obligation there is a distinction in recognizing a cause of action based on a statute, or on regulations that the funding agency is mandated to put forward.

The principle--

Chief Justice Rehnquist: But there's no case suggesting that there isn't, either.

I mean, I think Justice Souter's point was that this is an area where there is no precise authority one way or the other.

Mr. Waxman: --Correct.

What we have on our side is, I believe, a completely unbroken practice of enforcing obligations under both the Spending Clause and otherwise equally, whether they arise within the four corners of the statute, or under substantive regulations that are mandated by the statute.

Now, I understand that this... that our position puts great weight on the validity of these regulations, but that point, as the court of appeals noted, was expressly conceded by the State below, and we don't think that it's at issue here.

With respect to the implication of a, an implied private right of action against a State official, which was Mr. Sutton's first point, Mr. Schnapper cited some of the cases under Title VI and its cognate statutes, but I think it's also important to recognize not only the long line of 1983 cases, many of which enforce Spending Clause statutes and their regulations in injunctive action, but also the point that Justice Kennedy made in his dissent in Golden State Transit for himself and Justice O'Connor and the Chief Justice, which is that there may be instances in which a healthy disagreement may arise as to whether a particular provision of Federal law creates a right, privilege, or immunity, but when what is being sought is injunctive relief, prospective relief only against a State official, the courts have long recognized a cause of action under the Supremacy Clause, Sections 1331 and 2201, including in Spending Clause cases which we have cited and discussed probably too briefly in footnote 12 of our brief.

Cases like Blum v. Bacon and Lead-Deadwood are Spending Clause cases... Blum was, even involved a regulation... in which a suit was brought by a private party against the State official saying, look, the State has a policy.

It's reflected in a regulation or a statute that operates in a manner that's inconsistent with Federal law and therefore it is preempted, and the background principle, the principle of law, I respectfully submit, that Mr. Sutton is advocating runs directly contrary to the particular cases we cited under Title VI and its cognate statutes and 1983, but also this more underlying, long line of cases that includes but goes well beyond Spending Clause precedents.

Our position fundamentally in this case is that for 25 years, it is true, Mr. Chief Justice, there is not a holding directly on point that says, you may have a private right of action to enforce the Title VI regulations, but there... for 25 years at least there has been a shared understanding among the three branches, reflected in a unanimous set of, body of case law from the federal courts, from successive congressional enactments.

In addition to the attorney's fees amendment, the Rehabilitation Act amendments, and the Civil Rights Restoration Act, Congress has enacted 11 cognate civil rights statutes in which the funding agencies are expressly directed to promulgate regulations patterned after those under Title VI, all against a backdrop in which, at least since Lau v. Nichols and running up to the present, implied rights of action against State public agencies and other public agencies have been adjudicated, and the executive branch across administrations... I've pulled out briefs filed on behalf of the United States by my predecessors, Robert Bork and Rex Lee, explaining to the Court that the implied private right of action to enforce these cases, and I believe that the former one was in Alexander, which was a case against a State, are important for the... an important complement to Federal enforcement officials.

Our brief in Darrone said, quote, the award of individual relief to a private litigant who has prosecuted her own suit is not only sensible but is fully consistent with and, in some cases, even necessary to the orderly enforcement of the statute.

If there are no further questions, we'll submit.

Rebuttal of Jeffrey S. Sutton

Chief Justice Rehnquist: Thank you, General Waxman.

Mr. Sutton, you have 3 minutes remaining.

Mr. Sutton: A few brief points, Your Honor.

In terms of the question of what vantage point the Court uses in looking at this issue, there are many cases from the eighties and nineties where the Court has not looked to the date on which the statute was enacted for determining whether it's an applied right of action.

Touche-Ross, involving the 1934 Securities Act, is the very same statute that Borak involved, and it didn't look back in time.

It followed what the Court was doing at that point in time.

The true is... the same is true of Transamerica, California v. Sierra Club, and Northwest Airlines.

Even Cannon itself applied the Court v. Ash test which came 4 years after Title IX.

Now, as for the question whether Guardians has resolved this, the last thing that Guardians resolved was the question of whether there was an applied right of action.

Even if one allowed for the counting of dissents and plurality votes, you only had two justices agreeing there was an implied private right of action in Guardians, so that surely was not decided there.

And the notion that pre-1983 there were settled expectations on this point can't possibly be true.

Look at Justice Marshall's opinion in Guardians.

Footnote 1 identifies the split in lower court authority on the very question the Court tried to resolve but didn't, so that doesn't seem possible.

As far as the preemption cases that the Federal Government is relying on, I think it's footnote 11 or 12 in its brief, that's a very different issue.

The question of whether a properly promulgated rule would preempt State law is one issue.

It's a second issue whether a private individual can enforce it.

I have no other points.

Thank you, Your Honor.

Chief Justice Rehnquist: Very well, Mr. Sutton.

The case is submitted.

Attribution:

The Oyez Project

Featured:

Blessing v. Freestone - Oral Argument

Fri, 09 Jan 2009 14:50:09 +0000

Case:

Blessing v. Freestone

Media File:

95-1441_19970106-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of C. Tim Delaney

Chief Justice Rehnquist: We'll hear argument now in Number 95-1441, Linda J. Blessing v. Cathy Freestone.

Mr. Delaney.

Mr. Delaney: Mr. Chief Justice and may it please the Court:

Congress enacted title IV-D pursuant to its Spending Clause powers.

That meant, under Pennhurst, that Congress had to unambiguously notify the States of any consequences of their accepting Federal funds so that the States could make an informed choice about whether to participate in that program, and under this Court's decisions in Suter, Congress could provide that notice to the States by unambiguously conferring rights in title IV-D that would be privately enforceable.

Here, Congress has neither unambiguously conferred any rights upon respondents, nor unambiguously notified the States that title IV-D can be enforced privately by over 18 million title IV-D applicants.

Indeed, title IV-D says just the opposite, because when Congress offered the title IV-D partnership agreement to the States, it unambiguously deposited all enforcement authority in the Secretary of Health and Human Services.

Congress told the States unambiguously that the Secretary would enforce title IV-D, that the Secretary would apply a substantial compliance standard on a systemwide basis rather than an individual case-by-case basis.

Unknown Speaker: Well, what was sought here in the complaint was something based on the substantial compliance requirement, was it not, in the complaint?

This was a broad complaint.

Mr. Delaney: Yes, Justice O'Connor.

Unknown Speaker: There are, however, some provisions in the statute here that are very specific.

For instance, provisions that for, if the State is going to collect money for non-AFDC parents, that it will pay the money over to those parents very specifically and within certain time limits.

Now, that's a pretty specific requirement, is it not?

Do you say that no parent for whom the State has collected money under that provision would have a right to ask the State to pay it over if it were withheld?

Mr. Delaney: Justice O'Connor, that is an important difference here in this case, and that is, once the State actually receives the money, then the individuals would have a right, a property interest in getting that money if the State is wrongfully withholding it, but that is not a statutory right.

That then becomes a constitutional right in their property.

They don't need to move forward--

Unknown Speaker: Well, it might also be a statutory right.

In any event, you would find at least some provisions are specific enough that by some route they could be enforced, would you not?

Mr. Delaney: --No, ma'am, not through the title IV-D itself.

As we envision title IV-D, it's a funding mechanism.

The States gave up some of its rights in terms of domestic relations to the Federal Government in exchange for the money, so it's a contract between the sovereign interests, and what's happening here is we have the Federal Government coming in and trying to run part of the program.

Unknown Speaker: I would think some of the specific provisions might well fall within cases that we have decided previously giving individuals some rights, but this complaint was not based on any such specific request, was it?

Mr. Delaney: No.

This was a very broad--

Unknown Speaker: Now, in Arizona's brief here you seem to want us to address some other issues like the overruling of Maine v. Thiboutot, and some Eleventh Amendment arguments that were not raised in the cert petition.

Is that correct?

Mr. Delaney: --We have raised those--

Unknown Speaker: Why should we get into those?

I mean, you didn't come here with cert petition questions identifying those.

Mr. Delaney: --We did not specifically, but we think that they are subsumed within the question presented, and--

Unknown Speaker: Fairly subsumed, so that people all around the country would understand you were going to be here arguing the overruling of Maine v. Thiboutot.

Mr. Delaney: --Yes, ma'am, and indeed the respondents, when they opposed our cert petition, said that we were doing just that, and that our petition loudly echoed that type of activity, and they have fully briefed the case.

We think that this case presents an excellent vehicle for the Court to reexamine Maine v. Thiboutot, but we don't come here today saying that that's the only way we can win.

We can set that argument aside, and we win on the fact that title IV-D does not unamiguously notify the States that there is any enforceable right in--

Unknown Speaker: But Mr. Delaney, that hasn't been the approach when 1983 is there.

This is not a Cort v. Ash case.

This is a 1983.

Maine v. Thiboutot says there is a right to enforce laws of the United States, and in connection with the question that Justice O'Connor asked you, I think you responded that there would be a claim... suppose the State collected the money and simply didn't turn it over.

You acknowledge there would be such a claim?

Mr. Delaney: --We believe that there would be a claim under either State law grounds or constitutional grounds in the property interest.

Unknown Speaker: But what about a case where the parent was located, the noncustodial parent, and had a job, and the State simply refused to do anything about a wage implementation order?

Would that also... well, would it be enforceable or not in Federal court?

Mr. Delaney: No, ma'am, it would not be enforceable under title IV-D, because title IV-D again is a funding mechanism, and it's a funding relationship, and in order for the court... or in order for the parents to come in and say that they have an enforceable right, we need to make sure that they have one.

Here, there is no conferral of that right.

Unknown Speaker: So your view is it's either all or nothing, so that there's no claim possible under IV-D no matter how specific?

Mr. Delaney: And... correct, and in terms of the substantial compliance standard that Congress has laid out in title IV-D, again that gets back to the funding mechanism, when you have this funding relationship and Congress says in order to continue getting funds you have to perform at a substantial compliance standard on a system-wide basis.

And it used to be when IV-D was first enacted that it was full compliance in 1975, and it continued that way until 1984, and Congress saw that no State had ever been able to comply at a full compliance standard, so Congress ratcheted it down from full compliance down to substantial compliance, and in the process notified the States that you didn't have to deliver service in each and every case, and that's the way that the Secretary also enforces it.

Unknown Speaker: Well, it notified the States that it wouldn't take its enforcement measures such as reducing, what is it, the IV-A money or whatever, as a result of something less than a failure, or substantial compliance, but it doesn't follow from that that there is no individual right if in a particular case there is individual crime.

Mr. Delaney: Well, in fact we think that it does follow that way, Your Honor, because Congress has developed a very comprehensive scheme in title IV-D.

You mentioned the fact that we would be losing title IV-A funds.

The rationale there is Congress wanted to have title IV-D operating full bore, at full speed, doing all that it could for the masses that it was designed to try to take care of, and in the process of then pulling off on an individual case-by-case basis various lawsuits we're... again, we have over 18 million title IV-D applicants across the Nation, and it will cripple the program if you allow these individuals to then come in and try to enforce this on a case-by-case basis.

Unknown Speaker: I thought your point is it wasn't the deal, that the States when they went in thought that all they had to do was make a good faith effort and achieve substantial compliance.

Mr. Delaney: Absolutely, Your Honor.

It was--

Unknown Speaker: And if they have to achieve total compliance, at least insofar as being liable to individual suits is concerned, it's quite a different program they're buying.

Mr. Delaney: --It would radically change, Your Honor... just as you are suggesting it was radically change the agreement that we had entered into with the Federal Government.

The Federal Government came in and told us again that we would have to comply on a substantial compliance standard on a system-wide basis, that if we didn't we would have liquidated damages in the form of specific liquidated penalties against us, but again they would be assessed against title IV-A as opposed to title IV-D.

We were told that the Secretary would then have the discretion to waive those liquidated damages when appropriate, and we could then go in and negotiate with the Secretary.

There were other mechanisms available for us to go in and in essence say, this isn't the time to be enforcing the terms this rigorously.

But again, we were told that we had an agreement, and it was given to us in very unambiguous terms exactly how it would be enforced.

Unknown Speaker: Well, the Federal Government has not yet suspended Arizona from the benefits.

Mr. Delaney: Your Honor, in fact the Secretary has found that Arizona is in substantial compliance.

In 1984 she came out--

Unknown Speaker: That's a surprising finding, in light of Arizona's recalcitrance in carrying out its program and its apparent inability to handle these matters.

I mean, it has been a dismal sort of a performance there in Arizona, but nonetheless, the Federal Government has not withdrawn the funding.

Mr. Delaney: --Correct.

Arizona has not had anything withheld beyond the... it was almost $1 million.

We did have that penalty assessed against us in the early nineties.

In terms--

Unknown Speaker: Has the Federal Government... excuse me.

Mr. Delaney: --In terms of Justice O'Connor's statement Arizona has done an abysmal job, as the complaint lays out, in 1988 Maricopa County, with no notice to the State, bailed out of the title IV-D program, and it dumped over two-thirds of all of the cases in title IV-D upon the State.

The State then had to scramble to try to start meeting those obligations.

And then in 1991... again, the Secretary then came out and found that we were out of substantial compliance, did the audit, and then was coming in annually to do new audits to see where we were, did assess penalties of almost a million dollars, and then found under a subsequent audit than Arizona has now achieved substantial compliance.

And, indeed, as we lay out in some of our briefing materials, Arizona's now receiving national awards, and it's the number one State in terms of improvements for collections over the last 4 years, so Arizona has turned things around and in large part because of the comprehensive mechanism that Congress has laid out, which is to get our attention, and it did when we got that million-dollar penalty assessed against us, but then to--

Unknown Speaker: Did the Federal Government intervene in the district court action?

Mr. Delaney: --No, sir, not in this case.

Unknown Speaker: There was a letter that said in 1992 Arizona was found in substantial compliance.

Has there been anything from the Federal Government since then evaluating this program's compliance?

Mr. Delaney: Your Honor, that was actually a letter in 1994 based on the latest audit, that Arizona is in substantial compliance.

Unknown Speaker: But it was as of 1992, was it not, or--

Mr. Delaney: It was based on a 1992 audit, and no, there is not a subsequent audit that has taken place.

Unknown Speaker: --Do I assume correctly that you would agree that if the agreement between the National Government and the State of Arizona, it had a clause in it providing that Maine v. Thiboutot would be applicable in the relationship between Arizona and the welfare recipients, that then the agreement would be sufficiently unambiguous and they would have the private rights of action to compel your enforcement, is that correct?

Mr. Delaney: If it was that specific in the statute, yes, but it is not in this particular statute, and there are all sorts of mechanisms that I've already identified showing that it is not.

Unknown Speaker: Do you also take the position that, regardless of how clear the general law might be... for example, Maine v. Thiboutot law... indicating that the welfare recipients would have an action for enforcement, that still there would be no action cognizable unless the agreement between the Federal Government and the States expressly referred to that unambiguous law?

Mr. Delaney: We believe that that is what is required under this Court's decisions in Suter, and in Pennhurst, that in the Spending Clause context the States have to be put on notice what the consequences of their agreement or--

Unknown Speaker: Right, but the notice must be within the four corners of the agreement.

The notice cannot be notice by virtue of general but unambiguous law if it is not specifically referred to in the agreement.

Is that correct?

Mr. Delaney: --Yes, sir.

That is our position, that it does need to be spelled out within the confines of the funding mechanism statute so that the States are on notice what it is that they're going to be exposed to.

And again, the problem that we face as States is that there are two different lines of authority out there.

we have the Pennhurst-Suter line that talks in terms of the Spending Clause and the fact that there are significant federalism concerns here when you have contracts between two different sovereigns, and then we have the Wright-Wilder case, line of cases that suggest to the contrary.

Unknown Speaker: But isn't... I haven't looked at Pennhurst recently, but wasn't it the problem in Pennhurst that the State didn't know for sure what its obligation was, not... the question wasn't whether there was a remedy if there were a clear obligation.

Mr. Delaney: They... the problem there was that the States were not on notice what was required.

Unknown Speaker: That's right.

Mr. Delaney: Right.

Unknown Speaker: But here you're on notice about what's required.

Mr. Delaney: No.

We're not on notice about what the consequences are.

We would put--

Unknown Speaker: By that you mean you're not on notice as to whether or not somebody can sue you if you fail to do what's required.

Mr. Delaney: --Yes, sir, and we believe that is a very significant difference, because if we're being told that we're going to be penalized by the Secretary and the Secretary alone, then we can deal with that, but to then have 18 million different individuals who can then walk in and demand enforcement is something completely different.

We were never told that they had enforceable rights.

Unknown Speaker: It seems to me that you're... even under your acknowledgement you're potentially liable to 18 million individuals if you don't give them the money that's coming to them.

You've said that yourself, but you say they just have to sue not in Federal court but in State court for their own property.

Mr. Delaney: If I did, Your Honor, I misspoke.

These individuals do not have any enforceable rights.

Our contract is with the Federal Government.

Our obligations flow to the Secretary.

Unknown Speaker: I thought in answer to Justice O'Connor you said that if money was owing to a particular individual they could sue for it.

Mr. Delaney: But that's different.

When there's money that we have actually received from a third party and we are holding that money, then--

Unknown Speaker: Aren't there 18 million people for whom that could happen?

Mr. Delaney: --If we are able to collect, but again, Nation-wide the collection rate is only 18 percent because of the significant problems in child support enforcement.

Unknown Speaker: What apart from... let's leave aside the question of the collection activity that we're talking about.

What if the State of Arizona simply withheld, under the prior AFDC scheme simply withheld a payment due?

Could the individual bring a claim for that payment?

Mr. Delaney: We don't believe they could under title IV-D, no, sir.

Unknown Speaker: How would they do it?

Mr. Delaney: If Arizona withheld the... if we collected the moneys?

Unknown Speaker: No.

I don't know exactly what the AFDC formula is, but whatever the AFDC formula is, if there were a single parent with two children, and they were entitled to X dollars a month, and the State did not distribute the X dollars, could the parent and the children bring a claim against the State for the money?

Mr. Delaney: No, sir.

No.

No longer, because in the 1996 Reconciliation Act--

Unknown Speaker: No, I... under the prior AFDC scheme.

Mr. Delaney: --Under the prior AFDC scheme I believe so, under Thiboutot, but that is different than our scheme, where we have this agreement.

Again, it's a funding mechanism, and there's not direct dollars--

Unknown Speaker: No, but what is there... I'm sorry, but what is there in the AFDC law or in the agreement between the State and the National Government with respect to the administration of the AFDC scheme that gives them, or perhaps in your terms puts the State on clear notice that the individual recipients could bring an individual claim for the money in the case that I posit, which is not present with respect to the action before us here?

What in the agreement is different?

Mr. Delaney: --Justice Souter, I'm not as familiar with the AFDC case law or statute, just as you are not, but the significant difference is that--

Unknown Speaker: We're evenly matched.

Mr. Delaney: --We're evenly matched.

[Laughter]

I wish that were the case.

In--

[Laughter]

In terms of the difference, though, there is a very significant difference.

In title IV-A with AFDC, under the old system you had direct dollars, they were quantifiable, that if you went through and you met the specific standards of the day you could then have an entitlement to that.

Under title IV-D you're talking about services, not dollars.

You're talking about something that's not quantifiable, something that is much more amorphous, and in title IV-D the difference is instead of having a direct one-on-one relationship, we as the State have to go out and try to locate an absent parent, have to establish paternity for Joe or John or Paul or Ringo, who may be in various different States, so we have to issue subpoenas to try to track them down.

It's a very different--

Unknown Speaker: Well, that might very well go to the question whether you had fulfilled your obligation in an individual instance to try to collect, but I don't know that it would support a distinction in principle between the two cases.

Take an example... in fact, I guess it's already been mentioned... in which the parent with the support responsibility is more or less standing on the sidewalk outside the State welfare office.

All they've got to do is serve him with a document and haul him into court, and the State simply says, we don't want to.

We're busy.

We have other things to do.

There, it seems to me the State's obligation is just as clear and definite as it is in the instance of the obligation to pay money, and I'm having difficulty drawing the distinction in principle between those two sets of circumstances.

Mr. Delaney: --And a lot of that falls back, Your Honor, to the issue of what the States were told, and we were told that we would have to substantially comply in order to get our funds, and--

Unknown Speaker: So I think you're saying... I'm sorry, but may I interrupt you with this question: I think you're saying not so much that you weren't put on notice that you would have this obligation, but that the substantial compliance requirement in effect puts you on notice that you didn't have it.

In other words, I think you're arguing that the substantial compliance condition says, we don't worry about individual cases.

Your only obligation is an obligation in the mass, as it were.

Is that your argument, that it's kind of like a defense?

Mr. Delaney: --Yes, Your Honor, that is a way of looking at us, at our argument, which is we were told that we wouldn't have to do it on a comprehensive system, and we were told not only in... with... in terms of substantial compliance.

We were told in section 658, that would then reward us with incentives if we did better than had been anticipated.

As the Court found in Pennhurst, the fact that there are incentives show that there cannot be any mandatory obligations.

Unknown Speaker: Mr. Delaney, in comparing the two, the direct benefit to the IV-A money, isn't there something like for social security benefits that there's an administrative route that you have to go first, and then if you're turned down, then you have further judicial review?

Is there nothing like that for--

Mr. Delaney: There is nothing in IV-D that--

Unknown Speaker: --And in IV-A... I'm trying to get back to Justice Souter's question, when he said well, what if you were entitled to AFDC benefits and the State didn't pay them, under the old regime.

Mr. Delaney: --Again, that's different than what we--

Unknown Speaker: And it seems to me that most benefit systems like that you have to make an application, get turned down, go through the administrative mill, and then end up in court.

Mr. Delaney: --Right, and again the key phrase there is a benefit program.

That is different than title IV-D, which is... concerns services that the State is providing based on an agreement that we have with the Federal Government.

And it's different because again on... we're being told that we're going to be measured with substantial compliance, with incentives, with the paternity establishment, for example, and the statute itself says that we will comply if we get anywhere between 45 and 90 percent establishment of paternity.

That's not 100 percent.

We're not being told by our Federal partner in this that we have to reach 100 percent anywhere.

We're being told--

Unknown Speaker: What about the payments?

What about the... perhaps the statute's changed so much that I don't know which version I'm dealing with, and so I might just be referring to an old statute, but this... the words I have in the red brief at the end seem to talk about IV-D.

And then there's something, 42 U.S.C. 64, that says a State plan for child and spousal support must, on page 9a it says, provide that amounts collected as support shall be distributed as provided in section 657, and then section 657, which wasn't actually in the brief, seems to have, like, eight paragraphs which say rather specifically who gets what money, and then it seems like 654(b) says the State disbursement unit shall distribute all amounts payable under 657(a) within 2 business days.

So it seemed like there was a lot of rather specific requirements saying exactly how many dollars different people would receive, some of them being AFDC people and some of them being non-AFDC people, and I think Justice O'Connor's original question, which I thought Justice Stevens was getting at too, is doesn't at least that part of the statute create a private right, or create a 1983 action that would require the State to pay the money, the specific dollars that it must pay to the people who are entitled to those dollars?

Mr. Delaney: --Your Honor, if we have actually received the moneys and we're holding the moneys and we don't distribute, then yes, we could be sued if we're wrongfully withholding it, but we could be sued not under title--

Unknown Speaker: Well, I would be amazed if the Constitution says you have to pay within 2 business days, as this statute does.

I would be amazed if the Constitution has the same requirements as to how much money you can deduct for expenses or not as this statute does.

So are you saying that this statute does not at least give that right, the right that the very specific provisions as to actual dollars that the State would have, are you saying that this statute does not give that right to a person who is entitled to those dollars?

Mr. Delaney: --Your Honor, in terms... getting back to substantial compliance, or whether we have been in substantial compliance, we don't know yet--

Unknown Speaker: I'm not talking about substantial compliance, you realize.

My question is, is it your view that the statute does not give that right to those very dollars with the specific expense deductions, the specific time periods, to the particular plaintiffs who are entitled to those dollars?

That was my question.

Mr. Delaney: --At first glance, yes.

However, getting back to substantial compliance, the Secretary will be promulgating regulations saying how she is going to measure substantial compliance.

There are other provisions in the statute that talks about having to do certain things.

The Secretary has promulgated regulations and said that those time lines can be waived, those time lines can be treated differently if you collect the moneys within the audit period, and so the whole substantial compliance thing does come back in in terms of measuring whether there would be an individual right there or not, and--

Unknown Speaker: Could I follow up on that for a minute?

Supposing you have the hypothetical situation Justice Breyer described.

You've got some money collected there, and you're in substantial compliance with the statute.

You have that money sitting there, and a plaintiff who wanted that money sued you in State court, said we want that money turned over to us.

Could you defend on the ground that we don't have to because we're in substantial compliance with the statute?

Mr. Delaney: --No, Your Honor.

Again, if we actually had the money, I don't think that we could.

I think that we would have to--

Unknown Speaker: Well then, why is substantial compliance a defense to a Federal cause of action if it's not a defense to a State cause of action?

Mr. Delaney: --The chief concern we have... and again, this whole line of questions has gone off on the issue of actually holding the moneys, and we think that that's a different situation because we actually have property that we are holding of someone else's.

That's distinguishable from the broad range of the rest of title IV-D.

Unknown Speaker: The complaint would not argue that there's been a violation of any obligation under the act.

The complaint would simply say, you have my money, right?

It's a State law cause of action for money improperly withheld.

Mr. Delaney: Exactly, and--

Unknown Speaker: When did title to that money pass to the individual?

Isn't there just a Federal duty to turn over an amount of money collected?

You say it suddenly became the idnvidual's property.

Mr. Delaney: --Well, actually, it's done pursuant to a court order, and the court order tells the individual that they have to pay.

Then the State is sitting there as a repository, so it's really just enforcing that current court order, that we are then holding that individual's money, that we then turn it over.

Unknown Speaker: What relief was prayed for here by the plaintiff?

Mr. Delaney: Sweeping relief, in that they asked for an order that Arizona be ordered to achieve as well as sustain substantial compliance.

Again, the Secretary has already found that we are in substantial compliance.

Unknown Speaker: So it wasn't just a request that money held by you be turned over to individual plaintiffs, then.

Mr. Delaney: No.

No, it was not at all, Your Honor.

It had to do with much more broader scope, saying that we have to be held in substantial compliance, and again the Secretary has already found that we're in substantial compliance, and the Secretary's brief today tells us that that is not a right that the individuals can be enforcing.

Your Honor, I'd like to reserve the balance of my time.

Unknown Speaker: Very well, Mr. Delaney.

Ms. Berzon, we'll hear from you.

Argument of Marsha S. Berzon

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

I'd like to begin by clarifying the complaint.

The complaint in paragraph 143 on pages 36 and 37 of the Joint Appendix spells out the particular provisions of the statute and regulations that are being complained of here.

They include the collect and using the parent locator service which is specifically mandated by the statute, refusal to collect in the manner that is specifically required by the statute, refusal to carry out paternity determinations in the manner required by the statute, and so on.

Unknown Speaker: But the--

--What relief was requested?

Was the counsel wrong--

Mr. Berzon: The relief that was requested was double.

On page 42 there was first relief entering... asking that declaratory judgment be entered determining that the operation of Arizona's title IV-D program violates controlling substantive provisions of Federal law creating rights in plaintiffs, and those provisions are the mandatory, specific, and individual provisions that are in this statute and the implementing regulations--

Unknown Speaker: --Well, it didn't say that at all.

It went on to ask for grant permanent and as necessary and appropriate interlocutory injunctions--

Mr. Berzon: --That's correct.

Unknown Speaker: --prohibiting continued adherence to the aforesaid pattern and practices, and requiring affirmative measures sufficient to achieve as well as sustain substantial compliance with Federal law throughout all programmatic operations.

Mr. Berzon: That's right, but--

Unknown Speaker: Your answer really wasn't very careful.

Mr. Berzon: --I was about to get to that.

I'm sorry.

I was just--

Unknown Speaker: I hope you will.

Mr. Berzon: --I certainly will, and what I was going to say about... I said it was double, and I was getting to the double part.

The double part was a request for an injunction of that kind.

However, that is simply the prayer for relief.

The Ninth Circuit did not reach any remedial question.

The substance of the complaint is with respect to the specific enforceable provisions, and I would suggest that if this case was found to state a cause of action under 1983 and remanded the question of relief and whether that--

Unknown Speaker: What is your--

Mr. Berzon: --injunction is proper is one that the Court could determine at that point, or the Court could determine now that isn't proper, but--

Unknown Speaker: --What is your best--

Mr. Berzon: --that is not the substance or the core of this case.

Unknown Speaker: --What is your best authority for the proposition that this suit, which in effect asks for an ongoing regulatory scheme to be implemented by the State of Arizona is not barred by Ex parte Young?

Mr. Berzon: The best authority is Edelman v. Jordan.

Unknown Speaker: Pardon me?

Mr. Berzon: Edelman v. Jordan.

That case is almost on all fours with this one.

It was a case in which--

Unknown Speaker: Well, Edelman v. Jordan required that a notice be sent out.

This requires ongoing supervision of a State administrative scheme.

I think that's quite different.

Mr. Berzon: --I did not understand that Edelman v. Jordan required that a notice went out.

Later, in Koren v. Jordan, it was determined that notice of relief--

Unknown Speaker: Oh, yes, Edelman was--

Mr. Berzon: --Edelman was--

Unknown Speaker: --Was for retroactive--

Mr. Berzon: --At that time was assuming that the statute was still in effect.

At the time of Koren that statute had been reversed, but at the time of Edelman the statute was in effect, and Edelman understood that what the... that the ongoing injunction was going to remain in effect, that the problem was with retroactive relief, but that an injunction to continue to comply with the statute was quite at the core of what Ex parte Young is about, and the case is really indistinguishable from this one.

It is like--

Unknown Speaker: --Well, this case looks to me very much, frankly, as though the respondents were just asking the Federal court to step into the shoes of the Secretary at the Federal level and compel substantial compliance with the act, just as the Secretary's obligation would be, and to have the Federal court take over the entire administration of this IV-D act, and I never read that act as contemplating such a broad role for the Federal court--

Now, that's not to say there may not be certain individual provisions in the act that are specific enough that could require enforcement, as has been discussed already, but the notion that the Federal court could be asked to come in and just take over the whole idea of whether there is substantial compliance in all its details, supervise it, struck me as going beyond any case that this case had ever handed down.

Mr. Berzon: --At this juncture the issue in this case, as I understand it, is simply whether there are any enforceable rights of the particular kinds that are alleged here, and I commend again section 143, which really spells out what they are under 1983.

The relief available I think is really quite a separate question.

Unknown Speaker: Ms. Berzon, I'm happy to talk about the individual rights rather than the whole program.

Suppose you have a Federal statute that, let's say, provides for broadcast licenses, and the claim is that the license has been improperly denied.

The personsuing under 1983, however, is not the person who would have gotten the license, but rather a hot dog stand across the street from the person who would have gotten the license, who claims that he lost a lot of business, that had the license been issued here, there would have been a lot more traffic and so forth.

Would that person have a cause of action under 1983?

Mr. Berzon: I don't think he would, and I don't think that this bears any resemblance to that.

Here we have a statute--

Unknown Speaker: Now, wait.

So you acknowledge that some exercise must be indulged in in deciding what is a right, deprivation of any rights, privileges, or immunities.

Not everyone who is adversely affected by the failure to act has a right, so--

Mr. Berzon: --This Court's cases make that quite clear.

Unknown Speaker: --So we ask the question here, when 1983 was enacted, would these people be deemed to have rights?

Now, a brief by an amicus suggests that at the time 1983 was enacted, under contract law third party beneficiaries of a contract between two people would not be able to sue in order to enforce the rights promised to the third party beneficiary, and that's the situation you have here.

It's a contract between the Federal Government and the States.

The States agree as part of that contract to render certain benefits, services to your clients.

Your clients are suing as third party beneficiaries.

As I read the law at the time of 1983, third party beneficiaries had no right, no right to sue, just like the hot dog stand owner wouldn't have any right to sue today.

Mr. Berzon: First of all, this Court has really crossed that bridge a long time ago, beginning with King v. Smith, Rosado v. Wyman, Edelman v. Jordan, Thiboutot itself, Wilder, Wright and so on.

All of those cases have exactly the structure of this one.

They are cases in which the... there is a Spending Clause statute in which the State in return, and I should say here for a large amount of money from the Federal Government in a situation in which States that do their job actually come out with a net surplus, have agreed to provide specified rights, and this Court in Bennett v. Kentucky Department of Education--

Unknown Speaker: Was this argument made in those cases?

Mr. Berzon: --I'm sorry.

Unknown Speaker: Was this argument made and rejected in those cases?

Mr. Berzon: I don't know whether the third party beneficiary argument was made, but certainly the argument that the only enforcement mechanism available is that within the statute and not the one that specifically expressly provided by 1983 was made, but I would also--

Unknown Speaker: Was there not some consideration--

Mr. Berzon: --I'm sorry.

Unknown Speaker: --Was there not some consideration coming from the third party beneficiary in some of those casess?

Mr. Berzon: I would say that there was probably a lot less than there is here, and here we have a situation in which the individuals have cognizable rights to the support, and what the statute is doing is assisting them providing services in obtaining the support, and I'd like to say in comment to--

Unknown Speaker: Ms. Berzon, there's an anomaly, isn't there, in that at least the Government is insisting that substantial compliance is none of the business of the beneficiaries.

That's simply between the Secretary and the State.

But your position seems to be, or the Secretary's position seems to be that you can enforce full compliance.

Seventy-five percent of collections won't do.

You can insist on full compliance.

Doing it in 3 days instead of 2 days won't do.

You can insist on full compliance.

Now, isn't... how does one rationalize giving the beneficiaries a right to full compliance when all that the Secretary can insist on is substantial compliance?

Mr. Berzon: --Actually, it isn't true that that's all the Secretary can insist upon.

The structure of this statute includes title IV-A and title IV-D.

Title IV-A is the financial assistance provisions, which used to be AFDC and it's presently temporary assistance to needy families.

It is in that section and that section alone that the substantial compliance language appears, and it appears in order to delineate a special draconian penalty which says that if there is really, really noncompliance with the statute, not only is the money that's being spent for IV-D at issue, but other money, separate money, money that is not being spent for this program but for a different one is going to be docked as well.

In other words, it's a... really it's a separate and draconian penalty.

Substantial compliance does not appear in IV-D.

IV-D is... all of the requirements set out in IV-D are mandatory, specific, universal, run to each child, every child, all children--

Unknown Speaker: So then what was the letter following the audit that says you are now in substantial compliance not with everything in the world but with IV-D?

Mr. Berzon: --The letter that... first of all, I believe, and perhaps the Solicitor General can clarify this, that it was not universal in any event.

It was only the specific issues that were determined not to be in substantial compliance earlier.

There is no determination at all that at this moment Arizona is in substantial compliance and, indeed, despite the representations that were made earlier, Arizona is dead last among the States with respect to the efficiency of their collections.

Unknown Speaker: I don't unfortunately have that particular brief with me, but I'm fairly certain that there was a broad statement that Arizona... we are pleased to tell you that Arizona is in substantial compliance with the program.

Mr. Berzon: But in any event, what I was going to go on to say is that the statute as read against Bell v. New Jersey, which has very similar provisions with regard to funding, would permit the Secretary to, for example, recoup misspent money and the regulations... with regard to IV-D money now, on a full compliance level.

And this Court in Bennett v. Kentucky Department of Education specifically rejected a very similar argument that would have read substantial compliance in a penalty provision into the liability or obligations of the statute as a whole, and it rejected that and said it isn't true.

It only applies to the particular penalties as to which the substantial compliance language appears, and it does not delineate the obligation when the obligation itself is stated in a mandatory and not limited fashion.

So the substantial compliance issue here is largely a red herring.

It deals with a very specific penalty.

It does not deal with the Secretary's rights as to IV-D money, and it does not deal with the beneficiary's rights as to IV-D money.

Unknown Speaker: Why do you think that's more draconian than the relief you ask for in this complaint?

I mean, I'm not... if I were the State administrator I'm not sure that the cutting... that the monetary penalty from the Federal Government, or the cutting off of Federal Government funds, would be any worse than being subjected to a suit that demands, in effect, every individual get what the act requires.

Mr. Berzon: Again, I would like to suggest that the case at this juncture is not about relief.

It's about whether there is a cause of action under 1983.

Unknown Speaker: I understand that, but I'm just questioning your assertion that the substantial compliance provision only applies to some draconian relief.

It seems to me that to insist that the State comply with every jot and tiddle of this law with respect to every person who is benefited by the contract with the Federal Government is itself pretty draconian.

Mr. Berzon: My argument was simply that the statute in terms makes it only available... only applicable to the relief, and that Bennett v. Kentucky Department of Education makes clear that when that's the case it applies to what it applies to and not to other provisions that do not in terms speak in other than mandatory, specific, and universal terms which the various provisions here do, and I'd like to say--

Unknown Speaker: How could I find out which provisions you're talking about?

My particular problem is, suppose I thought that some of these provisions... I take it in 654, where there are 24 listed obligations, suppose I thought that some of them Congress did mean to be mandatory in the sense that they might fall within 1983, but others of them Congress didn't.

What should I do here?

It doesn't seem to me that the parties have argued it out provision by provision.

I didn't even know what particular provisions you'd be talking about specifically, so what... I'm quite puzzled.

If I thought that perhaps some but not others, what's the proper disposition of the case, and how do I know which are which?

Mr. Berzon: --The... again, the complaint is quite specific about what provisions it's complaining about.

Unknown Speaker: It mostly said regulations.

It mostly cited reguations.

It didn't cite--

Mr. Berzon: It mostly cites regulations, but those--

Unknown Speaker: --So which... where do I find out which provisions of the statute you're talking about?

Mr. Berzon: --Primarily the provisions of the statute that we're talking about are the ones that derive from 654(4), which is the provision that says that each child is to be provided services with regard to location, paternity, establishment of child support orders, modification, and collection, and then there are various provisions in this statute and in the regulations that spin out exactly what that means, as well as provisions in the statute which spell out the fact that the regulations are binding on the States, and that the Secretary is to issue these very specific timing regulations, which he did do.

So I would suggest that what we need to focus on here is the substance of the complaint, and that the relief prayed for is really quite beside the point at this juncture.

Unknown Speaker: Well, can you give us at least an example of, if you're right that there is a claim that there is a private right, of relief that would be beyond question within the ordinary judicial realm?

Mr. Berzon: I think the relief, and I... we say this in our brief, given the very specificity of the statute and the implementing regulations, it's really not difficult.

The relief is, comply with them.

That's the relief.

Unknown Speaker: Then how does a judge--

Mr. Berzon: As to the particular... I mean, obviously the person has to have standing as to whatever they're complaining about, and therefore, for example, Ms. Freestone's problem was that they were not withholding wages from her husband in the way that the statute requires, and the relief--

Unknown Speaker: --So the direction would then be, go after her husband, and that would be the relief.

Mr. Berzon: --Yes, and this case was pled as a class action and has been certified--

Unknown Speaker: But what about, as there are many people similarly situated and we can't identify them all because we don't have the records, go after all defaulting parents?

Mr. Berzon: --If there was a properly certified class action and if it were proven that there was an overall pattern of not doing so after a trial, then ordinary equitable principles would apply.

Now, the Ninth Circuit again was--

Unknown Speaker: You said, Ms. Berzon, as the statute requires.

Technically the statute here doesn't require anything, does it, unless the State enters into a contract.

The State says... what it says is, if you agree to do this, the Federal Government agrees to do the other.

Mr. Berzon: --That's true, but the State has, and this Court has--

Unknown Speaker: The State has agreed, so the issue is whether the State's breaking its word with the Federal Government gives the right to people who are not parties to that contract to come in and complain about it.

Mr. Berzon: --Once again, this Court, starting with Rosado v. Wyman, has dealt with this problem and in Rosado and a series of later cases has suggested the nature of relief which might be available here would be conditioned on the State continuing to take the money.

If the State at any point decided to opt out the money the requirements would no longer apply.

Again, this has been thrashed out, it's been determined, and the cases are there, so any--

Unknown Speaker: I don't agree that it's been--

--Were those class actions?

Was Rosado a class action?

Mr. Berzon: --I believe Rosado was a class action.

Unknown Speaker: Isn't... you spoke of general equitable principles of relief applying, and I guess it's not clear to me that they necessarily would, at least I think in the way you intended, because in the usual class action case I think the assumption that we make going into court is that there is no one in effect who is going to act on behalf of the class except these particular plaintiffs who are suing on behalf of the class.

But that's not so in a case like this, because here we have a Federal agency which presumably is in business to do precisely what the class relief is requesting, and that is to look at the big picture and to sort of take the mega enforcement action, so I would have thought that even on general equitable principles the only relief that it would be appropriate for a court to decree as opposed to leaving it to the National Government to demand would be the specific relief of those who claim that they have a particular entitlement quite apart from whatever in the main the State's failure or success may be, which is the business of the National Government.

Mr. Berzon: Again, this Court's cases have never drawn that distinction.

Many of the cases--

Unknown Speaker: Why shouldn't we draw the distinction?

Mr. Berzon: --under the Social Security Act have been class actions.

Unknown Speaker: Why shouldn't we draw the distinction?

In other words, why should a court in effect take over an obligation which has been pretty clearly delineated to be that of the Secretary here, as opposed to doing what courts usually do in nonclass action cases where there's nobody to act on behalf of a class if the court and the plaintiffs don't, and that is simply to provide the specific--

Mr. Berzon: I guess because it would be difficult to find... certainly it would be difficult to find any exception in 1983 which would preclude--

Unknown Speaker: --Well, 1983 doesn't say anything one way or the other.

1983 provides in effect jurisdiction to provide equitable relief, and the question that I'm raising is really one of equitable relief principles and that is, when you have somebody who in effect can do the work of the class action, i.e., the Secretary, why should a court do anything other than do the work that the Secretary cannot do well?

Mr. Berzon: --I guess because the individuals in question who are class representatives, if they can prove a classwide relief, are simply doing what a class action proposes.

Now, again I'd like to reiterate--

Unknown Speaker: I think you've answered the question, Ms. Berzon.

Mr. Berzon: --Thank you very much.

Unknown Speaker: Your time has expired.

Ms. Millett, we'll hear from you.

Argument of Patricia A. Millett

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

Before I make my points, I would like to clarify Arizona's status with respect to substantial compliance.

It is incorrect to say that we have found them in substantial compliance in their overall operations.

The 1994 letter to which Justice Ginsburg referred states only that we have found them in substantial... and this is at page 1 of the reply to the cert petition, that appendix.

The program has achieved substantial--

Unknown Speaker: Where are you reading from, Ms. Millett?

Ms Millett: --I'm sorry.

It's the reply to... the cert reply, at the cert stage, appendix--

Unknown Speaker: Reply by whom?

Ms Millett: --The reply by Arizona.

Unknown Speaker: Whose reply?

Ms Millett: Their cert petition reply.

Unknown Speaker: Arizona's?

Ms Millett: Yes.

They filed... the reply at the cert page, and app 1... at app 1 the letter states that the program has achieved substantial compliance with the unmet criteria cited in our March 1992 penalty notice.

There's no broad finding of substantial compliance, and in fact we have not made that yet.

We do not know what... I'm not suggesting this has happened by Arizona.

We don't know.

As I said, we have investigated, but it would... it's not uncommon in these circumstances for agencies to focus on... State agencies to focus on the unmet criteria, and then that takes resources away from another one.

Unknown Speaker: Ms. Millett, as to the criterion, the Government's brief said something about three different kinds of provisions.

They said, there are some that are not judicially enforceable at all, some that are judicially enforceable, and some that are not judicially enforceable to the same degree as others, so you laid out those three categories but you didn't fill any of them.

So looking at this, the dozens and dozens of quite specific requirements, how does a court say which ones are not judicially enforceable at all, which ones are fully judicially enforceable, and which ones are judicially enforceable somewhat?

Ms Millett: I think you have to look at the plain language of the statute and the regulations.

Parts of the statute--

Unknown Speaker: Well, you've looked at them.

Ms Millett: --Right.

Unknown Speaker: So can you give--

Ms Millett: Yes.

Unknown Speaker: --Since you set out those categories, can you fill them for us?

Ms Millett: Certainly.

Examples of the types of things we just don't think are judicially enforceable at all because they don't create rights are some of the sort of macroadministrative mechanisms under the statute, things such as, we discussed the substantial compliance requirement, which is just a penalty provision that we administer, the existence of a computer system writ large.

The general scheme for operating, the tools for operating this are not the types of things that would be judicially enforceable because they do not run to individuals as rights.

Specific things that are judicially enforceable, just in the statute itself... the regulations we think creates many, many more, but the statute itself talks about, as Justice O'Connor already mentioned, the requirement the States distribute proceeds collected in a specific manner and under the new act between certain specific times frames is a specific enforceable right that runs to the individual.

It's their money, and Congress has said you have a right to get it in a certain amount of time, and--

Unknown Speaker: Congress hasn't said that.

It's not really a right.

If the State had chosen not to go into this program nobody would have any rights to anything here.

If there is any entitlement to it, it is through the contract between the State and the Federal Government, isn't it?

Ms Millett: --Your--

Unknown Speaker: It's too misleading to refer to it casually as a right.

It may be a right, or it may not be a right, and that's part of the issue.

It arises out of this contract, and that's what makes it difficult to decide these Government grant and benefit program cases, as distinguished from those cases in which the Federal Government does create rights.

Automatically it says the States must do this.

Ms Millett: --Well, some--

Unknown Speaker: Then you have a 1983 right, and it's easy to talk cavalierly about rights, but every time you say right, I... you know, I think that's really what's at issue here.

Ms Millett: --Sometimes Congress creates things that are recognized as rights outside the contract context, such as a Clean Water Act, a Clean Air Act, that don't apply to States until they choose to enter into an activity that is covered.

This would be the same way.

Yes, if no one gets into this program, although all 50 States are, there are no rights, but once you get in you are bound by the Federal law that you have voluntarily chosen to submit to and been paid substantially to comply with.

This Court's decisions, previous decisions involving these types of contract cooperative relationships have all recognized that once you're in we can decide whether or not the Federal law you have now agreed to comply with creates rights, and we believe that to underscore this with respect to the Social Security Act, Congress acted after this Court's decision in Suter and passed 42 U.S.C. section 132a-2, and that underscored Congress' intent that under 1983 this type of relationship, once it's entered into, can create rights.

Unknown Speaker: Yes, but there may be very few socalled privately enforceable rights here because the statutory scheme is one that essentially wants the States to be involved in a program to substantially carry out the Federal vision, and to be involved in substantially trying to help people collect child support, but clearly it's not going to be effective in every case.

There are deadbeats who are never going to be located or who don't have the money.

You can't squeeze blood out of a turnip, and you've never going to get it, and Congress surely didn't contemplate here that for most of these provisions that there are individual rights which the statute never contemplated the State would be required to carry out in every single case.

It was seeking broadly substantial compliance.

There may be some individual exceptions within the act, such as where money has in fact been collected and not paid over, but I think those might be few and far between.

Ms Millett: Your Honor, we would disagree.

Congress wants full compliance.

The fact that it has a penalty provision in IV-A and not in IV-D, in IV-A, in terms of substantial compliance is no different.

The old AFDC program had a substantial compliance penalty provision, too.

They concede that that was enforceable.

Unknown Speaker: Does the Secretary have authority to do anything other than those draconian things, either suspend payment or dock payments?

Could the Secretary seek the kind of relief these plaintiffs are seeking?

Ms Millett: We think that the Secretary and the United States generally has the same right under a contract as any other party to seek specific performance--

Unknown Speaker: And how about the Secretary herself?

Suppose that... we have a letter talking about 1992, written in 1994.

Suppose the plaintiffs say the real problem is the Secretary.

She is just letting the States get away with murder, so we want to sue the Secretary for insufficiently monitoring this program, not simply in Arizona.

There may be States that are much worse than Arizona.

How about that?

Would there be a claim?

What is the Government's position?

Could the Secretary be sued for abysmal lack of enforcement?

Ms Millett: --I think that you would have... a plaintiff would have serious standing problems that sound a lot like Simon v. Eastern Kentucky Welfare Rights Organization, where they were trying to sue the Commissioner of Internal Revenue to change a rule which would then require... supposedly require hospitals to change their conduct which then might result in benefits to the plaintiffs.

That would be the same sort of attenuated scenario.

Unknown Speaker: I don't see that, because here the Secretary can take away they money.

There the question was, how would the hospitals respond?

Ms Millett: We could take away the money.

As a second tier we also think that our audit and penalty things are committed to agency discretion so there would be a second problem beyond that, and there's nothing in the statute that would allow a court to determine--

Unknown Speaker: So your answer is that there would be... there is standing against the State Department of Welfare but there would be no standing against the Secretary?

Ms Millett: --Right, because the person that... because what they want is services, and we don't deliver the services, and this was the same problem again in Simon.

You need to sue the person who can give you what you want, to make it very simple.

Unknown Speaker: Can I ask about... I just have one question in this case which stems from your idea that some of these are enforceable and others are not.

That's why I wanted to find out which one they're talking about, and they say they're talking about 654(4) primarily, and if I look at that, that provision says that the State has to promise it will undertake to establish the paternity of the child, and that the State will undertake to secure support for the child.

Now, those are the two provisions.

It seems to me those are awfully vague and general.

So now... I'm sure that's what they'll say.

I want to know what is it that leads you to think that those words that I just quote are meant to give a specifically enforceable right to an individual?

Ms Millett: I think it's those words in combination with others.

We don't think that every single stage of paternity or support services is enforceable.

You have to look at the statute regs and see if it spells it out.

Let me give you an example.

Unknown Speaker: The regs?

You mean you're saying the regs are what are enforceable?

Ms Millett: No.

There's statutory provisions and regulations both.

Let me... I can give you a couple of examples of statutory provisions in the... that might affect these plaintiffs.

First of all, there's the distribution one that's already been discussed.

Section 654(8) requires that when someone seeks location services--

Unknown Speaker: Yes.

Ms Millett: --you must use a Federal--

Unknown Speaker: Okay, I got... I understand your point now.

But then what am I supposed to do if I think you have made the... I'm not sure about 654(4) and I don't feel they've argued that specifically.

Maybe you have.

But what do I... what am I supposed to do if I think some were not argued, particularly not 654(4), with enough detail for me to decide?

Some you may be right on.

Others you may be not.

What am I supposed to do with this case?

Ms Millett: --I believe a remand--

Unknown Speaker: Yes.

Ms Millett: --I believe a remand would be appropriate.

Thank you.

Unknown Speaker: Thank you, Ms. Millett.

Mr. Delaney, you have 3 minutes remaining.

Rebuttal of C. Tim Delaney

Mr. Delaney: Thank you, Your Honor.

I have just three quick points.

Unknown Speaker: You'd better hurry up and make them.

[Laughter]

Mr. Delaney: Ms. Berzon was talking about looking at the substance of the complaint.

If you look at paragraph 132(t), they complain about the extraordinary staff personnel shortages as the paramount cause of noncompliance with IV-D requirements.

Then at 133, paragraph 133, they complain that Linda Blessing lacks the authority to direct the legal work of the AG's office, and at 134 they complain about the fact that title IV-D at the State level incurs problems with clerks in the Superior Court.

What they're asking for here is not a structural injunction.

They're asking for a restructural injunction because they want a Federal judge to come in and tell Arizona how to redo its State government activities, and as the SG's representative just said, you need to sue the person who can grant the relief.

Linda Blessing cannot redo what the Arizona legislature's budgetary concerns are.

Linda Blessing cannot go out and reconfigure the lines of Arizona State government so that she can control the AG's office, and she cannot go out and rewrite Arizona government in terms of having to make the counties comply.

So it really boils down to, what's a Federal court going to do here?

Is it going to duplicate what the Secretary's done, or will it be imposing new duties beyond whatever the Congress has passed?

My second point gets to one that Justices Breyer and Ginsburg have raised, which is, how do I know which are which?

The SG has just told us, well, we can look at them provision by provision, and some are and some aren't.

We have to guess and hope that we come up with the answer.

We believe that the Constitution says otherwise.

The Spending Clause as this Court has interpreted says that the States have to know unambiguously what is enforceable and what is not.

We have to know in advance so that we can make the determination whether we want to accept this agreement or not, and the Constitution requires that it be spelled out by Congress and not by judges who have to guess which ones are--

Unknown Speaker: But their argument will be, when I look at 644(4) and look at all the regs, I'll discover it's very, very specific, and if it is?

Mr. Delaney: --Again, we think that that should be something that they do across the street rather than out at the various district courts or even at State courts to be guessing, well, this one looks like it is, and this one looks like it isn't.

Instead of having a Nation-wide uniform system we're going to wind up with a judge in Phoenix looking at something different than one in Massachusetts and saying that the same provision is or is not enforceable.

Congress should be doing that.

And my final point, just racing through here, Justice Ginsburg, you had asked a question about the--

Chief Justice Rehnquist: Thank you, Mr. Delaney.

The case is submitted.

Unknown Speaker: Two out of three ain't bad.

[Laughter]

Attribution:

The OYEZ Project

Featured:

Meghrig v. KFC Western, Inc. - Oral Argument

Fri, 09 Jan 2009 14:49:47 +0000

Case:

Meghrig v. KFC Western, Inc.

Media File:

95-83_19960110-argument.mp3

Related Transcript:

1995_95_83_argument.xml

Transcript:

Argument of John P. Zaimes

Chief Justice Rehnquist: We'll hear argument next in No. 95-83, Alan Meghrig v. KFC Western, Inc.--

Mr. Zaimes, you may proceed whenever you're ready.

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

This case, after all the briefing on a wide range of issues, remains a statutory interpretation case, and the guidance that this Court has previously given on how to resolve such cases, particularly where Congress has provided strict... excuse me... direct indications of its intent in several ways, we think charts a very clear path for how the case should be resolved.

Let me digress for just a moment to talk about the facts in this case that are at this stage undisputed.

They are... this is still a pleading case, notwithstanding the many twists and turns that it has been through.

The case concerns a small commercial property located on a street corner in Los Angeles that was owned by petitioners from 1963 to 1975.

The petitioners sold the property to respondent in 1975.

Respondent had been a tenant on the property for about 10 years before that, since 1965, and had operated a Kentucky Fried Chicken store on the property.

In 1988 respondent decided that it would bulldoze that Kentucky Fried Chicken store and bulldoze also the strip mall that was alongside it and put a brand new store on the property... it was going to be a two-story, art deco, specially designed store... and in the course of that work discovered contamination on the property by refined petroleum product.

That was in October 1988.

The respondent fully cleaned up the contamination in a matter of months, by March 1989, and gave notice to petitioners under the Resource Conservation and Recovery Act, what we call RCRA in shorthand, in May 1990.

It was not, though, until December 1991, more than 3 years after the contamination had been discovered, that respondent commenced its first action in State court alleging in toto 10 different causes of action, most of them sounding in common law, but two under State statutes.

Unknown Speaker: Was the cleanup done pursuant to an order of the municipality?

Mr. Zaimes: It was done pursuant to... it was done under the supervision of the County of Los Angeles, Department of Health Services.

I don't believe that there was an order in effect at the time that the cleanup was done, but they had general oversight--

Unknown Speaker: Had a building permit been conditioned on the cleanup?

Mr. Zaimes: --I believe it had.

I believe it had.

The--

Unknown Speaker: So, the respondent was under really a legal duty to clean up the property, at least if the building permit were going to be granted.

Mr. Zaimes: --I'm not sure if that is an allegation of the complaint, but I believe that that would have been the state of facts at the time that the cleanup was done.

After two successful demurrers by petitioners, that case went up on appeal to the State court and this action was filed in the Federal district court in LA alleging a single cause of action under the Resource Conservation and Recovery Act.

That was in May 1992.

Now, it is Congress' intent in the citizen supervision of that statute that we are here to determine, and we believe that the congressional intent derives from several sources, including the plain words of the jurisdictional statement of the statute, other related sections of the statute, the legislative history of the statute itself--

Unknown Speaker: Well, Mr. Zaimes, there are two potential questions that I guess we might resolve, and I'm not sure if we have to resolve them both or not.

One has to do with the statutory requirement that an imminent and substantial endangerment be alleged.

Mr. Zaimes: --Yes.

Unknown Speaker: And that may possibly be decisive for our purposes of this case.

The other has to do with what's recoverable, assuming there is a valid claim made, and the extent of a court's equitable authority.

What does that cover?

Are you going to address both those issues?

Mr. Zaimes: I am going to address both of those issues.

Unknown Speaker: And do we need to decide both in your view?

Mr. Zaimes: I believe you do need to decide both, and the primary reason that you need to decide both is that part of the way that this case has come to this Court is that there is a conflict in the circuits.

The Ninth Circuit has fundamentally determined that as to the second issue, what type of relief is available under the statute, that a cost recovery action may be pursued.

The Eighth Circuit has determined precisely the opposite.

Unknown Speaker: That's the question on which there is a split of authority.

Mr. Zaimes: That is the question on which there is a split of authority.

It is less clear that there's a split on the imminent and substantial endangerment.

Unknown Speaker: Doesn't the Ninth Circuit create the split?

Mr. Zaimes: I'm sorry, Justice Breyer?

Unknown Speaker: Doesn't the Ninth Circuit create the split on the question of when the endangerment had to take place?

Mr. Zaimes: My recollection of... the Ninth Circuit says the endangerment can be in the past or in the present.

Unknown Speaker: Right.

Mr. Zaimes: Now, I'm not sure that the Eighth Circuit reached the issue of whether it has to be past or present directly.

It relied more on the Cort v. Ash analysis of whether there was an implied right of action for damages in the case.

In addition to the words of the statute, we have legislative history--

Unknown Speaker: I'm sorry.

I'm just not quite clear on your... why you answered that we must decide both because if we say that the Ninth Circuit was wrong about when the endangerment must be, if we say it is an imminent, yet-to-be-realized danger, why do we have to answer any other question?

The Ninth Circuit is then reversed and your client has no responsibility.

Mr. Zaimes: --Well, that resolves the situation, Justice Ginsburg, for my client I agree.

I'm not sure that that resolves the remainder of the Ninth Circuit's decision.

If you were to only reverse--

Unknown Speaker: We can decide this controversy only.

We decide a live case or controversy.

And your controversy is over once you prevail on the point that there was at the time this action was taken, that the suit was brought, no imminent danger of any kind.

Mr. Zaimes: --That would resolve this case fully.

And the reason--

Unknown Speaker: Or alternatively, we could attack it from the other direction and could determine that there's no cause of action for money damages.

Mr. Zaimes: --That is true.

Unknown Speaker: And, therefore, it doesn't matter whether or not this thing was prior or not.

Mr. Zaimes: You could resolve it that way also.

My answer to Justice O'Connor was that because there is the conflict... I was keying off of--

Unknown Speaker: The second way is... the second point is the one on which there is the conflict.

Mr. Zaimes: --The second point is the one on which there is the clear conflict, yes.

Now, in addition, I will say that this case has engendered a considerable amount of activity just since the Ninth Circuit came down.

This is... and I am speaking outside the record, but as a matter of policy, if the Court wanted to resolve the issue of the... of what RCRA entitles a person to do, it could reach both issues for the reason that if it only resolves imminent and substantial endangerment, then the likelihood of there being recurring issues on what type of relief is available is going to be great.

But the fundamental reason is there is a conflict in the circuit but, Justice Scalia--

Unknown Speaker: What if we had a case where there is an imminent and substantial endangerment alleged and the plaintiff says, I want an injunction and I want an order that the defendant will pay the costs of future cleanup?

Is that within the court's equitable power?

Mr. Zaimes: --This is before... this is an order that the defendant would clean it up now or the order would say, plaintiff, you may clean it up and we are going to order defendant to pay that?

Unknown Speaker: Either way.

Mr. Zaimes: Either way?

In the first instance, if the order were simply defendant... plaintiff will clean it up and defendant will reimburse, I don't believe that they're... that the court is entitled to issue that sort of order because what the statute says is the district court may restrain or order such person to take such other action.

What is contemplated by that is that the defendant is going to undertake the cleanup, not that some money damage award is going to issue.

And that's the fundamental basis of our position in the case.

Unknown Speaker: What if the court makes exactly such an order and says, defendant, stop what you're doing now, clean up?

And the defendant doesn't either because the defendant can't get its hands on the money to pay for it or is just contumacious and whatnot.

Can the plaintiff at that point come in and say, all right, you've made a perfectly proper order here, but nothing is getting done?

Authorize me to, in effect, take whatever steps I can take to abate and to clean up simply to discharge the responsibility which is ultimately upon this other party.

Under those circumstances, could the plaintiff get... and the court says, yes, all right, go ahead.

Under those circumstances, could the plaintiff get restitution?

Mr. Zaimes: I'm not... I don't believe that it could under this statute.

Now, bear in mind this is one statute and this is one remedy in a broad array of remedies that are available, so while we're focusing on this statute and what it provides--

Unknown Speaker: But you would still win the case if that were the rule here, wouldn't you, if we accept your position on--

Mr. Zaimes: --I--

Unknown Speaker: --You'd still win the case if that were the rule here.

Mr. Zaimes: --Justice Souter, I believe that I would win on the RCRA claim.

I believe that I would lose on several other claims.

I would lose on the State... any of several State law claims.

Unknown Speaker: But we're not adjudicating them.

Mr. Zaimes: I understand that.

Unknown Speaker: We're talking about RCRA, and under the RCRA claim, you would win, would you not, on my assumption?

Mr. Zaimes: The way this statute is framed, I believe that I would win in that sort of situation because--

Unknown Speaker: So, you want a broader rule than the rule that it would take you to win the case.

Mr. Zaimes: --Well, I'm seeking in some... and we touched on this in the context of the imminent and substantial endangerment.

The imminent and substantial endangerment issue disposes of my case, but--

Unknown Speaker: But I assume you're here arguing your client's case, not bringing interesting issues to us.

Mr. Zaimes: --That's right.

Unknown Speaker: And your client would win on the position that I have suggested, wouldn't it?

Mr. Zaimes: It would.

Unknown Speaker: And that would end this lawsuit.

Mr. Zaimes: It would.

Unknown Speaker: But you're trying to take the high ground, as I understand it.

[Laughter]

You think that the more defensible principle is a principle that not only lets your client win, but let's some other people win.

That's--

Mr. Zaimes: Well, I'm taking fundamentally the position that I win on either one.

I win on the imminent and substantial and I also win on what the scope of relief is that is afforded--

Unknown Speaker: --You not only want to win, you want to win on the basis of a correct principle, which is what you're arguing.

Mr. Zaimes: --Absolutely correct, Justice Scalia.

Unknown Speaker: Then to go to the correct principle, how could you in fact interpret this statute to say that a plaintiff could never get monetary damages?

Suppose the gasoline station next to you is in fact right now leaking gasoline through your wall killing your chickens or whatever, and what you do is you have to put up a barrier to stop it.

And at the same time, you run into court and you say enjoin it.

So, the court says, enjoin it.

You say I've spent $50,000 on the gasoline barrier to keep my chickens safe, and I'd like to be reimbursed for that.

Are you saying that that wouldn't be necessary to give you the little extra money that you needed in order to take immediate action within a few hours in order to stop all your livestock from dying or whatever?

I mean, normally in equity I think that kind of restitution would be normal.

So, what's the argument on the merits that this statute wouldn't give you that, even though that's not in this case at all, a totally hypothetical?

Mr. Zaimes: With all those assumptions, the argument is that that is the way this statute is structured.

Unknown Speaker: The word in the statute is "necessary", and how would you say that that kind of normal equitable relief, which is the principle you want to argue for, never could be necessary?

Mr. Zaimes: Well, with all due respect, Justice Breyer, the wording of the statute is

"order such person to take such other action as may be necessary-- "

Unknown Speaker: And it may be... why isn't it necessary in the circumstance, given the history of equity, et cetera, to make at least the monetary restitution necessary to clear up the absolute immediate emergency action that the plaintiff took in order to save the lives of his livestock?

Mr. Zaimes: --Fundamentally because our argument is that that is not what Congress intended.

Congress intended to--

Unknown Speaker: Why not?

Mr. Zaimes: --Why?

Because in the broader scheme of things, the citizen suit remedy in this statute, as in its predecessors, is designed to afford limited relief to plaintiffs and not to have plaintiffs coming in with all sorts of money damages claims--

Unknown Speaker: I agree with that.

That's why I say... you were arguing for the proposition never, and that's what's bothering me.

Never.

Mr. Zaimes: --I'm arguing for the proposition never under this statute.

Unknown Speaker: Mr. Zaimes, your second... I mean, we may be unfair to you in severing the two points as though they don't overlap.

As I understand it, part of your argument with regard to the damages point hinges upon your assertion that this is a statute that is only intended to prevent future harm.

It is not intended to remedy for past harm.

Mr. Zaimes: That is true.

Unknown Speaker: And in the hypothetical that Justice Breyer just posed to you, what you were doing is reimbursing the plaintiff for that past damage that he's incurred for putting up the barrier.

And there's no doubt that he would not be able to get that if we take the first point in the case.

There's no doubt that he would not be able to get that.

Once... although he's put up the barrier, once all of the oil pollution next door has been eliminated, he has no cause of action at all, neither for putting up the barrier nor for anything else.

And part of your argument is that these two halves go together.

When you understand that the statute is only intended to remedy for future harm, there's no sense in allowing a court to give damages for something that happened in the past.

Mr. Zaimes: That is part of the argument and that is what the statute provides, and that's fundamentally--

Unknown Speaker: But suppose that the court ordered the previous owner to clean up under this statute with proper notice and the owner is contumacious.

He does not obey the court's order.

And the plaintiff then, giving due notice again of his intent, undertakes to clean up the... and stop the waste himself.

As an ordinary measure of contempt of court sanctions, is not the plaintiff entitled to recover the cost that he expended to avoid the harm that the defendant, in contempt of the court's order, refused to undertake on his own?

Mr. Zaimes: --Well, perhaps as a matter of contempt.

And I'm glad you raised that, Justice Kennedy, because I was contemplating that when Justice Souter asked a similar question earlier.

But, again, a statute... this particular statute provides a limited array of remedies, and while in the situation you've described if the contumacious defendant does not clean up, there may be a remedy available under sanctions principles and that may get the plaintiff to the same point he would otherwise be, but--

Unknown Speaker: Well, aren't there cases holding that courts retain equitable authority not specifically taken away by Congress?

Mr. Zaimes: --There are those cases.

Those cases have been cited by respondent.

Unknown Speaker: Right, and you recognized the validity of that notion.

Mr. Zaimes: The court does retain equitable power, and the limits on that equitable power are circumscribed by the particular statute at issue.

And fundamentally where we part company with respondents in the line of cases that starts from Porter and traces its way through Franklin v. Wynnette is that we are faced with a much different statute than was at issue either in Porter or--

Unknown Speaker: But in my hypothetical case, you cannot get the power of the court to order that limited measure of damages from the phrase

"take such other action as may be necessary? "

Mr. Zaimes: --Well, again, since the phrase is actually

"order such person to take such other action. "

the phrase seems to be even more limited than the part that you're quoting, Justice Kennedy, in all due respect.

And it seems to aim more at requiring somebody to undertake acts as opposed to requiring a payment of some sort.

Unknown Speaker: I thought your argument was that given your position on the first point as to whether the statute is directed only to the prevention of future harm, extant threats, that the phrase "as may be necessary" must reasonably be read to mean as may be necessary to achieve the purpose of this statute, which is not to reimburse for past expenses but to prevent future harms.

Mr. Zaimes: It can be read that way.

Unknown Speaker: Now, if you--

--Is that your reading?

Mr. Zaimes: Well, my reading is that the statute has a limited--

Unknown Speaker: But Justice Scalia just set out a position.

Is... I thought... at one point I thought that was the way you read it.

Is that the way you read it?

Mr. Zaimes: --The way I read the statute... and I was taking Justice Scalia's comments in the context of Justice Kennedy's question, but fundamentally the way I read the statute is the statute says that you can address an imminent harm.

You can take steps to prevent future harms, and that is what is afforded--

Unknown Speaker: And that is what circumscribes the court's power as a court of equity to make orders and provide remedies.

Isn't that correct?

Mr. Zaimes: --Yes, that is true.

Unknown Speaker: All right.

If that is the... I didn't mean to take your question away from you.

I'm sorry.

Go ahead.

Take it.

If that is the case, then why shouldn't your answer to my first question be different?

Because the assumption in my first question is we have in fact a situation which is presenting imminent harm here.

The court says, stop it.

Stop doing what you're doing.

Clean up enough so that there is no further imminence of harm.

The threat will be gone.

The defendant says no or simply does not do it.

All the plaintiff wants is to get to that point which the court had every authority to order the defendant to reach.

And so, the plaintiff says, let me clean up and then give me restitution for doing what you had the authority to order the defendant to do.

Why doesn't a court have that authority?

Take it, Mr. Zaimes.

Take it.

Mr. Zaimes: I'm about to.

Unknown Speaker: Good.

Mr. Zaimes: I think the court does because you're starting from a point where the court exercises its jurisdiction initially consistent with the statute.

And another way to look at it is that the court is simply following up on something that initiated under the jurisdiction that was given it... given to it originally.

Unknown Speaker: And once you say that, then aren't you back into a line drawing problem.

The statute doesn't give a damages remedy.

That's true.

But a statute may give a remedy to require a person to pay money to the plaintiff insofar as that's an equitable action related to the basic cleaning up of the spill.

I mean, I don't know exactly how to draw that line, but the line between the equitable remedy for money, which is ancillary to the injunction, and damages action would seem the right line, do you think?

Mr. Zaimes: Not necessarily because where I... the way I get to the ability to award damages in the hypothetical posed first by Justice Souter and then by Justice Kennedy is the jurisdiction is invoked initially pursuant to the statute to remedy a future harm or an imminent endangerment.

And then damages are awarded in furtherance of that.

The jurisdiction has already been exercised.

So, the example you're giving, Justice Breyer, is a lot broader and does enter into some line drawing problems.

Unknown Speaker: Do you have an answer to the, I think, main criticism of your reading which is that it encourages delay on the part of the person on the spot?

It says to that person, don't clean it up because if you do, it's going to be out of your own pocket.

Instead, let the contamination increase and go sue somebody else.

Mr. Zaimes: I have three very brief answers to that.

Number one, we as parties litigating and the court are limited by what Congress has provided, number one, and the scheme that Congress has provided provides a 90-day notice provision and then by implication in some situations would require a plaintiff to wait.

Secondly, the... by giving notice, there is some likelihood that particularly with a serious endangerment, that the EPA or the State or the alleged contaminator are going to come in and do some action.

So, the argument advanced by respondents that we are going to have hazardous waste sites that are continuing to damage the environment and damage human health isn't necessarily so.

And thirdly, within the statute itself... and the statute is contained in the appendix to respondent's brief... there is a provision and it's within the notice provision.

The notice says 90 days to the EPA, to the State, and to the contaminator.

There is a provision that says, except where there is an allegation of a violation of subchapter 3 of the statute, and subchapter 3 is the portion of the statute that deals with hazardous waste.

So, presumably in a situation where you have hazardous waste, the plaintiff need not wait the 90 days if it is going in to remedy a hazardous waste situation.

So, those are my three responses to that argument.

Mr. Chief Justice, may I reserve time on the remainder?

Unknown Speaker: Yes, you may, Mr. Zaimes.

Mr. Minear, we'll hear from you.

Argument of Jeffrey P. Minear

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

The initial and controlling issue in this case is whether a citizen plaintiff may seek relief under section 7002(a)(1)(B) of RCRA if there is no current endangerment at the time of suit.

We think the answer is clearly no.

Section 7002(a)(1)(B) provides that for judicial relief in response to specific activities, namely, the treatment, storage, and disposal of waste, that, quote, may present an imminent and substantial endangerment, end quote.

The statute's use of the term "may present" indicates there must be a current endangerment at the time the suit is filed.

That construction is born out by section 7002(b)(2)(A), the so-called notice provision, which requires the plaintiff to provide notice to the defendant and also to the other government agencies of the endangerment before filing suit.

Respondent attempts to avoid that construction by arguing that the limiting clause requiring endangerment actually refers to a description of the hazardous waste and not to the antecedent activities.

The statute, however, will not afford that construction.

Section 7002(b)(2)(B), which appears at the bottom of appendix page 3 of respondent's red brief, states that a citizen suit is precluded if the EPA is taking action in response to, quote, activities that may present the alleged endangerment.

For that reason, it is clear that Congress was referring to the activities and not the waste when using the term "endangerment".

Unknown Speaker: What again is your reference there, Mr. Minear?

Mr. Minear: That is at appendix page 3 of the red brief.

Unknown Speaker: And what section?

Mr. Minear: It is 7002(b)(2)(B).

Unknown Speaker: Thank you.

Mr. Minear: This... the construction that we urge here is not only consistent with the statutory terms, but it is also consistent with the overall design of the statute which is structured to abate existing hazards.

For example, the statute makes reference to prospective remedies.

It also provides a notice provision, as I discussed before, which provides for the elimination of the hazard and the avoidance of the suit.

It also contains no statute of limitations respecting any damage claims that would thereby prevent any stale damage claims.

In addition, the legislative history supports the construction that we urge.

For example, House Report 198 describes the section 7002(a)(1)(B) remedy as a limited abatement remedy.

If you agree with us that the... a citizen must show a imminent and substantial endangerment at the time of suit, then the Court need go no further in this case.

The respondent did not show a current endangerment, and the court of appeals decision should be reversed on that basis alone.

Unknown Speaker: Well, we didn't take this case to get rid of the case.

We took the case principally I think... at least I did... to resolve the circuit conflict, which doesn't exist on this point but rather exists on the second point.

Why isn't it perfectly valid to attack the second point as to whether money damages are recoverable?

And in the course of... I... at least I think that in order to decide that second point correctly, you have to incidentally reach the first point.

Mr. Minear: Well, I think there are two answers to that.

First, I think it's important for this Court to recognize that the preconditions for suit must be satisfied before we get to the issues of remedy.

Now, obviously, they are related, but I think it is... it puts the Court in a difficult position to address the question of remedies where no such remedy could be afforded in this particular case.

Second, if you do resolve the case on the first issue, I think that might well cause the court of appeals to reconsider its reasoning with regard to the second issue, and it may well be that the circuit conflict that currently exists will dissipate as a result of your ruling on the first issue.

In any event, I think that it is important for the Court--

Unknown Speaker: The opinion doesn't read that way, Mr. Minear.

I think that's quite unlikely.

I think maybe we ought to wade into it and find out what it is that the court can do in the way of damages.

Mr. Minear: --Your Honor--

Unknown Speaker: Do you argue that the statute authorizes the court to award past cleanup costs as a remedy or that it just doesn't prohibit it?

Mr. Minear: --It doesn't expressly address the issue, but it does provide... allow the court to allow relief that is necessary.

Unknown Speaker: Well, do you say that actual money damages for past cleanup costs fits within that statutory description?

Mr. Minear: We think in certain circumstances a monetary remedy can be necessary to fulfill the purposes of the statute.

The purpose of the statute here is to allow the courts to compel a responsible party that has created a current endangerment to abate that endangerment, and it will be in some circumstances necessary to apply a restitutionary type remedy to ensure that that purpose is fulfilled.

For example, suppose that the... a plaintiff brings a suit and during the notice period asks the defendant to clean up the site.

The defendant will have a powerful incentive not to take any action to clean up the site and to try to force the endangered community to assume those costs if it knows that the court will be unable to award any damages in those circumstances.

I do not believe that's what Congress had intended in this situation.

Moreover, the position that we take is consistent with the general view this Court has expressed with regard to a court's equitable powers.

This Court has noted in various circumstances that a court may include a restitutionary remedy together with other equitable relief.

Unknown Speaker: But this isn't a broad grant of equitable jurisdiction.

It's a much more circumscribed grant of part of a court of equity's powers.

Mr. Minear: Well, we think that the primary circumspection or limitation on the court's power is really the requirement of the current endangerment.

Once there is a current endangerment, then it becomes... it behooves the court to take those steps that are necessary to abate the endangerment and also to assure that the responsible--

Unknown Speaker: Well, do you think that the language to "restrain any person", et cetera and then to

"order such person to take such a. "

is the sum and substance of the... what would be granted if the courts... if the statute said the court shall have equitable jurisdiction?

Mr. Minear: --Yes, we think it is.

We think that it gives the same general grant of power with regard to any order that may be necessary.

Equity... equitable principles are circumscribed by the requirement of necessity, that the court's power must... the court must step in to prevent an injustice in a particular case.

And we do think that the--

Unknown Speaker: Well, it seems to me not just an injustice, but an injustice that is related to eliminating a... an extant threat to the environment.

Mr. Minear: --That is correct.

Yes, I would agree with that.

Unknown Speaker: As I hear you now and as I heard Mr. Zaimes' concession in oral argument, I don't think you're disagreeing with Mr. Zaimes on this point anymore, as you seemed to be originally.

That is, he seemed to be taking the position in the briefs that you couldn't get money, period.

Now I think he's acknowledged that you can get money so long as it is in connection with an order for somebody to remedy a threat to the environment.

Mr. Minear: If Mr. Zaimes has made that concession, then we are in substantial agreement on that point.

Unknown Speaker: But I thought you went somewhat further, and let's take this case exactly, what the dates were.

The contamination was discovered in October.

Suppose the plaintiff had immediately given notice to the defendant, but during the 90-day period itself under pressure, say, from town authorities, plaintiff starts cleaning up and then has to wait those 90 days to bring the suit.

So, by the time we get to... what would it be?

February?

From October to February.

The plaintiff has already incurred a substantial sum.

Then from the time the suit begins in February until March when the cleanup is done, plaintiff incurs further expenses.

Is it your position that all of the expenses during the 90-day period plus after suit commences are reimbursable or only after the suit commences?

Mr. Minear: It's our view that all of them may be reimbursable, but there are several other conditions that we would recognize.

First of all, they have to be expenses that were reasonably necessary to abate the danger that was presented by the hazard that was proposed.

There also had to be notice to the defendant with regard to these expenses and a decision by the defendant not to take... undertake them.

And the reason why these expenses are assessable is because they are necessary to ensure that the statute works the way that Congress intended, namely, that it would encourage the responsible party to clean up the site and eliminate the need for a suit.

If the party refuses to do so, then it faces the additional costs that will be associated with reimbursing the plaintiff, in addition to the equitable order that might require the defendant to complete the cleanup of--

Unknown Speaker: I don't see how that's necessary to achieve the purpose of the statute.

The money... the cleanup that has been done with money already spent?

Those are some costs.

That cleanup has been done.

You don't achieve anything by paying the person for that.

Mr. Minear: --Well, Congress does not simply see... wishing to see that the sites be cleaned up.

They're also interested in seeing that the responsible parties would bear those expenses.

Unknown Speaker: Not in this statute.

Not in this statute because you acknowledge that so long as the entire cleanup has been done before suit is lodged, you get none of your money back.

Or at least before the 90-day notice is given.

You draw the line at the 90-day notice.

You acknowledged that if I do somebody else's cleanup and complete it entirely so that there's no more harm to the environment, I cannot get anything under this statute.

Mr. Minear: May I answer that question?

Unknown Speaker: Yes.

Mr. Minear: We draw a different distinction with regard to that line that Congress drew, and that is that it was concerned with directing the court's resources to imminent hazards, those that required immediate abatement.

And once you cross that threshold, the court has its full equitable power.

Thank you.

Unknown Speaker: Thank you, Mr. Minear.

Mr. Romano, we'll hear from you.

Argument of Daniel Romano

Mr. Romano: Thank you, Your Honor.

Mr. Chief Justice Rehnquist, may it please the Court:

I think that in light of the concessions that were made by counsel for the petitioner, I believe that about one-half of my argument is no longer necessary.

As I understand the petitioners' viewpoint now, assuming that we've complied with the statute, then we are entitled to seek equitable restitution under the statute if the reimbursement cost and the cleanup action that we took was, quote, necessary under the statute.

We don't disagree with that.

Unknown Speaker: No, I don't think that was the concession.

I think the concession was that the court could issue an order which tells you to clean it up and requires the other party to pay you for your cleanup.

That's not here.

No, he hasn't conceded that he owes you any money.

Mr. Romano: The court--

Unknown Speaker: What he conceded is that a court could issue an order allowing the party now in possession of the property to clean up the hazard, the extant hazard, and saying, when you clean it up, you will be paid for... it will be paid for by the other party.

But that's not this case.

Mr. Romano: --In other words, availability of restitutionary remedies is present in the statute, and this is about one-half of our argument.

Now, how do we go about--

Unknown Speaker: Well, I'm not sure.

He can tell us later, because he's reserved time, what he conceded and what he didn't.

I think you should address the argument of whether or not the statute permits the award of what in essence are monetary damages.

The Government cites rent control cases where there was restitution, the Moore case and I think the Porter case.

Mr. Romano: --That's correct.

Unknown Speaker: Those were decided well before our opinion in Cort v. Ash.

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

I believe that the opinion in Cort v. Ash really does not address the issue over here.

The opinion in Cort v. Ash dealt with whether or not the court should imply a private cause of action from a statute.

What we have over here, we have a cause of action which was presumed to exist under the statute in light of the Porter decisions and Franklin decision which Congress is presumed to have known about at the time that it enacted the statute.

The language of the statute in Porter and the Franklin cases and in this case are virtually identical.

They grant the court to... authority to issue such other order as may be necessary.

This language has been held by this Court in the precedent that we cited to include all available equitable relief.

Unknown Speaker: Well, there's nothing implied about the cause of action here, is there?

Mr. Romano: No.

It's explicit.

Unknown Speaker: Any person may commence a civil action on his own behalf.

It's just a question of what he... when he can do it and what he can get as a result of that.

Mr. Romano: Precisely, Your Honor.

That's why we say we're dealing here with an explicit grant of jurisdiction and authorization for any person, citizen, to commence an action on his own behalf against all of the named defendants under the conditions stated in the statute.

So, we don't have to deal with Cort v. Ash, and this is where the Eighth Circuit was wrong.

Now, we say that under the words of the statute, the court can do a number of things.

They can issue a prohibitory injunction.

It can issue an mandatory injunction ordering in fact the cleanup of the property by the defendant, and this point is considered by the defendants.

We say it is a very small step from there to allow the court to say under the circumstances of the case, if appropriate and if necessary, you, plaintiff, go out, clean the property, and then you will obtain reimbursement from this defendant.

Unknown Speaker: Yes, after the case is pending.

But that... you know, after the case is pending and there is still cleanup to be done, the court could order that.

I tend to agree with you.

But that's not what happened here.

The cleanup was done years ago before the suit was filed.

Mr. Romano: Justice Scalia, let me respond to some comments you made which bear on this point.

Earlier you stated I believe that it was your view of the statute that it applies to prevent future contamination.

But if... in fact if you look at the statutory objectives stated in RCRA itself, section... 42 U.S.C. 6902(b), the Congress said it is the intent... the national policy of the United States... and I'm skipping ahead over here... to minimize the present and the future threat to human health and the environment.

This is what we did in this case.

So, the only issue is--

Unknown Speaker: But not to remedy... not to shift money around with respect to past threats.

Present and future, but not past.

Mr. Romano: --The issue is that is presented before this Court is what should a property owner do upon the discovery of contamination on his property.

Now, he can do one of two things.

And we have to assume, in the context of this decision, that that contamination presents an imminent hazard condition.

Now, what does that mean?

It means he has a... drums of toxic waste leaking to the groundwater.

It means that there is a condition whereby there is a discharge into the soil where children are playing.

It may be that there is a potential explosive conditions that need to be abated.

Would you rather have a plaintiff take care of those conditions and then seek his response later, or would you like him to go to court?

The answer to this... provides--

Unknown Speaker: I might have enacted a different statute.

Is that what you're asking?

Would I have enacted this one or a different one?

Mr. Romano: --No, Your Honor.

I believe that this is precisely what Congress has enacted by--

Unknown Speaker: Then why didn't they use the same words, encompassing words, that were used in CERCLA?

I think you're asking us to interpret this provision of RCRA with the same breadth as the CERCLA provision.

Mr. Romano: --Justice Ginsburg, this is a very different statute from CERCLA, and in fact it is unique.

No other statute is found in the environmental laws of the United States which allows a citizen to proceed and file and deal with an imminent hazard condition.

CERCLA doesn't have that.

A citizen--

Unknown Speaker: I'm talking about what you can recover.

The provision for reimbursement for cleanup costs is broad in CERCLA, is it not?

Mr. Romano: --Yes.

Unknown Speaker: And here there is no similar provision that says for what you've done to clean it up, you can recover.

Mr. Romano: We believe that Congress... Congress could have put the imminent hazard/endangerment provision in CERCLA.

It did not.

It put it in RCRA so that the broadest possible remedies will be available to deal with conditions of imminent and hazard endangerments.

Now, if Congress put that statute in CERCLA, it would only apply, Justice Ginsburg, to substances covered by CERCLA which is hazardous substances.

Congress well understood that environmental contamination which may lead to imminent and hazardous conditions may arise not only from hazardous substances, but also from solid waste and hazardous waste, substances which are not covered by CERCLA.

Moreover, Congress has understood that petroleum contamination is not covered by CERCLA, yet may present an imminent hazard condition.

We believe that's why Congress put that statute in RCRA not in CERCLA.

There was a reason for why Congress did that.

Unknown Speaker: Well, what's your position, Mr. Romano, with respect to a situation where a property owner discovers the hazard, goes ahead and cleans it up so that there's no longer any imminent or substantial endangerment, and then goes to court?

What can he recover in the way of a monetary award?

Mr. Romano: Well, I believe that under the proper circumstances this particular individual may recover his... may obtain equitable restitution of his environmental cleanup costs, those costs that were necessary, in the words of the statute--

Unknown Speaker: So, you say then he doesn't have to present an imminent and substantial endangerment to health.

Mr. Romano: --We don't believe that the condition of imminent and substantial endangerment has to be present at the time of the filing of the lawsuit.

Now, we believe that the statute supports us on this issue.

When Congress wanted to put a limitation on the timing of the filing of the lawsuit in this statute, it imposed them in section B of the statute.

Congress said no action may be commenced until several things have happened.

One, you could provide notice to the State, to the EPA, and to all the responsible parties, and then if within a period of 90 days the EPA or the State does not commence any remedial activities, then you may go to court and file a lawsuit.

Unknown Speaker: It's... but in 2, which is what says what the court can do, it refers to the endangerment.

Surely that's referring back to an imminent and substantial endangerment.

Mr. Romano: Which?

That... the limitation of the endangerment is not temporal.

For sure an endangerment has to exist at the time of the cleanup, otherwise we will not be here.

But assuming that an endangerment exists at some point in time, then should the person at that time file legal proceedings, send notice?

In many cases there are literally hundreds of defendants that are--

Unknown Speaker: Well, but that may be a good argument, as one of my colleagues said, for a different statute, but it seems to me that this statute does require an imminent and substantial endangerment at the time you bring the lawsuit.

Mr. Romano: --Your Honor, the only words that even hint on that is the language "may present" which, granted, is in the present tense.

We think that--

Unknown Speaker: Wait a minute.

Now, what about subsection 1 which you say sets forth the conditions?

What about 1(B)?

It seems to me 1(B) makes no sense except on the assumption that this is a statute which deals with pending threats.

That is, it says, no action may be commenced under section (a)(1)(A): A, prior to 60 days, or B, no action may be commenced if the Administrator or State has commenced and is diligently prosecuting a civil or criminal action in a court of the United States to require compliance with such permit, standard, regulation, condition, requirement, prohibition--

Mr. Romano: --Your Honor--

Unknown Speaker: --Why would you eliminate somebody's cause of action for past damages so long as a State is pursuing a remedy to enjoin any future violation?

It makes no sense.

Mr. Romano: --If I understand Your Honor's question, it deals with violation of standards or permit conditions or so forth.

This is not what we're dealing in this lawsuit.

The RCRA citizen supervision is divided into two parts.

Part (a)(1)(A) which deals with lawsuits commenced by citizens to enjoin violations which are alleged to... against defendants which are alleged to be in violation.

This is a lawsuit which is similar to many other statutes found throughout the environmental laws, and they are aimed into enforcement of the regulatory aspect of the statute.

The statute we're dealing with today is a very different species of citizen supervision.

It is unique and it is a liability statute.

And it says now under... it allows a party to initiate proceedings when the conditions of imminent and substantial endangerment exist.

So, the question is, does the "may" language, "may present" language... is it a language which is temporal in it or is it really something else?

We believe it's something else.

It is necessary to limit the whole universe of solid and hazardous waste, about the broadest universe of substances you can imagine, to those ones which may present an imminent and substantial endangerment.

Unknown Speaker: But that's just bad English.

We do not assume that Congress uses bad English.

I mean, to convey the thought you've just expressed, they would have said may exist or may have existed.

What you're saying may exist means... simply there's a possibility.

There is or was a possibility.

But that's not how we say that in English.

The way we say that in English is may exist or may have existed.

Mr. Romano: Your Honor--

Unknown Speaker: When we say may exist, we mean... what we mean is may exist, now.

Mr. Romano: --I understand that there is for sure... for sure there is an ambiguity in the way the statute is written, and we believe that our reading of the statute--

Unknown Speaker: You missed my point.

My point is there is no ambiguity, not if you're speaking English.

May exist or may have existed is the meaning you say may exist conveys.

It does not convey that meaning.

Mr. Romano: --Your Honor, we believe that when Congress wanted to put limitations on when such lawsuits should be filed, it put them under the actions prohibited section.

That language is not found over there.

What the petitioners are arguing is take some language which we believe is out of context.

It's a descriptive language defining the type of waste that presents the hazard conditions and reading that into the jurisdictional section of the statute which comes later on.

Unknown Speaker: Well, would you say the same thing about (a)(1)(B)'s list of potential defendants like a present generator or something, that those are just kind of illustrative and you could bring an action against lots of other people too?

Mr. Romano: You can bring an action under the terms of the statute against all past and present owners... not owners, transporters, basically all the group of defendants which are alleged to have contributed in some fashion to the contamination of the property.

And Congress has clearly stated that under the statute it is the desire of Congress to have all of these defendants share equitably in the cleanup of the contamination.

If I may, Your Honor, any other reading of the statute, the reading urged by the petitioners in this case, will lead to what we believe will be perverse results because the bottom line is you have a property owner which is... has discovered a condition of imminent and substantial endangerment of his property.

What you want him to do to preserve his legal rights, he will not really have absolutely no incentive to do any cleanup activities whatsoever on the property.

Unknown Speaker: Well, I thought your client made the cleanup because ordered to do so by the City of Los Angeles.

I didn't think this was some voluntary thing.

Mr. Romano: Your Honor, there was actually never an order.

What the city--

Unknown Speaker: But the city said you had to do it.

Mr. Romano: --The city said if you want to build your restaurant on this property, you better take care of that problem.

And what my client did is voluntarily go out and investigate the nature of the problem, only to find out that the extent of... that, A, the problem was petroleum contamination, but to make matters worse, it... the bottom pile of petroleum actually hit the groundwater beneath the property.

That's what we believe contributed to the conditions of imminent and substantial endangerment.

At that time the court has to ask ourself, what should... that is the critical point in time here.

Unknown Speaker: Well, you still have some State causes of action here presumably.

Mr. Romano: Your Honor, our experience in this case is that we actually do not.

We are now pending for the second time in the court of appeals before the State of California, and we don't think the State remedies are... have much meaning.

But even if they did, the statute does not specifically state that a citizen may proceed an action under this section without regard to any other available remedies.

There's a savings clause.

The legislative history specifically says you do not... plaintiff does not need to exhaust all other remedies before it commences a lawsuit under this section.

Unknown Speaker: That's... isn't that make sense?

That is to say, I take it the reason you lost in State court is because the State court found that the Meghrigs never undertook any acts which caused gasoline contamination on the property.

And so, if you want a damages action, perhaps you should have to go against the people who caused the problem.

But if you want a cleanup action, perhaps it's a better idea to get a broader category of people--

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

Unknown Speaker: --which would argue then against using this statute simply to try to get damages for something that's over and done with in the past.

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

We agree with that.

Unknown Speaker: But then how would you win?

Because you're trying to sue against something that happened in the past.

So, I mean, maybe I don't understand it, but you're trying to get... you're trying to go against some people whom the State found didn't cause the contamination but, nonetheless, they did handle the gasoline in the past and it all was a problem in the past.

But you want to get damages from them now, don't you?

Mr. Romano: No, we do not.

We do not want damages.

Unknown Speaker: What you're calling restitution, but I mean, you want to be reimbursed from them who didn't cause the problem for your expenditure.

And it sounds to me as if it would make sense to let you get the reimbursement from a person who did cause the problem, which is what the State court would allow, but not necessarily to get reimbursement for a past event from people who are basically innocent, which is what you want to interpret the Federal statute to allow.

Mr. Romano: Your Honor, the issue as to whether or not in fact we are relying... we are entitled to obtain restitution from the Meghrigs is really not before the Court today.

If the Court in fact agrees with us and the case is remanded to the district court, the district court may, using equitable principles, decide whether or not we're entitled to restitution.

Unknown Speaker: May I ask another question that you could answer that's not strictly before us?

Why was there no effort to sue anybody until after the cleanup was done?

That's one question.

And the other is, are you telling us that unlike State law, the Meghrigs, even if they had nothing to do with the contamination, are responsible under the Federal statute?

Mr. Romano: Your Honor, in response to the second question, we believe that the Meghrigs are responsible under State law, and in fact that's why we took an appeal from that order that was attached to... as an exhibit... an appendix to the petitioner's brief.

Unknown Speaker: What about under the Federal statute that says, has contributed or who is contributing?

These are people who say... let's assume for the moment that what they say is correct... we didn't... during our period of ownership, we didn't have a clue that there was any petroleum involved.

Mr. Romano: That in fact we believe is incorrect.

Now, we're talking about facts, Your Honor, which are outside of the record and based on discovery that we obtained in the State court proceedings... and I'm happy to talk about those.

They're not in this--

Unknown Speaker: But just let's assume I said that they're correct, that the gas station long preceded their ownership of this property, that they did not contribute to the contamination.

They were not operating a gas station.

It was a vacant lot while they were owners.

Are they nonetheless contributors?

Mr. Romano: --Under State law?

Unknown Speaker: No, under this statute.

Mr. Romano: They may well be deemed to have contributed under the Federal statute if they had discovered the presence of contamination on the property and did absolutely nothing about it, which the facts... that's what the fact show.

Unknown Speaker: I thought there was... discovery wasn't made until... that your client wanted to do this building.

Mr. Romano: Discovery by my client wasn't made, but we had found that there was... we believe that certainly the Meghrigs' agents, their father and the contractor that was managing the property on their behalf, they are the entities that removed the underground tanks.

And we have photographs which showed what that soil looked like.

The soil clearly looked very heavily contaminated.

So, we believe that the Meghrigs knew or certainly should have known about the fact of contamination on the property.

They just never--

Unknown Speaker: Then if you can go to my other question.

What impeded you faced with this statute that says "may present" from beginning suit at the earliest possible time?

Mr. Romano: --We were faced with a situation where the issue was either go to Federal court and litigate this for opinion order, at the very minimum 90 days but more likely several months or years down the line, maybe all the way up to this Court before we could do anything about the property.

Meanwhile my client--

Unknown Speaker: Well, not according to the Government's interpretation.

The Government said as long as you did your cleanup within the 90-day period, as the Government reads the statute, you would be entitled to reimbursement.

So, my question is why timely suit wasn't commenced and cleanup commenced instead of saying, we'll do the whole thing and then we'll attempt to sue for past--

Mr. Romano: --I think that the short answer to that one, Your Honor, is that at the time that my client found out about the contamination, he was more concerned about taking care of the problem as opposed to suing people for recovery of his cleanup costs.

Unknown Speaker: --That's a good answer.

Mr. Romano: And... thank you.

[Laughter]

Unknown Speaker: It may not win your case.

[Laughter]

Mr. Romano: Well, the Government makes... the Government's position is an interesting position because... we don't agree with that, obviously, and the reason for that is, is that the Government says, okay, if you find contamination, what you do is you have to start providing notices to people, assuming you can locate all of those people, before you do any cleanup activities.

Only you... only after you provided notice to all of the defendants can you then follow with the filing of a lawsuit.

We believe that such a reading of the statute will really contravene the congressional purpose in enacting the statute which is if you have a condition which is by definition the worst type of environmental contamination, what you would want to do is clean it up and then work out the details as to who is responsible.

And I would say that principles of equity which govern the statute provide all of the necessary restrictions on enlarging this kind of action.

A district court on remand can decide and hold that we acted as an officious inter-meddlers.

A district court can decide that the costs that we've incurred were not necessary, and the district court may decide that we set on our rights and laches is available.

Certainly I don't think people will be bringing those kind of lawsuits without... if they didn't have any merit to them when they're facing with an attorney's fees and cost penalty in the event if they lose the lawsuit.

So, we believe that it is entirely appropriate for the Court to hold that a plaintiff may, in the limited circumstances where the contamination presents an imminent and substantial endangerment to health and the environment, do whatever is necessary to abate those conditions, and then sue under this statute to recover his costs.

Thank you very much.

Unknown Speaker: Thank you, Mr. Romano.

Mr. Zaimes, you have 2 minutes remaining.

Rebuttal of John P. Zaimes

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

I'll cover only three points in that 2-minute time, if I may.

First, I had begun to discuss the cases, the line of cases, cited by respondent beginning with Porter v. Warner Holding and ending up more recently in Franklin v. Wynnette County.

Those cases are cited for the proposition that there was a broad equitable power in Federal courts that can be called on in this situation.

And if we look at Porter as the beginning of that line, Porter was a case in which the words of the statute were much different from those here.

Porter had a statute that allowed the court to issue an injunction or other order, significantly broader than what we have here.

And the court in that case looked at the legislative history and determined that the legislative history of that statute, the Emergency Price Control Act, was consistent with a reading that allowed the court, the lower court, to order the apartment owner to reimburse monies collected over the limit set by the Emergency Price Act.

In the Franklin case, there was no congressional guidance on the limitations of remedies under that statute.

Franklin arose under title 9 and the right of action had been found to be an implied right of action under Cannon v. City... University of Chicago.

So, what the court determined was that there were four remedies available where Congress has not spoken as to the nature of the remedies.

Since Congress hadn't even expressly indicated the right of action, they hadn't indicated the remedies either.

Here we have an abundance of guidance.

We have the language of the statute.

We have legislative history of this and predecessor statutes and even of the CERCLA amendments in 1986, all of which point to a very limited reading... limited availability of remedies under this citizen supervision.

And we have a comparable statute, RCRA, which, as Justice Ginsburg notes, has a full discussion of the kinds of limitations that are placed on plaintiffs seeking to recover their costs.

The second point I want to make with respect to the contumacious plaintiff example, we must remember that State law covers those contumacious plaintiffs in abundance, as does CERCLA in all but petroleum contamination cases.

Chief Justice Rehnquist: Thank you, Mr. Zaimes.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until Tuesday, January sixteenth at ten o'clock.

Attribution:

The OYEZ Project

Featured:

United States v. California - Oral Argument

Fri, 09 Jan 2009 14:49:25 +0000

Case:

United States v. California

Media File:

91-2003_19930223-argument.mp3

Related Transcript:

1992_91_2003_argument.xml

Transcript:

Argument of Kent L. Jones

Chief Justice Rehnquist: We'll hear argument next in number 91-2003, the United States v. California and the California State Board of Equalization.

Mr. Jones, you may proceed.

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

This Federal common law action for money had and received was brought by the United States to recover $11 million in public funds paid to the State of California as taxes by the manager of the Naval Petroleum Reserve.

The manager is a Federal contractor who operates under an advance-funding, cost-reimbursement arrangement with the United States.

The State taxes were assessed with respect to purchases of personal property made by the manager in the name of the United States.

The United States contends that the taxes were erroneously and unlawfully assessed.

The courts below did not reach the question of the legality of the State tax.

They acknowledged that the United States has a Federal common law right to recover unlawful payments of State taxes, but they held that the Federal cause of action was inapplicable in this case because the United States had not pursued administrative tax refund procedures available under State law and had not brought its judicial challenge to the State tax within the 90 days provided by State law.

In our view, and in the unanimous view of six other courts of appeals, the Federal common law right of the United States to recover public funds that have been unlawfully obtained is not subject to compliance with the State procedures applicable to State law tax refund suits.

Unknown Speaker: Mr. Jones, is... should we make a distinction in the kinds of unlawfulness that may be appropriate predicates for that common law action?

There was nothing unlawful in the sense of being either criminal or mistaken or tortious.

The unlawfulness here, on your view, is simply an unlawfulness in the sense that if the taxability issue were litigated as far as it could be litigated on the merits, the United States would win and California would not.

But should we distinguish between those two senses of unlawful?

And if we do, are you in trouble under the common law action?

Mr. Jones: Well, there is no basis, or rationale even, for distinguishing in that sense, Justice Souter.

The common law action for money had and received was designed by this Court to protect the United States, to prevent and remedy unlawful takings of public monies.

Whether... or the way that it seems most direct to state it is that under Federal common law, if Federal funds have been taken without lawful justification, they must be returned.

It is for the person who has taken the funds to establish the lawful basis.

In this case, the State of California proposes that the lawful basis for its taking of the funds is the State tax law.

Our position is that the State tax law does not provide a lawful basis.

We would take the same position with respect to other takings of public property with respect to which we think there is no lawful justification.

Unknown Speaker: Well, Mr. Jones, who's the taxpayer here?

Mr. Jones: Well, as California uses that term, the taxpayer is the Federal manager of the Naval Petroleum Reserve.

Unknown Speaker: Who do you say is the taxpayer here?

You don't think the Government's the taxpayer, do you?

Mr. Jones: In... there's two ways to answer that; one is factually and the second is conceptually.

Factually, the court of appeals said, and was correct in saying so, that these taxes were paid with Federal funds.

That's at page--

Unknown Speaker: Well, Federal funds reimbursed the contractor here.

Mr. Jones: --Actually, it was something more than that.

As you would see looking at page 142 of the joint appendix, this is actually Federal funds that were paid directly to the State.

There was... this is an advanced funding arrangement of the type the Court discussed in the United States v. New Mexico case.

These--

Unknown Speaker: Well, in United States v. New Mexico do you think we thought the United States was the taxpayer?

Mr. Jones: --I don't know if... if that question, framed that way, was before the Court.

What was at issue in United States v. New Mexico was whether the immunity of the United States from State taxes applied.

Unknown Speaker: Uh-huh.

Mr. Jones: And what the Court held in that--

Unknown Speaker: And we said it didn't.

Mr. Jones: --The Court held that it did not apply in that case.

Unknown Speaker: And the United States is in no better position here, I assume, than in New Mexico.

Mr. Jones: Well, we are in a better position here.

Our contention is that there is no lawful basis for the State tax to be applied to us.

The... we're not contending--

Unknown Speaker: But you don't claim any sovereign immunity either.

Mr. Jones: --We're not--

Unknown Speaker: Either for yourself or for the contractor.

Mr. Jones: --We are not contending the tax is unconstitutional.

Unknown Speaker: Exactly.

Mr. Jones: However, as... just to inform the Court and not because it's instrumental in our argument, the State's tax is shaped with constitutional constraints in mind.

The State has crafted a tax that applies only to Federal contractors and applies to them differently than it would to other types of contractors, and it does so to meet the requirements of the Constitution.

But our position is that the State tax is unlawful as a matter of State law.

That is another way it's--

Unknown Speaker: Yeah, but maybe you're just in the position of... of being subrogated to whatever the right of the taxpayer was.

If the taxpayer is the... the contractor, then maybe the United States stands... stands in those shoes for purposes of litigating this question, as a matter of State law.

Mr. Jones: --Well that, of course, is the State's position.

Unknown Speaker: Yeah.

Mr. Jones: And I acknowledge that there is a bit of a chicken and an egg problem here.

Unknown Speaker: Yeah.

Mr. Jones: And... and it's a little glib to say it, but nonetheless I think there's an element of truth; it's a Federal chicken and a State egg, and under the Supremacy Clause the chicken prevails.

And in our view, the chicken is the common law right that this Court has recognized in... consistently, that the United... that anyone who takes Federal funds has to have a lawful justification.

Unknown Speaker: But in much different circumstances, Mr. Jones.

I don't think any of the cases that you rely on involve a simple case where the claim was that the... the tax was illegal under State law.

Mr. Jones: This is the first time this issue has come to this Court, but it's been in the courts of appeals for decades.

Unknown Speaker: Well, presumably that's why it's here now.

Mr. Jones: That's correct.

This is the first time this Court has had to decide whether a lawful justification exists when the State has taken our funds under an... made an unlawful... an illegal assessment of our funds.

Unknown Speaker: Well, when your funds have been paid to the State by your agent.

Mr. Jones: That is correct, and that was exactly the context of the Bayne case in 1876, where a Federal officer had Federal funds, he misappropriated those funds and transmitted them to a third party.

This Court allowed the United States to recover directly from the third party the funds that had been unlawfully obtained by that party.

Here too, the Court has to assume, on the record of this case, that the State tax is unlawful, that the State has... has no lawful justification for the taking of the funds.

Unknown Speaker: No, but we certainly cannot assume that the funds were unlawfully taken from the United States.

Mr. Jones: I'm sorry, I couldn't hear you.

Unknown Speaker: I mean in... in the Bayne case the funds were unlawfully taken by the Federal officer from the United States, they were misappropriated, as I recall.

So the United States stood, in seeking a quasi-contractual remedy, in a very stronger position than the United States stands here.

Mr. Jones: Well, except that here the... this case falls with... does fall within the confines of this Court's prior decisions in that the funds were paid under protest and under threat of penalty.

This is not a case where the taxpayer voluntarily made the payment and then came back years later and said by the way, I don't think I should have been required to.

What the Court has held is that when... when the taxes have been paid under protest and under threat of penalty, that it is not regarded as a voluntary payment and that it can... the Federal Government, the common law action applies to recovery of the funds.

Unknown Speaker: What... so you've got... you've got the better of me on that legal point.

What's your best case for that proposition?

Mr. Jones: Well, I think Bend v. Hoyt addresses that subject.

I am relatively sure City of Philadelphia v. Collector does.

Unknown Speaker: Is it incorrect to say that the State is indebted to the contractor?

Mr. Jones: Well, under California law, the contractor is what is called the taxpayer.

I am just talking now about California... the way California describes the situation, and the United States is called the real party in interest.

California says that the real party in interest is not allowed to bring a suit to recover the refund, only the taxpayer may.

As a result, the United States has no remedy under State law.

California does not recognize any claim of the United States.

The only exception that the California courts have described to that standing rule is when, as a matter of State law, the taxpayer is required by law, as a condition of receiving the refund, to pass the refund through to the real party in interest.

Unknown Speaker: If... if this case had proceeded with the contractor's claim being adjudicated and there was a final judgment in the California courts as to the contractor and that judgment was in favor of the State, adverse to the contractor, would you still have the right to maintain this suit?

Mr. Jones: We would then have the problem that the Court, I believe, addressed in the Montana case about collateral estoppel.

And I think it's relevant to point out... and we would be bound if we had participated in the litigation and... and--

Unknown Speaker: Which you did here, incidently, did you not?

Mr. Jones: --Well, but the... the State court litigation here did not proceed to conclusion.

Unknown Speaker: Well, you did at the administrative level.

Mr. Jones: Well, I don't... I don't think it can be said that we participated in any manner at the administrative level; we had no right to.

The contractor made that protest.

Unknown Speaker: Didn't you pay the... didn't you pay the attorneys, or am I incorrect about that?

Mr. Jones: Well, under our contract we had a duty to reimburse them for the costs.

But I believe that... that... the joint appendix, and I don't recall the page... the counsel who was representing the contractor said quite clearly he had no authority to represent the United States.

He was there--

Unknown Speaker: Well, could you have stopped your contractor from settling this case?

It didn't go to the... it didn't go to conclusion and decide the very issue that... that the contractor had raised.

Mr. Jones: --The settle... the settlement of the claim presents a different issue than... than collateral estoppel.

The United States, in our view, has an independent Federal cause of action that the contractor cannot settle.

Unknown Speaker: Well, could you have... could you have forbidden the... your contractor from settling that case and... and instead, litigating it to its conclusion?

Mr. Jones: Could we have forbidden them from settling it?

I, frankly, don't know the answer.

And it's normal in--

Unknown Speaker: Well, if you could, you just... you just blew it, that's all.

Mr. Jones: --Well, this case wasn't settled in that respect below.

What was done in the State courts was that the State acknowledged that a certain portion of its taxes were improper; the remaining portion was still being disputed.

The record reflects that the contractor then advised the State that they had decided to dismiss the contractor's claim and that the United States would then commence a suit in Federal court.

Now, the court of appeals didn't seem to be aware of that.

It sort of made it sound like we made a tactical decision--

Unknown Speaker: Yes.

Mr. Jones: --To settle something and then sneak it away.

Unknown Speaker: Exactly.

Mr. Jones: But at least--

Unknown Speaker: We take our facts, generally, as found by the court of appeals.

We don't relitigate facts here.

Mr. Jones: --Well, the court of appeals didn't find anything on that.

It's just reading between the lines, it seemed to be the tenor of the court's--

Unknown Speaker: But it... but it was dismissed without prejudice, wasn't it?

Mr. Jones: --It was dismissed without prejudice and at page 97 of the joint appendix there's a letter between counsel that makes it quite clear that the State was aware that the United States was going to pursue the claim in Federal Court.

Claims of the United States involving public funds inherently implicate an important national interest.

Unknown Speaker: Oh, let me just press one... one more question here.

On your theory that the United States is the primary party here, do you think that the California... that the Federal contractor had standing to proceed with its litigation in State court, claiming the money?

Mr. Jones: Because it was in State court, under the State rules it had standing.

The State rule is that--

Unknown Speaker: But under your theory here, it wouldn't.

Mr. Jones: --Well, I believe there's... there's two separate causes of action.

California law recognizes a cause of action for the putative taxpayer, and allows them standing to pursue it only in State court.

This Court has recognized a Federal common law cause of action for the United States, which we think is a separate cause of action that, under 28 USC 1345, falls within the plenary jurisdiction of this Court.

There is no dispute we are the real party at interest, that these were paid with Federal funds; all of the elements of the Federal common law cause of action have been met.

I would just like to take a minute to explain what I think is the background of that action, although it may be apparent by now.

As the Court held in the Chesapeake & Delaware Canal Company case, even when commercial transactions such as stock dividend payments are involved, when the United States seeks to recover public funds it is, quote, acting in its governmental capacity as much as if it were collecting taxes.

The Court has thus consistently concluded, as it stated in Clearfield Trust, that it is for the Federal courts to fashion the rules governing the rights and duties of the United States in its financial and proprietary transactions.

Unknown Speaker: Well, Mr. Jones, might there not be, in that situation, one rule for actions by the United States against private parties who may have kind of absconded with Government funds, as it appears to have been the case in Bayne, and another rule where the State is... where the Government is simply protesting a collection that has already been made by a State of taxes?

Mr. Jones: Well, the only orderly way in which we can protest that collection is to subject ourselves to the risk of penalties and compulsory process at State law, or to bring... to make the payment in an orderly fashion, as this Court has... has held in... in the Courts I cited... in the cases I cited to Justice Souter.

Unknown Speaker: Well, did any of those involve proceedings that involved the collection of State taxes as opposed to private individuals?

Mr. Jones: Actually, the common law rule has its roots in those two cases I cited that involve suits to recover Federal taxes.

This Court has held... held at common law that individuals could recover Federal taxes from the United States, even though they had been voluntarily paid, because it was the orderly thing to do, I suppose.

Unknown Speaker: Was there any other process for doing so at that time?

Mr. Jones: There was no statutory remedy at that time, although I suppose that the taxpayer could have resisted the assessment and not voluntarily--

Unknown Speaker: Well, could... under the California rule, you could not have intervened in the proceedings that your contractor had instituted.

Mr. Jones: --California cases seem to assume we can intervene.

We could... but we would--

Unknown Speaker: They assume you could.

Mr. Jones: --Yes.

They assume that we could intervene, and there's no authority, really, that answers that question.

But I also assume, because there isn't any... any case law to the contrary, that we could assume... we could intervene, but we would be intervening in a State court proceeding.

Unknown Speaker: Yes.

Mr. Jones: We would be intervening in a proceeding that would make the Federal claims subject to State law procedures, to the State statute of limitations, and to State court adjudication of the claim.

And those results are inconsistent with this Court's recognized need for uniform rules to govern the claims of the United States, in particular with 28 USC 2415, which provides a 6-year statute of limitations for claims by the United States arising under contract, express or implied, in law.

Requiring us to proceed in State court as an intervenor would also conflict with 28 USC 1345, under which Congress has given the Federal courts plenary jurisdiction over claims by the United States.

Unknown Speaker: Plenary and exclusive?

Mr. Jones: Well, exclusive through the removal procedure... not expressly, Chief Justice Rehnquist, but pragmatically exclusive through the removal procedure.

The United States is entitled to have its claims adjudicated in Federal Courts.

Congress has determined that.

Unknown Speaker: But... but when you talk about removal, you're talking about the United States as a defendant, then.

Mr. Jones: Well, the United States has... has the option in every case to have its claims heard in Federal court.

No party has the option to require the United States to have its claims heard anywhere else.

Unknown Speaker: Well, but what may be the rule as to the United States as a defendant may be quite different than the rule as the United States as a plaintiff.

I mean, if... if the United States is to... is to be sued by someone claiming that the... the Government owes it money, Congress may quite likely have provided that the suit is to be heard in Federal court, either through removal or through having been brought there in the first place.

But I don't see that says much about the legitimacy of the Government's claim to recover taxes in a State proceeding.

Mr. Jones: Well, 28 USC 1345 gives the Federal court jurisdiction over all, and that's the statutory word, all causes of action, suits, or proceedings commenced by the United States.

It is as broad and plenary a jurisdiction as Congress has provided.

Congress obviously intended that the claims of the United States would be adjudicatable or adjudicated in Federal courts.

There is no basis under the Federal common law remedy for requiring the Federal cause of action of the United States to be adjudicated in State court.

I should make emphatic what I... I said indirectly about the statute of limitations.

The Court has held on several occasions that the Federal claims of the United States, and in particular the Federal common law action for money had and received, is not subject to State statutes of limitations.

In 1966, Congress enacted a statute that expressly provides for every action for money damages brought by the United States for contracts implied at law to be given a 6-year Federal statute of limitations.

The Federal statute of limitations applies directly to the quasi-contractual claim of the United States.

The statute legislatively fills the gap created by this Court's decisions rejecting State law rules of limitation for the Federal claims.

Unknown Speaker: Does that apply even if the United States is subrogated to the claim and proceeds in a subrogation capacity?

Mr. Jones: If the... I take it the premise of that question is there are two causes of action.

The United States has its Federal cause of action; the United States also, under the State's theory, could be subrogated to the State law cause of action.

The answer to your question turns on the character of the State statute of limitations, at least that's what the Ninth Circuit has held in a series of cases not at issue here today.

The Ninth Circuit has suggested that when the State statute incorporates the limitations period as an element of the cause of action, then compliance with the State statute of limitations is necessary to give rise to the cause of action.

We think it apparent... although that issue isn't presented here, we think it apparent that this State statute of limitations does not incorporate compliance with the State period as an element of the cause of action.

To the contrary, what the State statute of limitations says is that failure to bring suit within 90 days will be deemed to constitute a waiver of the State claim, so it is a traditional or more traditional State statute of limitations.

So the short answer to your question is if we had proceeded under State law, we would not be subject to the State statute of limitations, the 6-year Federal statute of limitations would apply, but the case hasn't been presented on that basis in the lower courts.

The State's argument takes a somewhat different tack.

They don't join the contention that we should be required to exhaust a nonexisting remedy.

They instead contend that we should be required to resort to the State process.

For the reasons I've already described, that conflicts with well established rules requiring Federal rules to govern Federal actions.

But I should also point out that it would make the public right of the United States to recover public funds turn on the perseverance of Federal contractors who ultimately have no stake in the outcome, and who operate under an enormous variety of tax procedures in literally thousands of local taxing jurisdictions.

In Clearfield Trust the Court concluded that because United States transactions proceed upon such a vast scale, the Federal right should not be subjected to the exceptional uncertainties imposed by the vagaries of the State law rules.

Finally, I do want to address the Court--

Unknown Speaker: Yeah, but businesses do that all the time.

I mean they have less money than the United States.

I don't understand why that is such a big imposition.

Mr. Jones: --I think the Court has--

Unknown Speaker: The United States is... is claiming exemptions, or whatever, under State laws, to follow those procedures.

Mr. Jones: --I think the Court has recognized that the claims of the United States differ both in quality and quantity in that respect.

The United States as the sovereign, should not be subjected to State law rules that limit Federal rights.

I think the Court looks at it from that perspective.

I believe it is also true that it is... it is comparing apples and oranges to compare even a large corporation with the pervasive and extensive reach of the Federal Government throughout every city, county, and State.

Unknown Speaker: But the so-called Federal right here is simply a claim under California law.

Mr. Jones: Chief Justice Rehnquist, it is a claim under Federal law.

It is a claim that the State has taken money without lawful justification.

It is a claim under Federal common law.

Unknown Speaker: Yeah, but the basis for that claim lies entirely in California State tax law, doesn't it?

Mr. Jones: I would put it the other way.

I would state... say that the basis for the State's defense, the basis for the State's assertion that, in fact, it took the monies lawfully, lies in its claim under State law.

That is a claim that we... we disagree with and that the Court, for purposes of this case, must assume is incorrect.

For purposes of this case, the Court must assume the State tax is unlawful and that--

Unknown Speaker: Well who... who'd better decide that case, the California courts or the Ninth Circuit, as to whether a California State tax is unlawful or not, under... under California State law?

Mr. Jones: --Well this... there certainly has never--

Unknown Speaker: For California courts are better equipped to speak on that than the Ninth Circuit.

Mr. Jones: --There's no question that the Federal courts have competence to decide these questions of State law.

The question, it seems to me, the prudential one that you're framing, is whether the... as a matter of comity or abstention, the State courts should decide these Federal claims.

The comity doctrine, as applied in fair assessment, stems from the Anti-Injunction Act and... and the conclusion that Congress didn't intend jurisdiction to reach State tax rules.

But the... but the Anti-Injunction Act, by this Court's decision in Department of Employment, does not apply to the United States.

And to the contrary, Congress gave the Federal courts plenary jurisdiction.

Unknown Speaker: You're asking us here to extend previous holdings of the Court to a situation involving collection of State taxes.

And it seems to me that you've... you've got to answer questions like which would be the preferable court system to decide the question, just as a matter of policy since the prior cases don't support what you're seeking to do here.

Mr. Jones: Well, Chief Justice Rehnquist, we think the case... this Court's cases do support it.

And as a matter of... and as a policy matter... the two policy sources that I can refer the Court to... this Court has plenary jurisdiction over claims of the United States; it doesn't have that kind of jurisdiction for anyone else.

And secondly, the Anti-Injunction Act does not apply to the United States.

In the Department of Employment case, this Court sustained a holding that the United States could enjoin a State tax and recover damages.

Unknown Speaker: Well, what if you... what if you got into court on this suit that... that you think the Federal court can hear, and it suddenly happens that a Supreme... a decision of the Supreme Court of California was found that squarely decides the issue that you want litigated against you?

Now--

Mr. Jones: That--

Unknown Speaker: --That's a matter of State law, then, isn't it?

Mr. Jones: --I would expect the Federal court to look for sources of State law here, just as it does in any other case where it decides questions of State law.

Unknown Speaker: Why, sure.

Why, sure.

And you... and you would be stuck with it.

So... so... so you really are wanting to litigate an issue of State law.

Mr. Jones: Well, actually, we want to litigate facts as well.

We want to litigate the question of whether the contractor under our Federal contract is a construction contractor.

Unknown Speaker: Right, exactly.

Mr. Jones: There are factual questions and legal questions that implicate the rights of the United States, and we think they should be decided in Federal court.

Unknown Speaker: Well, let's assume that there's a... a State supreme court case that's... that is so similar to this that anyone would say it would control.

Mr. Jones: In that event, I suppose the district court properly should decide that there was a lawful justification of public funds.

But on this record, this Court has to assume there was no lawful justification.

And I want to... I should point out, just in... that in the Board of County Commissioners case the Court emphasized that nothing... and I think I quoting... nothing that the State can do will be allowed to destroy the Federal right, which is to be vindicated.

And our point is that we should be allowed to determine our Federal right under the Federal common law in Federal courts.

I'd like to reserve any time I have left for rebuttal.

Unknown Speaker: Very well, Mr.... Mr. Jones.

Mr. Milam, we'll hear from you.

Argument of Robert D. Milam

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

Although the contractor's attorney disclaimed any representation of the United States, the joint appendix is clear that the United Stakes... States directed and controlled that action.

Not only at joint appendix pages 131 and 135 does it show that... the United States obligated to pay the contractor's attorney, at joint appendix page 58 the WBEC attorney told the Board of Equalization at the hearing on petition... at the petition for redetermination that the United States was instructing WBEC as to each step in the process.

Joint appendix pages 59 and 60 show that the United... the WBEC attorney told the Board of Equalization at that same hearing that he had been not authorized to discuss a certain subject with the board.

Unknown Speaker: May I ask you this question, does that really make any difference?

Under your theory of the case, I don't think you have to establish that the Government controlled the case, do you?

Mr. Milam: I agree.

I don't think so.

Unknown Speaker: Yeah.

Could the... you say the Government did control this case, but could it formally have intervened under California law?

Mr. Milam: Your Honor, under... under the judicial remedy, the Code of Civil Procedure, section, I think, 389, authorizes and almost requires a real party in interest to be before the court.

And as to the judicial remedy, I believe it could have intervened under that section.

Unknown Speaker: And did it get to... it never got beyond the administrative stage, did it?

Mr. Milam: I don't understand the question, I'm sorry.

Unknown Speaker: Did the... well, the contractor wanted a refund?

Mr. Milam: Yes.

Unknown Speaker: And it... and it... and it employed the administrative remedy.

Mr. Milam: Right.

Unknown Speaker: Did it... did it... it never got to court, did it?

Mr. Milam: WBEC filed two court actions in State court, yes, at the direction of the United States.

Unknown Speaker: And those were... and those were settled?

Mr. Milam: Those were not... I agree with Mr. Jones' characterization of that, that the... the Board of Equalization, through discovery, found that it had--

Unknown Speaker: Uh-huh.

Mr. Milam: --Misapplied the tax to some extent.

Unknown Speaker: To some extent.

Mr. Milam: And so they agreed to pay that back.

And the result of that was the dismissal of the suit by... of the two suits by WBEC.

Unknown Speaker: So--

Mr. Milam: There was no settlement, as such.

Unknown Speaker: --No, no, no.

Well, but nevertheless, did... did the contractor raise the issue that the United States wants to litigate?

Mr. Milam: Yes.

The... the issues before the State courts would be the same issues before the Federal court.

Unknown Speaker: And... and so that issue never went to judgment.

Mr. Milam: It did not.

Unknown Speaker: It did not.

Mr. Milam: It was... the cases were dismissed.

Unknown Speaker: And you think... and... and... you think the United States could have intervened in those two cases.

Mr. Milam: Yes, I believe--

Unknown Speaker: And if they lost in the... in the trial court on the issue they wanted to litigate, they could have appealed.

Mr. Milam: --Yes, I believe that.

Also, I believe, contrary to Mr. Jones, that the United States, under circumstances of this case, could have had an administrative remedy also... could have... could have filed a claim for refund and pursued administrative remedy.

There are circumstances when that... that would not be possible, but under the circumstances of this case I think they could have.

Unknown Speaker: But assuming this is Federal property at issue, do you know of any other instances where in order to hold on to its own property the Federal Government has to appear in State proceedings?

Mr. Milam: I cannot identify any other instances.

I would... I would suggest that when State taxes are at issue, the State and State courts have a tremendous interest in... in resolving those issues, but I cannot cite another case to... to support that.

Unknown Speaker: Do you accept the premise of its being Federal property?

Mr. Milam: That... the money was... was paid from Federal funds.

Now, whether they want Federal property back or not, I really don't know, because WBEC was a taxpayer, we assessed the taxpayer, and they had some mechanism to... to pay the money with Federal funds.

It's hard for me to believe that they want Federal funds back, but I... I don't know how to resolve that... that argument of theirs.

This was... the State court suits were an action... was an action... were actions by a State taxpayer, WBEC, against the taxing entity that imposed the taxes, and the only issue was the application of State tax law.

And this Court has often held--

Unknown Speaker: Was... was Mr. Jones correct in saying that the... the State was told that... when the case was dismissed or the cases were dismissed, that the United States was going to pursue the issue in Federal court?

Mr. Milam: --I think he cited something in the joint appendix.

I'm not aware of that, but he... he cited something in the joint appendix that I'm not aware of.

I do not know.

Unknown Speaker: So, I suppose the State could have... could have refused to have the case dismissed?

Mr. Milam: No, I think dismissal is... is a duty.

I mean it... it is a right of a party who brought the suit and... and actually under California law it's very difficult to... almost impossible to contest that.

If they want to dismiss without prejudice, they are allowed to do so.

Unknown Speaker: Even after the case has... even after discovery and things like that?

Mr. Milam: Yes.

I had... to give you an example, I had one case on appeal where I had... in the California courts... where I had filed my respondent's brief after the appellant's brief had been filed.

And after I filed my respondent's brief, the court allowed the taxpayer to dismiss the... the appeal over... over my protest.

But the... the opportunity to... to dismiss the case is very broad in California.

Unknown Speaker: But you say the United States could have intervened at any time?

Mr. Milam: Yes, Your Honor.

The United... under section 389 of the Code of Civil Procedure, a real party in interest has the right to be before the California courts.

In fact, I think they're almost required to be before the California courts.

Unknown Speaker: Now, would it have had the... the right also, in your view, to intervene in the administrative proceedings?

Mr. Milam: I'm sorry, I did not hear you.

Unknown Speaker: Would it have had the same right to intervene in the administrative proceedings?

Mr. Milam: Under the circumstances of this case, they could have either intervened, stepped into the shoes, or, on their own, pursued the administrative remedies.

As I said, that's not always the case if the circumstances were different.

But they could have done both in this case.

This Court has often held that in the interests of Federalism and... and the principle of comity, State courts are the best place to determine the application of State tax law.

Comparing the interests of the United States and the State of California in this case presents a dramatic example of why this should be the result in this case.

California has retained as part of its sovereignty the ability to tax its own citizens.

A part of that finality... a part of that sovereignty is the power to determine the finality of its tax payments.

That is, when they can no longer be refunded.

Joint appendix page 21 shows that the first WBEC case was filed on February 18th, 1983.

And here we are more than 10 years later, arguing whether the United States has a cause of action in Federal courts.

In contrast, under California law trial... court... cases must be brought to trial within 5 years or be subject to mandatory dismissal.

Joint appendix page 95 shows that upon instruction of the United States, the WBEC... E-C cases were dismissed, and joint appendix pages 46 and 49 show that they were dismissed within 1 month of the running of the 5-year statute, the California 5-year statute.

United States interest, on the other hand, is simply that of a taxpayer.

There are no issues unique to the United States in this case, no Supremacy Clause issues, no sovereign immunity issues, no discrimination issues, no Federal constitutional issues, and no Act of Congress is involved.

A Federal contractor can take advantage of the United States tax immunity because it derives from the Federal contract.

The reverse also must be true.

When the contractor cannot take advantage of the United States tax immunity, the right of the United States to sue the State for a tax refund derives soley from the Federal contract.

The United States agreement to reimburse WBEC in this case, under the contract, merely provides the opportunity for the United States to step into the shoes of the taxpayer, and enabling the United States to pursue those remedies of a taxpayer.

Indeed, because the United States controlled and directed these actions, it shows that the United States actually stepped into the shoes of the taxpayer in this case.

The actions of the United States in controlling the actions and the willingness of WBEC to submit to that control shows that they view their relationship as one of subrogee and subrogor.

The United States is asking this Court to do two things.

First, to disregard the available State remedies in asking this Court to have the Federal courts instruct California on the application of State tax law.

To paraphrase this Court in Penhurst State High School or Hospital versus Halderman, it's an invasion of California sovereignty for the Federal courts to instruct the State officials on the application of State tax law.

Unknown Speaker: May I ask a question that's kind of running through my mind about the analogy with the litigation costs and all?

Suppose... the United States under the contract had to pay the attorneys fees, I think, did it not, of the contractor?

Mr. Milam: They obligated themselves to... to pay--

Unknown Speaker: And if... if they were persuaded that the attorney had overcharged the client and they wanted to recover the overcharge from the client, would they... and... and the California statute of limitations had run, would they be able to sue in Federal court, in your view?

Mr. Milam: --I do not know the answer to that question.

Unknown Speaker: Isn't that the same question we have here?

Mr. Milam: I don't believe so.

Unknown Speaker: Why not?

It's a State law cause of action.

It overcharges a matter... say there's some State rule you don't charge unreasonable fees, or something like that.

And the United States basically is a subrogee to the contractor, trying to get back, on a State cause of action, an excess charge.

And here... here the contractor gave too much money to the tax collector, and it also gave too much money to its lawyer.

Why are they different?

Mr. Milam: Well, the only... the thing that I'm relying on in this... in this case is the sovereign power of California to impose taxes.

And that sovereignty, I think, makes it different from the example you... you gave me.

I'm not sure there's the same interest of California, but--

Unknown Speaker: Well, they have the sovereign power to decide how much... what is a fair fee for a lawyer, I guess, a member of the State bar, and so forth and so on.

But you think that's different?

Mr. Milam: --I think it's different, yeah.

Unknown Speaker: Yeah.

Of course, even if you admitted in that case, as I suspect might be the case, the United States could sue in Federal court, that's not the issue here.

It's just whether the State statute of limitations would apply to that suit, isn't that... isn't that right?

Mr. Milam: I'm not sure I understand the question, Justice--

Unknown Speaker: We're just arguing about what statute of limitations applies.

That's... that's the issue in this case, isn't it?

Mr. Milam: --Well if--

Unknown Speaker: So even if your response to Justice Stevens were yes, the United States would... could proceed in Federal Court against the... against the lawyer, you... you still might be--

--Even if... even if the statute of limitation is run, is my question.

Even if the State statute's run.

Even if it's run, I see.

That's why.

Mr. Milam: --Now, the State's... the difference between sovereign power and a running of a State statute of limitation is that under this Court's decision in United States v. Dalm, the principles of sovereign immunity indicate whether or not there's a claim against the sovereign.

And the... the Dalm case found that the... both a timely filing of a Federal claim for refund and a timely filing of a lawsuit were conditions precedent to the accrual of a cause of action.

Chief Justice Rehnquist: We'll resume there at 1:00, Mr. Milam.

Mr. Milam, you may resume.

Mr. Milam: Mr. Chief Justice and may it please the Court:

The United States is asking the Court to invoke equitable remedies, that of a contract implied in law or money had and received, and declaratory relief.

And California's position is that this Court's answer should be consistent with the long line of authority, from Dows v. City of Chicago in 1870 to Fair Assessment in Real Estate v. McNary in 1981, that the Federal Government cannot invoke equitable remedies, at least against a State where no Federal issues are involved, unless the effective pursuit of remedies, State remedies, is pursued... is done.

Unknown Speaker: Well, I take it you're... you're saying that this so-called common law cause of action the Government relies on just doesn't apply in the... the State tax context.

Mr. Milam: That's our position.

Yes, Your Honor.

Unknown Speaker: Yes, uh-hum.

What was the first of those cases you just mentioned?

Mr. Milam: Dows v. City of Chicago in 1870.

Unknown Speaker: Dow?

Mr. Milam: Dows, I believe.

Unknown Speaker: Yeah.

Where is that cited in your brief?

Mr. Milam: I don't believe I cited it in my brief.

Excuse me.

Unknown Speaker: Why didn't you?

Mr. Milam: I have no excuse.

Unknown Speaker: Could you give us the citation now?

Mr. Milam: I do not have it handy, Your Honor.

I'm sorry, I do.

78 U.S. 108 1870.

Unknown Speaker: But there are several court of appeals cases that... to the contrary to your position, aren't there?

Mr. Milam: There are and I'm going to... I'm going to discuss those in a few seconds, but first I want to discuss the Department of Employment case which deals specifically with this area.

Unknown Speaker: The what?

Mr. Milam: Department of Employment v. the United States.

Unknown Speaker: Oh yes, uh-hum.

Mr. Milam: Mentioned by Mr. Jones.

Unknown Speaker: Uh-hum.

Mr. Milam: The Department of Employment case was a case that refused to apply the Tax Injunction Act as to State taxes because a Federal instrumentality was being taxed in violation of its sovereign immunity.

That rule does not apply in this case because WBEC was not a Federal instrumentality and there's no issue of sovereign immunity.

Indeed, if you take the facts of the Department of Employment case and take away the Supremacy Clause issue in that case and substitute in its place the principle of comity, because tax... State tax law was involved, it's California's position that even Federal instrumentalities must be required to pursue State remedies before seeking relief in the Federal courts.

There are three cases at least, and maybe more, that... I've put down... I've put three cases that the United States has cited that fall into this category.

The United States v. Benton, United States v. Broward County, and United States v. DeKalb County all involve issues of application of tax... State tax law only and there are no Supremacy Clause issues.

And California believes that to the extent that these cases stand for the proposition that State remedies need not be pursued, they are wrongly decided.

These are all lower court decisions.

Unknown Speaker: Those are the ones on the Government's brief page 20, I think, yeah, yeah.

Mr. Milam: So California's answer to the question presented by the United States is that assuming it had... just assuming for purpose of argument that it can state a quasi-contract cause of action, when the issue is one of application of State tax law only and there are no Supremacy Clause issues, pursuit... effective pursuit of State remedies is required before the access to Federal Courts, and this includes meeting all the procedural requirements of State law.

Unknown Speaker: Why is that?

I don't understand.

I mean I can understand the other basis for the result you want, namely the basis that... where the United States is just subrogated to a... to a claim of someone else.

If that someone else has no right to ignore the State procedures, neither does the United States; that makes sense to me.

But you're... this theory you're giving us now that even if it were the United States in its own right that were suing, it would have to follow the State procedure--

Mr. Milam: Well, that was the question presented.

Unknown Speaker: --That seems, that's a lot harder to swallow.

Mr. Milam: I'm sorry, I'm... I interrupted you, I didn't--

Unknown Speaker: That... that was the question presented?

Mr. Milam: --The question presented is that the United States assumes it has a quasi-contract cause of action, and the question then is do they have to pursue State remedies.

And our answer is yes, even if they can state a cause of action--

Unknown Speaker: The quasi-contract cause of action precludes any subrogation theory.

Mr. Milam: --I don't believe it precludes subrogation theory.

I think the subrogation theory is correct.

But the United States, in presenting the question to the Court, assumed it had a quasi-contract cause of action.

Unknown Speaker: Oh, so I have to assume that this case is the same as though the United States were suing in its own right, as though the tax had been posed on the United States and not on its contractor?

Well, haven't you already answered that, yes, by saying that the United States could have not only intervened but might... should have been required to intervene because it's the real party in interest?

Mr. Milam: Yes.

That's right, Your Honor.

Unknown Speaker: Uh-hum.

Well.

Who's... you may agree with the subrogation theory but that isn't really the main thrust of your argument at all.

Mr. Milam: Well it... it... it... it is.

We think it's the correct answer, but the problem that, of course, we've had with... with that--

Unknown Speaker: Yes, but you say--

Mr. Milam: --There's no court that has... has held that.

And... and it's a new... it's an issue that this Court's never... never reached.

And so to rely solely on that.

Unknown Speaker: --Well why is that... why is that a problem?

I this Court has never held... never expressed an opinion one way or the other, why does that prevent you from urging it to us?

Mr. Milam: It doesn't.

It just causes me to... to... to be careful and not putting all my eggs in one basket just in case it... this Court doesn't agree with me.

Unknown Speaker: You want to have several strings to your bow.

Mr. Milam: Exactly, Your Honor.

Unknown Speaker: What about the--

--At least one egg out of a half a dozen.

[Laughter]

I'm not sure... the State's... the Government's proceeding on a common law count for money had and received.

Mr. Milam: That's my understanding, yes.

Unknown Speaker: Well is... was that an equitable action at common law?

Mr. Milam: I don't know the answer to that.

I--

Unknown Speaker: Well, I... I think it was not, which is what... why I'm not sure why you say that equity requires that it follows exhaustion of remedy.

You don't have to exhaust remedies to sue for money had and received, do you?

What's your authority for that?

Mr. Milam: --I have no authority, Your Honor.

Unknown Speaker: Do you... let's... let's go back to the cause of action again for a moment.

Mr. Jones relied heavily on... on the Bend & Hoyt and the City of Philadelphia case.

Do you accept them as being in point?

Mr. Milam: I don't accept them as having a... a contract... a quasi-contract cause of action.

But they may be in point if they do have a contract, quasi-contract cause of action.

Unknown Speaker: Well I thought... I looked at them very quickly.

I thought they did, but do you... can you think of any basis to distinguish them from the... from the case that you've got today?

Mr. Milam: The only basis that... that I've been able to distinguish the common law quasi-contract action is that the money was supposed to be paid involuntarily.

And although WBEC may be said to... to pay... have paid the taxes involuntarily, I don't think that could be said of the United States and the United States is the one asserting this action.

Unknown Speaker: Yeah.

Mr. Milam: So I'm not sure they meet the common law definition.

Unknown Speaker: Okay.

Mr. Milam: All the other cases... all the cases, besides the three I mentioned, relied upon by the United States involve Supremacy Clause issues.

And in that sense... and that situation is the only time that the courts allow the United States to go directly to the Federal Court.

Those issues are not present in this case.

The Clearfield Trust case also would not apply.

The Clearfield Trust was a response to this Court's decisions in Erie v. Tompkins and Hinterleiter v. LaPlada.

Those two cases stand for the proposition that Federal courts can invoke Federal common law to protect the interests of the United States.

However, the application of that rule has some conditions precedent which aren't present... which have not been discussed.

One is that this Court has held that when the United States and a State are the parties, then the interests of both governments must be considered.

And when you consider the interests of State government, the principle of comity also comes into play.

That was the Board of Commissioners v. the United States, 308 U.S. 343, 1939.

Also, this Court has stated that the invoking of Federal common law is usually applied in situations where a Federal rule is necessary to protect uniquely Federal interests.

There's no uniquely Federal interest in this case that needs protection.

Third, in determining whether to apply common law, this Court has held that a guiding principle is a significant conflict between the use of State law and Federal interest or policy.

And as the Ninth Circuit held in this case, there is no such conflict.

The United States does not have a quasi-contract cause of action, although up to this point I've been assuming it had, for two reasons.

First, the Ninth Circuit was correct in holding there has been no unjust enrichment of California as that term is used in the quasi-contract action.

How can California be unjustly enriched when WBE... State court actions could have resolved every State law issue in this case, including whether taxes were overpaid.

California cannot be unjustly riched... enriched at the expense of the United States when the United States directed and controlled the State court actions and failed to bring the suits to trial within 5 years and directed WBEC to dismiss the actions.

The second reason that the United States has no quasi-contract cause of action in this case is that the United States as a subrogee can invoke only those remedies of WBEC, and WBEC did not have a remedy of a quasi-contract action in this case.

Unknown Speaker: Well, as I suggested, that is somewhat inconsistent with your notion that the United States was the real party in interest and could have and should have intervened.

Mr. Milam: I don't believe so, Your Honor.

If... if the United States steps into the shoes of the... of the contractor it becomes... it becomes a real party in interest.

I think the real party in interest is the one whose money is at stake, and I don't believe that being a subrogee has any conflict with that concept at all.

Unknown Speaker: Well, why is the United States the real party in interest if it isn't its money that's involved?

Mr. Milam: That's the reason it is the real party in interest.

Unknown Speaker: Okay.

Mr. Milam: But that... I don't think that conflicts with being a subrogee.

The United States' claim in this case is based entirely upon California tax law.

And like this Court's decision in United States v. Dalm, the United States... the California tax law requires the filing of a claim for refund and the filing of a suit within 90 days of the notice of denial of the claim for refund.

WBEC did go through this procedure.

Notice of denials were made and it filed suit within 90 days.

However, because it's a part of the California accrual of a cause of action under a waiver of sovereign immunity, once the dismissals were made WBEC's actions... claim against the State of California were extinguished by operation of law when the dismissals were made.

The Ninth Circuit said that a dismissal means those cases were never filed, and if the WBEC cases were never filed no case was filed within the 90 days of the notice of denial of WBEC's claim for refund.

So the United States can make no claim against California either as a taxpayer, because it did not file a claim for refund, or as a subrogee of WBEC.

And it's reliance upon Summerlin--

Unknown Speaker: But can you bring a suit for money had and received as subrogee?

I mean the question we'd accepted is whether invoking... in invoking the Federal cause of action for money had and received, the United States must comply with the State law requirements.

Can you do that when you're a subrogee?

Mr. Milam: --I don't... in this case I don't believe so because WBEC had no such action and a subrogee just takes the remedies of the subrogor.

So the United States reliance on the Summerlin case is misplaced because it fails to distinguish between a statute... State statute of limitations depriving the United States of a preexisting valid claim and the conditions precedent to an accrual of a cause of action under a waiver of sovereign immunity.

The first question for Summerlin and Summerlin analysis is is there a valid cause of action.

If there's no valid cause of action, then you never get to the second element of Summerlin, the deprival... depriving of the United States of a cause of... of a claim.

Even if you assume that during the pendency of the State court actions that WBEC filed the United States had a valid claim, that claim was not denied by statute of limitations, that claim was denied by the voluntary dismissal of those cases under direction of the United States.

I have nothing further.

Unknown Speaker: Thank you, Mr. Milam.

Mr. Jones, you have 1 minute remaining.

Rebuttal of Kent L. Jones

Mr. Jones: Excuse me.

Federal... Federal common law has been applied to actions brought by the United States to recover States taxes.

This is not the first case of this type.

Board of County Commissioners was a suit by the United States to recover taxes paid to the State of Kansas.

I just--

Unknown Speaker: But there the only question this Court decided was whether interest would be available, wasn't it?

Mr. Jones: --It's the only question the Court decided, but it's not the only question the Court discussed and addressed.

The Court specified the fact that Federal common law creates the remedy and... and governs the choice of the... of the rules to apply.

Unknown Speaker: But nobody was arguing otherwise in that case.

Mr. Jones: I... I assume that's correct, but I don't know, I wasn't up there.

Unknown Speaker: Well, I mean judge... I don't claim to have been present at the argument.

I'm just saying from the opinion it doesn't appear that anyone was arguing otherwise.

Mr. Jones: Well, the opinion discusses the issues as if they were relevant to its decision, and so I assume that those issues were discussed before the Court.

But as far... I'm just being honest... in terms of what was actually presented to the Court, I'm... I'm not certain.

The second point is that common... at common law, at... the exhaustion of remedies was not required.

The City of Philadelphia v. Collector, this Court's decision specifically rejected a suggestion that the Federal remedy should not be available because there was an administrative procedure not exhausted.

The Court said there was no support for that proposition.

Chief Justice Rehnquist: Thank you, Mr. Jones.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Suter v. Artist M. - Oral Argument

Fri, 09 Jan 2009 14:49:30 +0000

Case:

Suter v. Artist M.

Media File:

90-1488_19911202-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Christina M. Tchen

Chief Justice Rehnquist: We'll hear argument first this morning in No. 90-1488, Sue Suter v. Artist M..

Ms. Tchen.

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

This case raises the question of whether the Federal Adoption Assistance Act and Child Welfare Act of 1980, specifically the provision commonly referred to as the reasonable efforts clause, creates rights that may be enforceable under 42 USC section 1983.

The reasonable efforts clause states that in order to be eligible for Federal foster care reimbursement funds, that States must have a plan approved by the secretary that provides that in each case reasonable efforts will be made to keep or return a child home.

The reasonable efforts clause does not provide any further definition or explanation of reasonable efforts.

In light of that, the Seventh Circuit Court of Appeals below misapplied this Court's decision in Wilder v. Virginia Hospital Association when it held that this clause was sufficiently specific and definite to create an enforceable right.

The State of Illinois maintains that although the Adoption Assistance Act is mandatory and benefits the plaintiffs here, that it is simply too vague and amorphous to create a Federal right.

This Court has stated that in order to create Federal rights upon the States, Congress must speak with a clear voice because of the values and concerns inherent in our system of Government, and that clear voice and clear statement is simply lacking here.

One of the elements of determining whether a clear statement has been provided by Congress under section 1983 is whether the interest asserted by the plaintiffs is too vague and amorphous such that it is beyond the competence of the judiciary to enforce.

What the Seventh Circuit did here was to take this notion of competence of the judiciary in the abstract.

It never looked at the statute at issue here and simply said, that because courts have proved competent to enforce a reasonableness terms in other statutes that have no relation to the statute at hand here, that therefore, courts are competent to enforce this particular reasonable efforts clause.

But this reasonable efforts clause stands in stark contrast, for example, to the clause construed by this Court in Wilder v. Virginia Hospital Association.

In Wilder this Court held that the Boren amendment to the Medicaid act created a Federal right to reasonable and adequate Medicaid reimbursement rates, but it did so after a lengthy and extensive analysis of the statute at hand.

And what this Court found was that the Boren amendment there set forth a lengthy list of specific factors, specific objective benchmarks defining what meant reasonable.

There are no such benchmarks or factors here, and what we are left with is a reasonable efforts clause with no definition supplied by Congress that will subject the States to a substantive right to reasonable efforts that will be defined not by Congress but by individual judges applying their own notions of reasonableness.

Unknown Speaker: What about the Sherman Act?

Doesn't the Sherman Act do the same thing in spades?

We preempt State laws regularly on the basis of a determination that the courts are supposed to make, that there has been an unreasonable restraint of trade.

Mr. Tchen: But what is missing here, Justice Scalia, is a specific designation that Congress intended to create a Federal right.

What we are trying to do here is we must... there is no specific designation of a Federal right or Federal intent to create a national standard of child welfare or to Federalize child welfare.

Unknown Speaker: Well, I may agree with you on that, but not because it is too vague.

I mean, what does vagueness have to do with whether the right exists or not?

You cannot create the right unless it is highly defined?

Mr. Tchen: What this Court has said in Wilder is to set out a three-part test for when under section 1983 this Court can infer a congressional intent to create a Federal right, and the third element of that test is whether the interest is too vague and amorphous.

Here we have a statute that we agree is mandatory, benefits plaintiffs, but it is simply too vague, and what this Court has said in Wilder is that there cannot be a Federal right unless there is a specific objective benchmark provided by Congress that measures what is reasonable, and that's what is lacking here.

I think it is important to note that the reasonable efforts that we are talking about here--

Unknown Speaker: Let me ask you on that point, is it so vague that the Secretary could never enforce this provision?

Mr. Tchen: --No, what the Secretary does and the Congress has specifically delegated to the Secretary the authority to approve a plan, to make sure that it provides reasonable efforts or to withdraw funds if not.

Unknown Speaker: Well, suppose it... you have a plan approved such as this one and then assume the State or whatever the agency is, did absolutely nothing to implement it, could the funds be withdrawn?

Mr. Tchen: The funds... the Secretary would have the discretion to withdraw the funds.

Unknown Speaker: But would it be following a... enforcing a Federal right if he did so?

Mr. Tchen: No.

I think it would be enforcing a Federal statute.

Again, section 1983 does not exist simply to remedy statutory violations.

Section 1983 exists to remedy deprivation of Federal rights, and what we have to find here is whether there is a Federal right that exists, not merely a mandatory Federal statute that may be violated.

I think it is important to note, we can always state the most egregious case where a statute we would all agree has been clearly violated, but that doesn't answer the question of whether there is a Federal right that is created.

Unknown Speaker: Why can't you use the same test to ask whether a Federal right has been violated, but where nothing at all is being done?

Mr. Tchen: What we need, Justice Stevens, is a benchmark that governs not only the easy case that you have posed, which is where there is simply no efforts at all that are being exerted by the State, but also the harder case, which I submit is this case.

Unknown Speaker: But that is what Justice Scalia's question was directed to, is that reasonableness is a standard that is judicially enforceable in other contexts, but you say not in this context.

Mr. Tchen: I say not in this case because for example, in this case, this is not the case where the State was making no reasonable efforts at all, never assigning--

Unknown Speaker: But this case will decide that case as well.

Mr. Tchen: --I think that is true, and I think the problems in this case demonstrate the problems with having a reasonable efforts clause that is not defined by Congress.

In this case, what the district court below found was that after the State of Illinois instituted a remedial plan to assign caseworkers more quickly, 83 percent of the time the district court found the State of Illinois was assigning a caseworker within 10 calendar days, less than 2 weeks.

Nonetheless, and we don't know why, the district court found that to be unreasonable.

The State further provided specific evidence on why there may be instances in which a delay in assigning a caseworker would be reasonable.

For example, the State of Illinois is under another consent to create another Federal case that requires the State to provide a Spanish-speaking caseworker only to Spanish-speaking families and children.

But a Spanish-speaking caseworker may not be available within the 3 days that the injunction requires or even the 10 days in which 83 percent of the cases were assigned.

There are other instances.

We had testimony in the preliminary injunction action that a 3-day across the board rule such as was imposed by the district court here requires us to assign a caseworker to a case with less risk, the truant teenager case, as quickly as we assign a case to the severely burned infant.

It is simply... it's an intrusion by the Federal court on that very specific decision making that child welfare administrators are supposed to make and what Congress intended child welfare administrators to make.

Unknown Speaker: Is there anything about the subject matter of the judgment which makes the Secretary more competent, or perhaps I should say a more appropriate person to make the judgment about reasonableness than a court?

Mr. Tchen: I think so, Justice Souter.

This is particularly an area where we don't know what works with abused and neglected children, and I think it's important to note that at the time the act was passed in 1980, this whole concept of requiring States to make reasonable efforts to keep abused children in abusive homes was somewhat new to the States, which is why there was a delayed effective date, and which is why the Secretary in promulgating regulations specifically stated that he made the determination it was better to leave the flexibility to the States and to allow States to make their determinations of how they were going to meet the reasonable efforts clause, allow the States to make the policy decisions of how to balance scarce resources and allocate scarce resources in this very difficult area.

It is, again, I think important to note, reasonable efforts... these are not reasonable efforts to conduct negotiations around a collective bargaining agreement.

They are--

Unknown Speaker: I am sorry, I thought you have finished.

Mr. Tchen: --They are not even reasonable efforts, I think, to set reasonable rates or reasonable rents, as in the Wright case, which are monetary calculations that could be measured against a marketplace, and in addition, this Court required specific lengthy factors in the statute.

Here we have no marketplace for reasonable efforts, and we have a much more difficult decision than determining what are reasonable rates or reasonable rents, and yet the plaintiffs ask us to find a Federal right in a statute that provides not only less guidance than the Boren amendment or the regulations in Wright, but absolutely no guidance whatsoever.

Unknown Speaker: Ms. Tchen, do you acknowledge that the statute requires the State to make reasonable efforts in each case?

Mr. Tchen: We agree.

We recognize that the statute requires reasonable efforts in each case.

Unknown Speaker: Where does it require that?

Mr. Tchen: Well, it states--

Unknown Speaker: As I read it, the section we are talking about, 671(a)(15) requires the State to come up with a plan that would produce reasonable efforts, but nothing is perfect.

I mean, if the plan provides for reasonable efforts, the fact that now and then it may in a particular case not produce that would not seem to me to violate (a)(15), but you think it does?

Mr. Tchen: --No, what we think is, it wouldn't necessarily violate (a)(15), which requires the State to have a plan that provides reasonable efforts.

There is a separate--

Unknown Speaker: What does it violate then?

Mr. Tchen: --There is a separate section, section 672(a) that says that in individual cases, that in order to receive Federal reimbursement, there must be a State judicial determination of whether reasonable efforts were made in the best interest of the child.

Now it is also the case however, Justice Scalia, that Congress recognized there are going to be a lot of cases where there should be no reasonable efforts made at all because of the best interests of the child which the State courts are required to balance as well in section 672 explicitly and this individualized decision making is what was intended under the reasonable efforts clause because the clause itself reads, in each case.

It doesn't say a system of reasonable efforts, which is what the plaintiffs are seeking here.

They want a substantive right to allow a Federal court to judge whether there is a system of reasonable efforts by the State.

But there is nowhere in the statute, the plain language never speaks about a system of reasonable efforts.

Unknown Speaker: Well, it speaks of a plan.

Mr. Tchen: It speaks of a plan--

Unknown Speaker: What's the difference between a system and a plan in your view?

Mr. Tchen: --Here the plan is an actual document, as in many other Federal and State cooperative funding acts, which requires that the State put together a document, submit it to the Secretary and have it approved.

Unknown Speaker: And that is what has to provide that reasonable efforts will be made?

Mr. Tchen: That's right.

Unknown Speaker: It's the plan.

Mr. Tchen: Is the plan.

Now the plan was never at issue in this case, and I think it's telling.

The plaintiffs here are not suing because they disagree with the plan that was approved--

Unknown Speaker: They agree that the plan provides for reasonable efforts?

Mr. Tchen: --They simply never raised the plan.

Unknown Speaker: They never raised--

Mr. Tchen: They never raised the plan.

What they are trying to do is say there is not just a right to a plan, but a substantive right beyond the plan to reasonable efforts which they define.

What is allows them to do and it allows Federal courts to do under this undefined substantive right to reasonable efforts is to peel off one after another various administrative structures in the States and hold it up to a standard of reasonable efforts, and it's already happening.

This case is only one of five that are currently pending against the Illinois Department of Children and Family Services, taking one part of the department's structure after another and holding it up.

In this case, it's caseworker assignment.

In another case, it's cash assistance and housing to abusive parents.

In another case it's parental visitation, and in yet another case, it's sibling visitation.

In fact, there are 13 States and the District of Columbia that currently are exposed to reasonable efforts lawsuits taking one little piece after another.

The plaintiffs have even cited one coming out of the Third Circuit most recently last week, in which a visitation rule was held up to the court and under some standard which we don't know because Congress didn't give us a measurement, it said that a visitation rule of 1 hour every other week was somehow not so meager that it fell below a standard of reasonableness.

But Congress has not provided us what that standard would be.

Unknown Speaker: --What are the reasonableness requirements that the Court must determine under 672 in the event of payment to a child?

Mr. Tchen: What the reasonableness--

Unknown Speaker: Where is that?

Is that quoted in 672?

Mr. Tchen: --It's 672.

I believe it's in petitioner's brief.

Unknown Speaker: The blue brief?

Mr. Tchen: The blue brief.

Unknown Speaker: I have been looking for it.

I can't find it.

672(a)(1).

Mr. Tchen: 672(a)(1), it's not quoted in full, but on page 24, it's stated that the foster care placement must be the result of a judicial determination that continuation at home, quote,

"would be contrary to the welfare of such child, and that reasonable efforts of the type described in section 671(a)(15) have been made. "

Unknown Speaker: So the statute does require the courts in this instance to make a determination whether or not reasonable efforts have been made.

Is that a different inquiry than the respondents are asking for here?

Mr. Tchen: Yes, it is, Justice Kennedy.

It is a uniquely different one.

It is a determination on a case-by-case basis, and 672 is very specific.

It's on the individual child for whom the State seeks Federal reimbursement, there must be an individualized determination based on the facts of that case, which is, as we submit, the only way you can determine reasonableness.

You have to look at the risk to the child.

You have to look--

Unknown Speaker: So the reasonableness of the plan is not in question in the inquiry that is made under 672(a)(1)?

Mr. Tchen: --No, it's not.

That is what plaintiff is seeking... in fact, plaintiffs specifically disavow that they are looking for that individualized determination, which is the only judicial determination that Congress intended under the reasonable efforts clause.

Unknown Speaker: Ms. Tchen, will you file with the clerk, as soon as you can after the argument, a full copy of the section you were just talking about?

Mr. Tchen: Yes, I will, Mr. Chief Justice.

Unknown Speaker: If you find it's not otherwise in the briefs or in the appendix.

Mr. Tchen: Yes.

Actually, I have a copy here.

Plaintiffs completely disavow that particular inquiry.

They are seeking a systemic right to reasonable efforts, which simply does not appear anywhere in the statute at all.

Furthermore--

Unknown Speaker: You say it doesn't appear in the statute, but the statute does require the plan to include a systemic right, doesn't it?

Mr. Tchen: --No, it says a plan that provides that in each case, reasonable efforts will be made.

Unknown Speaker: Well, the in each case language is in... I thought it was in (a)(2)?

Mr. Tchen: No.

It's in 671(a)(15), 671(a)(15) simply says that the plan provide that in each case reasonable efforts be made.

It doesn't say system.

Elsewhere in the statute there is reference to a case review system which indicates, I believe, that Congress knew and knew how to use the word system when it wanted to use system.

Unknown Speaker: Yes, but the very fact that the requirement is in a plan means it has to be part of the system, doesn't it?

Mr. Tchen: No.

I think what the Secretary's regulations say is what reasonable efforts means is a list of services.

There may not be one system for providing reasonable efforts.

You need to have flexibility.

You need to be able to address the variation of problems that exist in a State in this very volatile and highly individualized area of child welfare involving abused and neglected children.

The circumstances vary a great deal.

We don't know a lot about what works to keep children at home.

Unknown Speaker: What you are saying is the plan required by the Secretary contemplates variation for different kinds of cases.

Mr. Tchen: The plan simply says a list of services, that the States to comply with the plan, what the regulations say, is that there is a list of services which States may choose to--

Unknown Speaker: May I ask if that regulation is in the materials before us?

Mr. Tchen: --I don't believe it's quoted in full but it is also cited both in our brief and in the brief of the United States.

And I would like to reserve the balance of my time.

Unknown Speaker: I just have one question.

Assume that there is clear noncompliance with the reasonable plan requirement, could respondents bring an action against the secretary under the Administrative Procedure Act to compel the secretary to withhold payments?

Mr. Tchen: I don't think that is a question that has been directly addressed by this Court.

It may well fall as a nonenforcement decision under Heckler v. Chaney and may be precluded from suit as something that is left to the--

Unknown Speaker: But the inquiry there would be the same if such an action were brought?

Mr. Tchen: --It's an analogous inquiry, I think, under Heckler whether there is no law to apply, and I would like to reserve the balance of my time.

Unknown Speaker: Very well, Ms. Tchen.

Mr. Roberts, we will hear from you.

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

Unknown Speaker: Mr. Roberts, could you answer Justice Kennedy's... just the question he just put from the point of view of the Government?

Justice Roberts: --Yes.

We don't believe that an action against the secretary would lie because it would involve issues of prosecutorial discretion and no law to apply, so there wouldn't be a direct action against the secretary under the APA.

Unknown Speaker: Prosecutorial discretion?

Justice Roberts: Well, the discretion of how to enforce the requirements of the statute against the States, yes.

The secretary may well decide that the resources are better used providing care even though the State is not complying and then taking other steps to ensure compliance.

But no individual would have a right to sue the secretary, to compel the secretary to cut off funds to the State.

The court below erred in this case in concluding that the reasonable efforts proviso was sufficiently specific and definite to create a right enforceable under section 1983.

I think the issue is most clearly posed by asking the question, reasonable with respect to what?

The statute provides no answer.

This is not a case like Wilder where the statute provided for reasonable rates, but then went on at some length to specify what that meant: rates to meet the costs that must be incurred by efficiently and economically operated hospitals providing care in accordance with Federal and State law.

This Court in Wilder said that that statutory language provided an objective benchmark against which to assess the reasonableness of rates.

Here, the statute provides none.

Unknown Speaker: How do you answer Justice Scalia's question about the Sherman Act and its reasonableness standard, Mr. Roberts?

Justice Roberts: First of all, the Sherman Act specifically directs the courts to enforce the provision.

There is no such direction to Federal courts in this case.

Second of all, I think the Sherman Act does provide an objective benchmark: the standard of free market competition which the courts can use in applying those vague terms as well.

In this case the regulations also don't answer the question, reasonable with respect to what?

The case is therefore not like this Court's decision in Wright where the Court relied on regulations defining what was included in rent in holding that tenants could enforce a rent ceiling under section 1983.

Here the secretary specifically determined not to define reasonable efforts in the implementing regulations.

Unknown Speaker: Does that mean, Mr. Roberts, that the secretary could never withhold funds for failure to comply with this provision?

Justice Roberts: No, Your Honor.

The secretary can enforce the reasonable efforts provision by engaging in precisely the sort of social policy judgments that are entrusted to an expert administrative agency but which are not entrusted under our system to the Federal courts.

Unknown Speaker: Are they entrusted pursuant to any standard specified by Congress or are they entirely made up by the secretary?

Justice Roberts: Well, the secretary's determination of what's reasonable in specific cases.

Unknown Speaker: How does the secretary know what's reasonable, that is what I am asking you.

Justice Roberts: He knows by making the sorts of policy judgments on each case, as a State submits a particular plan and they say here is what we are going to do to comply with reasonable efforts, the secretary makes policy judgments--

Unknown Speaker: Are those policy judgments guided by anything Congress says in the statute?

Justice Roberts: --No, other than reasonable efforts, that is what confines the secretary's discretion.

It is a very broad--

Unknown Speaker: How does it confine the secretary's discretion anymore than it would confine the judge's discretion?

Justice Roberts: --It doesn't confine the secretary's more than a judge's, but the secretary, the Congress determined, had the expert experience in the field of child welfare to make the policy judgments.

There are, as we indicated, no right answers in this area, but Congress entrusted the secretary in applying the act to come up with good policy judgments.

They may be different in different cases--

Unknown Speaker: Without any legislative guidance whatsoever?

Justice Roberts: --The guidance is simply reasonable efforts to keep families together and to provide for the return of the children.

Unknown Speaker: Almost as vague as public interest, convenience, and necessity, isn't it?

Justice Roberts: Well, except that in this case there are no objective standards to which a court can resort.

In those other cases there are.

Now, some of respondent's amici do say there are objective standards.

The National Association of Social Workers, for example, says that the objective standards are those published and endorsed by the National Association of Social Workers.

And that highlights the problem in this case.

Congress refrained from enacting any such specific standards in the statute.

The secretary declined to enact any such specific standard in the regulations, though she was urged to do so.

And now these groups come before this Court and urge this Court to elevate their professional standards to the level of an enforceable Federal right.

Unknown Speaker: What are the State courts supposed to use?

It's the same language that the State courts are supposed to apply under 672 (a).

Justice Roberts: The State courts can apply it in the context of a particular removal decision involving a particular child and a particular family history.

The Federal courts... the respondents disclaim any such role for the Federal courts under section 1983.

They are much more interested in defining on a systemic level in the abstract what constitutes reasonable efforts.

The State courts look to the particular case, what the State has done for this child against... and balance that against the asserted need to remove the child from the home.

Now the respondents may not agree with their amici on the source of the standards to apply in this case, but if it's not those standards, which standards?

If the Federal courts are going to enforce a supposed right to reasonable efforts, the first thing they are going to have to do is set an objective benchmark against which to assess reasonableness, and that exercise involves policy judgments beyond the competence of the article 3 branch, not beyond their competence in the sense that judges would be incapable of coming up with an answer in any particular case, but beyond their competence in the sense that it moves the courts from adjudication of particular cases and controversies to the setting of social policy.

Unknown Speaker: Well, I suppose the State in submitting a plan promises to live up to it.

Justice Roberts: Yes.

It sets forth in its plans how it intends to comply with the requirement and the secretary either accepts it or rejects it.

Unknown Speaker: Says that is a good way, that's fine.

That is just fine, and so why would a court have to decide what a benchmark is, they just want to enforce this promise that the State has... here is what we are going to do and the secretary says fine, go ahead and do it.

And why can't a private person just enforce that contract?

Justice Roberts: Well, in the first place, that's not what is involved here.

The State's plan says nothing about providing a caseworker within 3 days and the Federal court is simply enforcing that requirement.

The State's plan says nothing of the sort.

Unknown Speaker: What does it say?

Justice Roberts: It simply lists the State services that are available, through which it intends to comply with the requirement.

Unknown Speaker: Doesn't it mean that in each case these services will be available?

Justice Roberts: It means that in each case reasonable efforts will be made, and here is an array of services from which they can draw.

It doesn't mean that every service will be available in every case.

In some cases no--

Unknown Speaker: What if the State doesn't provide any services at all?

Argument of Michael G. Dsida

Justice Roberts: --Well, in some cases that may be appropriate.

If you have a situation where immediate removal of the child is demanded for health and safety reasons, no efforts at keeping the family together may be the appropriate efforts.

The position of the plaintiffs here is at least three steps removed from the statutory language.

On its face this statute simply sets forth a contract between the United States and the State, confers no rights on anyone.

If there are any rights, it would seem to be simply rights to what the statute provides, a plan providing for reasonable efforts approved by the secretary.

Illinois has a plan, does provide for reasonable efforts, has been approved by the secretary.

If there were any further right to actual implementation of the plan it would be seem to be just that, implementation of the plan.

Here the plaintiffs and the court go beyond that and set forth the requirement of 3 days in every case though the State plan says nothing about that.

We are not told why 3 days is reasonable in every case while the 9 to 10-day average of the State is not, nor for that matter, why 3 days is reasonable here when the First Circuit determined that 24 hours was needed to meet the reasonableness requirement.

The point is that determining how quickly a caseworker capable of providing services should be assigned to a new case involves basic policy judgments about the allocation of limited resources in a child welfare system, the sort of policy judgments entrusted to the States in the first instance and to the secretary.

If there are no further questions--

Unknown Speaker: Very well Mr. Roberts.

Mr. Dsida, we'll now hear from you.

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

This case turns on two critical issues.

First, Federal courts are competent in applying reasonableness standards of the type at issue here, and their task is especially straightforward in this context when the defendants have made no efforts, let alone the reasonable efforts required of them by the statute, to keep families together.

Unknown Speaker: Do you agree with the petitioner, Mr. Dsida, that your clients have not attacked the plan filed by the State at all?

Mr. Dsida: Your Honor, I don't think that is a fair characterization of our complaint.

What we contended in our complaint was that the defendants had failed to make reasonable efforts and it was clear--

Unknown Speaker: Why do the defendants have to make reasonable efforts?

The statute says, the plan shall provide that reasonable efforts shall be made, doesn't it?

Mr. Dsida: --Your Honor, the plan also must be in effect... it's clear that the statute requires that the specific obligations under the plan must be implemented by the State and that has been this Court's position under Federal/State cooperative--

Unknown Speaker: So what's your answer to the question I asked you?

You don't agree with petitioners, that you did not attack the plan, and therefore you say you did attack the plan?

Mr. Dsida: --We did attack the plan.

We didn't use the word State plan specifically, but we did attack the plan in that defendants have failed to live up to their obligations under the plan.

Unknown Speaker: But that's two different things.

Mr. Dsida: Your Honor, the plan--

Unknown Speaker: Isn't that two different things?

One, whether the plan complies with the statute, and second, whether the defendants have lived up to their obligation under the plan.

Is that or is that not two different things?

Mr. Dsida: --That is two different things, Your Honor.

I think defendants correctly stated that the plan is different from their obligation.

The plan is simply is a document which they submit to the secretary.

Unknown Speaker: And that's what the statutory language that... at least the petitioners were talking about related to, isn't it?

Mr. Dsida: The statutory language requires them to submit a plan to the secretary--

Unknown Speaker: And you don't claim the secretary made a mistake in approving the plan?

Mr. Dsida: --That's not our--

Unknown Speaker: Just yes or no.

Mr. Dsida: --No, Your Honor.

Unknown Speaker: All right.

Mr. Dsida: The question today is whether or not the defendants have lived up to their obligations under the plan.

Unknown Speaker: So we take the case on the assumption that the plan is reasonable?

Mr. Dsida: That the plan is reasonable?

Unknown Speaker: Yes.

Mr. Dsida: Your Honor, the plan was approved by the secretary.

The defendants failed to adhere to their obligations under the plan.

Unknown Speaker: But as the base point, the beginning point is that we assume that there is in place a plan that if followed would comply with the statute.

Mr. Dsida: Yes, Your Honor, that's a fair assumption.

But what happened in this case is that defendants failed to make any efforts and in that context courts are competent to enforce the reasonableness standard provided here.

The second crucial point here is that enforcement of the reasonable efforts requirement will preserve only the most limited role for Federal courts in this area--

Unknown Speaker: Excuse me.

It seems to me you are arguing a different theory now.

If, as you say, all they are trying to do is get the State to live up to the State's promise under the plan, the benchmark should not be the very vague reasonableness standard of the statute, but rather the benchmark should be the plan.

Mr. Dsida: --The plan contains a promise by the State of Illinois to make reasonable efforts in each case, and they did not do that here.

Defendants up until today did not contest before the court that issue.

There is no dispute--

Unknown Speaker: I see.

Does the plan say that in so many words, we promise to make reasonable efforts in each case?

Mr. Dsida: --The plan essentially repeats the language of the statute, that the State will provide that reasonable efforts will be made in each case.

Unknown Speaker: Is the plan in the record?

Mr. Dsida: No, Your Honor, it's not.

But if the Court would like, we could submit that.

Unknown Speaker: Well, if you say you want to enforce the plan, it looks to me like you would let us know what the plan you are trying to enforce is.

Mr. Dsida: The plan contains the requirements set forth by the statute and among them--

Unknown Speaker: Would you see to it that the clerk has copies?

Mr. Dsida: --Yes, Your Honor.

Enforcing this particular statutory requirement will not, will preserve only the most limited role for Federal courts as well, but it's a role which is consistent with the contract entered into between the Federal Government and the States under title IV-E.

Now Illinois purports to adhere to this obligation by assigning a caseworker to each abused and neglected child in his or her family.

Under DCFS's system, the caseworker alone is responsible for providing services to keep children in their own homes, and for providing services to make it possible for children to return to their homes if they have been placed in foster care.

But as the district court found in plaintiff's cases, defendants regularly and systematically deprived these children of caseworkers and the services which caseworkers alone can provide for weeks and months at a time.

Unknown Speaker: Mr. Dsida, it seems to me that under your theory, that the court would be asked in each instance to look at the specifics of the plan and then determine whether in that State the plan was specific enough to give some cause of action for enforcement, and that would become the standard, which would seem perhaps to result in different standards being applied in different States depending on the content of a particular plan.

Mr. Dsida: No, Your Honor.

The ultimate obligation of the State is the one set forth by Congress in the statute.

The State must provide reasonable efforts to keep these children with their families or to return them to their families.

That is the standard which the courts are to apply.

That's the obligation which defendants admit that they are bound to adhere to, and the Solicitor General agrees on that point.

Unknown Speaker: And you don't rely on any other specifics in this particular State of Illinois as supporting your cause of action?

Mr. Dsida: No, Your Honor, that's the obligation which we contend defendants failed to adhere to, and it's clear in this case that they did not.

The district court found that in plaintiff's case, that defendants regularly deprived children of caseworkers, which is the sole means DCFS chose to use under their system to implement this reasonable efforts requirement.

And in a situation like this, it's very straightforward for courts to enforce and apply this statute.

The courts below needed to look no further--

Unknown Speaker: Well, I thought the courts below did in fact look further and look at what Illinois had done and said and because the State had indicated that the provision of child care workers was the linchpin and so forth, that that provided the standard.

The court didn't need to do that, I take it?

Mr. Dsida: --The court didn't need to do that, but what it was doing there was ultimately crafting its remedy, consistent with the State's approach in trying to resolve the problems which the plaintiffs had presented.

And the court looked at the defendant's plan to restructure the department after it heard extensive evidence that the defendants had regularly and systemically deprived these children of caseworkers, and the reasonable efforts which only caseworkers can provide.

So the court looked at the caseworkers only because defendants had made--

Unknown Speaker: Well, then if another State hadn't made the provision of child caseworkers a linchpin then no remedy could be devised?

Mr. Dsida: --It would depend on the particulars of that case.

If a State employed another technique to supposedly provide reasonable efforts, but then utterly failed to do so, as Illinois had failed to do here, then a court might be... it might be appropriate for a court to look at the particular practices of that State to provide a remedy which is not intrusive and which would not involve the Federal courts in the administration of the State agency's operations, and that's what the court did here.

It employed a remedy, exercising its broad remedial discretion, which was consistent with the State's approach, and it was one which was not intrusive and one which provided... which essentially deferred to the State's decisions and how they were to implement the requirements of this statute.

Unknown Speaker: Would it have been within the statute for the Federal administrator, for the secretary to refuse to approve a plan unless it was more specific than the one involved here?

You say that the plan here essentially just repeats that best efforts will be made.

Would it have been appropriate for the secretary to say, I won't approve a plan unless it provides for social workers to be assigned within 3 days?

Mr. Dsida: The secretary could have made that decision in this case, but the secretary did not.

Unknown Speaker: And if he had, we wouldn't be here.

We wouldn't have this case?

Mr. Dsida: If the secretary had not approved the plan?

Unknown Speaker: Right.

Mr. Dsida: That's correct, Your Honor, because presumably the State would have then responded appropriately in resolving their violation of the statute in that regard.

But what's clear here is that the Court can determine that the State has failed to live up to its obligations to make reasonable efforts.

Courts apply... Federal courts apply reasonableness standards every day.

It is a central part of the task of any Federal court judge, and that includes assessing the reasonableness of a party's conduct under countless Federal statutes.

Unknown Speaker: Is there something peculiar about the reasonableness judgment here in implicating essentially judgments about the appropriate determination of the way the State uses its money?

In other words, one of the benchmark problems in this case is that there doesn't seem to be a benchmark anywhere like the well-run clinic in Wilder, the free market, whatever, of whatever value that is.

Here, the reference has to be an appropriate expenditure of State revenues and a appropriate determination about the amount of revenues to be used, or do those two elements of the decision make this something quite different from the normal reasonableness determination that Federal courts make every day?

Mr. Dsida: Your Honor, if I understand your question, I don't think the courts are called upon under this statute to assess whether or not a State has spent its money appropriately.

Unknown Speaker: What if the State simply replies, as it seems to me it is bound to do in a certain number of cases, no, we are not going to have a caseworker for every complaint in 3 days because we haven't got enough money to pay caseworkers, and we haven't got enough money to do that because we have to build highways and we don't want to raise the tax rate and so on.

Ultimately, I suppose any State could have a caseworker in 3 days if it wants to spend money enough.

Why isn't that necessarily implicated?

Mr. Dsida: Your Honor, the State has accepted the obligation imposed by it under title IV-E by accepting substantial Federal funding--

Unknown Speaker: It has accepted an obligation to do something which is reasonable, but what is reasonable is in part a decision about the appropriate expenditure of State funds in relation to the problem, and there doesn't seem to be any more specific Federal standard to which a Federal court can look in determining whether that particular aspect of reasonableness has been satisfied.

Mr. Dsida: --Your Honor, under this Court's decision in Wilder, courts would be obligated or plaintiffs would be under a heavy burden to show that a particular State's conduct was not reasonable, did not meet the terms of the statute, so courts wouldn't be delving into the minutia of the State's administration and the State's spending of the funding.

But what this case is about is that the State has made no efforts and although there may be gray areas, there may be difficult cases for courts to determine, it's clear that in this case, the State's failure to make any efforts to keep these children with their families, and its failure to make any efforts to return children to their families was not reasonable.

Unknown Speaker: You are asking for more than simply a determination that nothing is not reasonable.

You are asking for a determination, in effect, of what is reasonable, assignment in 3 days, whatever.

Mr. Dsida: Your Honor, the assignment... the remedy crafted by the district court was not the violation that... we were not saying that failure to assign caseworkers is required under the statute.

What we alleged was that defendants were not making reasonable efforts.

Under their system, the caseworker is the linchpin, the only way the defendants make reasonable efforts, and we asked the district court to develop a remedy consistent with the State's reliance on caseworkers--

Unknown Speaker: The remedy being, in effect, a plan for the assignment of caseworkers--

Mr. Dsida: --Yes, Your Honor.

Unknown Speaker: --and standards determining when they should get assigned.

Mr. Dsida: Your Honor, that is in fact what we asked, but that is the remedy that the district court choose to use in deference to the State agency which itself elected to use caseworkers as the means by which reasonable efforts are made in each case.

We were not asking to impose a new structure on the State, and the district court ultimately deferred--

Unknown Speaker: You weren't asking them to order caseworkers when in fact caseworkers had not otherwise been thought appropriate.

What you are asking them to do is to determine when and how caseworkers should be used.

Mr. Dsida: --Your Honor, ultimately the district court--

Unknown Speaker: Isn't that true?

Mr. Dsida: --Your Honor, we asked the district court to order the defendants to provide caseworkers, that is true.

Unknown Speaker: Not just to provide caseworkers to provide caseworkers subject to certain standards of assignment, subject to a standard governing the number of days within which workers must be assigned, isn't that true?

Mr. Dsida: That's correct, Your Honor, and it was based on extensive testimony and extensive records documenting the importance of caseworkers under DCFS's system.

If the State determines that there is another means for them to provide reasonable efforts, there is another avenue for them to adhere to the obligations under the statute, they can go back in front of the district court, present their new approach to the court and say, Your Honor, this is how we--

Unknown Speaker: Fair enough.

And if they can't and you in effect are claiming or the Federal court is claiming that there ought to be a caseworker assigned within 3 days and the State says no, we can't do it because we haven't got enough money to pay for caseworkers, then to go back to my original question, ultimately you are asking for a determination about the appropriate expenditure of State money.

Mr. Dsida: --Your Honor, I do not think that is a fair characterization of our position here.

The Court does not have to look at how the State is spending the money, the Court is looking at--

Unknown Speaker: Well, look, let's assume... maybe I was leaving a term out, let's assume that in fact the State is correct, that it simply does not have a budget which would allow for the hiring of enough caseworkers to satisfy, we will say, the 3-day standard.

The question is, should money be appropriated in a different fashion, isn't that true?

Mr. Dsida: --Should Federal money be appropriated?

Unknown Speaker: Should State money?

I mean, it's a State/Federal mix, I assume.

Mr. Dsida: Your Honor, the State has entered into a contract with the Federal Government and the plaintiffs in this case are the ultimate beneficiaries of that contract.

Unknown Speaker: Would you answer my question first and that is--

--Mr. Dsida, when a Member of the Court asks you a question that can be answered by a yes or no, you should--

Mr. Dsida: I apologize.

Unknown Speaker: --answer yes or no and then give your reasons for answering the way you did.

Mr. Dsida: I apologize, Your Honor.

Ultimately, Your Honor, it would require looking at the State's budget, and it may in this case require the agency to restructure its budget in such a way to fulfill its obligations under the injunction.

Unknown Speaker: Yes, but may I just interrupt?

Is it clear that the budget is of State money or maybe this is a budget of the Federal program?

Does the record tell us anything about how much of the money that is needed to buy, to pay for additional caseworkers would come from the Federal subsidy and how much would come from the State tax revenues?

Mr. Dsida: No, Your Honor, that's not in the record.

But defendants have accepted substantial Federal funding--

Unknown Speaker: Presumably, the purpose of the funding was to enable the State to comply with this program.

Mr. Dsida: --That's correct, Your Honor.

Unknown Speaker: So how do we assume there is a need for the State to spend a single dollar of its own money?

We just don't know.

Mr. Dsida: That's correct, Your Honor, and I don't think the defendants have shown that the State is under any sort of financial burden which the Court, or which Justice Souter, you were concerned about.

There is nothing in the record which defendants have presented to show that they are unable to adhere or comply with the terms of the--

Unknown Speaker: That may be.

I am in no position to suggest otherwise there, but let me ask you just one more question.

Are we unable to tell from this record even whether the funds for social workers or the funds for the administration of the program in general consists of a mix of State and Federal dollars?

Do we not even know that?

Mr. Dsida: --There is nothing in the record, no, Your Honor, there is no... the record doesn't speak to how the money is divided between the Federal and the State governments and how it would adhere to this obligation.

But ultimately the defendants have accepted Federal funding under this statute and they concede that this statute imposes a binding obligation on them.

Unknown Speaker: Does the Federal statutory scheme envision that the Federal Government will fund 100 percent of the costs or does it assume that it's going to be a shared cost, State and Federal?

Mr. Dsida: Your Honor, the statute envisions that the costs will be shared--

Unknown Speaker: It's shared, it is not?

Mr. Dsida: --Yes, Your Honor.

Unknown Speaker: Exactly.

Mr. Dsida: And in fact, section 674 provides an elaborate funding mechanism to determine how the State is to be funded, but there is no question about whether or not defendants are under this obligation to make reasonable efforts.

The sole question is whether or not courts are capable of determining whether or not the State has violated its obligation in this case.

The record makes clear that in this case they have not.

The defendants do not have a plan in effect to make reasonable efforts to prevent or eliminate the need for removing these children from their homes.

Unknown Speaker: Well, the real question is whether a deficiency in that regard, if it exists, is one that is to be remedied by the Secretary's withholding of funds or by some individual suit under section 1983 or otherwise.

Mr. Dsida: Your Honor, this Court has repeatedly held since Rosado v. Wyman that the Secretary's ability to cut off funding under a Federal/State cooperative funding statute does not preclude enforcement of the statute under section 1983 by individual plaintiffs, and that is the case here.

In fact, the secretary--

Unknown Speaker: Yes, but we have also said that in order to provide a private cause of action under 1983, we have to find certain things, certain objective standards, and one thing and another.

Isn't that the question before us?

Mr. Dsida: --Your Honor, the question is whether... that is not the question before the Court.

The question is whether or not courts are competent to enforce this reasonableness standard, and courts enforce reasonableness standards on a regular basis.

It is a central task of Federal courts.

And in fact, in the Wilder case, less than a year and a half ago, this Court again affirmed that Federal courts are capable of enforcing reasonableness standards, even though under that statute Federal courts would be required to look at, among other things, what constitutes adequate health care, what constitutes reasonable access to adequate health care, whether or not the State's Medicaid rates adequately account for the particular needs of individual hospitals serving a disproportionately large number of low income patients.

In short, a rather complicated inquiry, but one which, under this Court's decision in Wilder, the courts are well-equipped to undertake, and there is no reason to believe that Federal courts are any less capable of enforcing the reasonableness inquiry, a requirement set forth in this statute.

In fact, the State court enforcement or the State court decisions under section 672 (a)(1) provide further evidence that courts generally are capable of assessing whether or not a State has made reasonable efforts to keep a family together, and defendants present no reason to or nothing to distinguish Federal courts' ability to enforce that standard contained in this Federal statute.

Instead, they point only to this section as an indication that Congress intended to preclude enforcement under section 1983 of this statute, but that State court determinations under this section occur only at the time the State assumes custody of the child.

They have no bearing on children who remain in their homes but are at risk of being removed when the State is making no efforts to keep them there.

They have no bearing on children who have already been placed in foster care when the State is making no efforts to return them to their families.

These determinations under section 672(a)(1) provide no opportunity for... to address the sort of systemic grievances which plaintiffs are seeking to remedy here.

In short, this provision pales in comparison to the express cause of action provided by Congress in the statutes at issue in Smith v. Robinson or National Sea Clammers, which this Court found sufficiently comprehensive to preclude enforcement under section 1983.

Just because section 1983 is available, however, does not mean that courts will be flooded with challenges to particular casework decisions in individual cases.

The Adoption Assistance and Child Welfare Act, like the Boren amendment, the provision at issue in Wilder, affords States substantial discretion in how they are to implement their obligations under the statute.

In keeping with Wilder then, plaintiffs will be under a heavy burden to show that the State's conduct fell outside of the range permitted by Congress under the statute.

In fact, in the Winston case which we addressed in our supplemental memorandum, the Court of Appeals for the Third Circuit showed how this heavy burden and this substantial discretion will prevent the sort of flood of litigation which defendants predict from ever occurring.

In that case the court first confirmed that the reasonable efforts requirement created enforceable rights under section 1983 but then it went on to hold that Pennsylvania's visitation policies were within the range of conduct permitted by Congress under the statute.

Pennsylvania had in fact exercised appropriate professional judgment, appropriate discretion in setting up those visitation policies, and as a result the court affirmed the judgment of the district court in favor of the State and county defendants.

Beyond that, beyond this heavy burden and the discretion afforded States, collateral estoppel will also serve to preclude what in all likelihood would otherwise be the bulk of claims under this statute, namely, parents challenging the decision to remove a child from the home in the first instance.

Unknown Speaker: Mr. Dsida, I think you may well be right, that the statute is not as comprehensive as other ones that we have found whose comprehensiveness precludes the inferring of any private right.

But comprehensiveness aside, you have here a statute that at the general level puts the thing in the lap of the secretary.

It leaves it up to the secretary to determine whether a plan is adequate or not and he can disapprove a plan.

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

Unknown Speaker: And there may be a lawsuit available to set aside his approval of a plan, that's conceivable.

Mr. Dsida: Your Honor, I don't believe that under Heckler v. Chaney we could challenge the secretary's decision to approve or disapprove a particular State plan.

I don't think we have that remedy available.

In fact, the only thing that the secretary does in enforcing the State's plan is looking at the individual cases in the State courts and determining whether or not the State court orders have found that reasonable efforts have been made.

There is no independent assessment of the State's efforts, either in the individual cases or on a systemic basis.

The secretary simply fails to do that, and in light of that, the secretary's conduct and the inclusion of the secretary in the remedial scheme doesn't provide the sort of comprehensive mechanism necessary for close enforcement of the statute--

Unknown Speaker: So the secretary could approve a plan that is grossly inadequate?

Mr. Dsida: --Yes, Your Honor, under--

Unknown Speaker: What would your remedy be?

You have none?

Mr. Dsida: --Our remedy is the Federal courts, Your Honor.

Unknown Speaker: Wait, you say you are here enforcing the secretary's plan.

Mr. Dsida: No, Your Honor.

Unknown Speaker: You are not here enforcing the secretary's plan?

Mr. Dsida: The State plan includes their obligation to make reasonable efforts.

We are attempting to enforce the obligation that the State agrees to undertake, to make reasonable efforts to keep families together.

Unknown Speaker: So you are saying, this is a statute that does not allow the direct review of the secretary's disapproval of a plan but somehow achieves the same result through 672 (a)?

I mean, that is what you are saying.

You are saying if the plan is inadequate you can kick it over.

Mr. Dsida: I am sorry.

I don't understand Your Honor's question.

Unknown Speaker: Let's assume the secretary approves an inadequate plan.

You say there is no direct action to stop that?

Mr. Dsida: We cannot review the secretary's decision in that context pursuant to Heckler v. Chaney.

Unknown Speaker: However, you can under 672 (a) come in and say what the secretary has said is good enough is not good enough because the State promised to do not only what the secretary said was enough, but reasonable efforts.

Mr. Dsida: Your Honor, our claim is under 671 (a)(15).

That is the provision of the statute of that we are contending defendants failed to adhere to here.

The secretary's determination solely relates to whether or not the State courts have entered these particular orders at the time the court takes custody of the children.

There is no assessment under the secretary's approach of the efforts made to return children to their families, and there is no assessment under the secretary's approach of efforts made at the time children are in their homes to keep them in their homes, and independent of that, Your Honor, independent of the secretary's approach, this Court has held that the secretary's ability to cut off funding or approve or disapprove a plan does not provide an indication that Congress intended to foreclose enforcement of a statute under section 1983, which this Court has repeatedly held is intended to provide a broad remedy for violations of Federal rights, privileges and immunities.

That is the case here.

Defendants have violated plaintiffs' rights under the statute to reasonable efforts to keep them with their families.

The Adoption Assistance and Child Welfare--

Unknown Speaker: Mr. Dsida, the secretary has the power that you are asserting as well, right, under 671 (b), the secretary could cut off funds for failure of the State to keep up its promises, right?

Mr. Dsida: --Yes, Your Honor.

Unknown Speaker: But he has chosen not to do that.

Mr. Dsida: He has chosen not to do that, Your Honor.

But that does not preclude our ability to enforce the statute under section 1983.

The adoption... Congress enacted this statute to keep children out of foster care whenever possible and enforcement of the reasonable efforts requirement is consistent with that purpose and is required by the structure, the language and the history of the act.

The reasonable efforts requirement is at the heart of the Adoption Assistance and Child Welfare Act and consistent with Congress's intent, it must be enforceable.

Unknown Speaker: I take it the reason that Heckler v. Chaney would apply in your view is that there is no meaningful standard to judge the secretary's actions?

Mr. Dsida: No, Your Honor, I don't believe that is the case.

Heckler v. Chaney provides the State, I am sorry, provides the agency substantial discretion in determining how to enforce a particular statutory provision.

Unknown Speaker: But the reason there was no action permitted there was there was no meaningful standard by which to measure the secretary's actions.

Mr. Dsida: Your Honor, if I recall that case, Your Honor, I think ultimately it turned on whether or not there are specific standards which the State or which the secretary is obligated to adhere to in enforcing the statute.

There are no particular guidelines or there is no flow chart or something to that effect dictating how the secretary is obligated to review the State's plan.

The secretary does in fact have some discretion in making those determinations, but there is not... there is certainly a means for courts or the secretary to use in reviewing the State's plan, namely, whether or not the State is providing reasonable efforts.

And that is not the case here.

The defendants simply failed to provide any efforts and while there may be difficult cases under this statute, this case is not one of them.

Thank you.

Unknown Speaker: Thank you, Mr. Dsida.

Ms. Tchen, you have 3 minutes remaining.

Rebuttal of Christina M. Tchen

Mr. Tchen: Three brief points.

In response to Justice Souter's questions regarding the record and the allocation of State resources, when the district court indicated its intent to impose a 3-day across the board mandatory injunction on the State, the State administrator over the case assignment process, Mr. Goad, did submit a supplemental affidavit, it's at the district court record, item under 96 in which Mr. Goad stated that to comply with the 3-day across the board injunction which was not what the State's original plan was with respect to caseworker assignment, would require the reallocation of resources from other areas in the department's budget.

We were unclear--

Unknown Speaker: Would that reallocation involve State money as distinguished from Federal money?

Mr. Tchen: --Yes, it would because the statute, although it's not in the record as a factual matter, the statute itself in sections 672 and 674 makes specific what title IV-E reimbursement is available.

It is available on a dollar-for-dollar basis.

If the State spends $1 for foster care, for maintenance payments, it receives 50 cents back from the Federal Government and there is a small administrative sharing of the costs as well.

Unknown Speaker: Ms. Tchen, I really don't understand this argument.

You don't really think that if the State comes in and pleads poverty to the secretary and says, we are a very poor State and therefore, we are going to make no efforts, for us that is reasonable, we are so poor that nothing is reasonable.

Mr. Tchen: No, I think... I am not arguing that, but I am arguing--

Unknown Speaker: So what relevance does that have?

I don't--

Mr. Tchen: --What relevance it has is that in fact in the secretary's regulations, the secretary made the decision not to implement, not to promulgate a mandatory regulation that said, States, you must do this, this and this to comply with reasonable efforts, because in promulgating that regulation, the secretary said that the difficult decisions of how to allocate scarce resources and State resources in this area must be left to the States.

What the district court here did was to take over that decision making for the State and say, I don't care that you have to take money away from other services, you are going to spend money to assign caseworkers within 3 days.

Unknown Speaker: --May I ask this question?

Is the question whether, quote, reasonable efforts, unquote, have been made a question of Federal law or State law?

Mr. Tchen: In the instance, in section 672 where there is individual determinations delegated specifically by Congress to the States, we believe it is a matter of the States looking at their individual case law, how they weigh best interests of the child--

Unknown Speaker: Your answer is, as the Chief Justice said, sometimes you can give a short answer--

Mr. Tchen: --I think it's the State law--

Unknown Speaker: --so you think you it's a question of... the meaning of these words in this Federal statute is a question of State law?

Mr. Tchen: --Defers to the States.

It defers to the States in this area--

Unknown Speaker: No, not just deference, ultimately.

Mr. Tchen: --Ultimately, section 672, we believe, gives that decision to the States.

Thank you.

Chief Justice Rehnquist: Thank you, Ms. Tchen.

The case is submitted.

Attribution:

The Oyez Project

Featured:

Karahalios v. Federal Employees - Oral Argument

Sun, 06 Feb 2011 03:46:20 +0000

Case:

Karahalios v. Federal Employees

Media File:

87-636_19890117-argument.mp3

Related Transcript:

87-636_19890117-argument.xml

Transcript:

ORAL ARGUMENT OF THOMAS R. DUFFY ON BEHALF OF THE PETITIONER

Chief Justice William H. Rehnquist: We'll hear argument next in No. 87-636 Efthimios A. Karahalios v. National Federation of Federal Employees.

You may proceed whenever you're ready.

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

May it please the Court:

The issue before the Court this morning in this case is whether a federal employee who has been injured by his union's breach of the duty of fair representation may bring an action to redress those injuries in district court or, put another way, whether Congress intended a union operating in the federal sector to receive immunity, complete immunity, from such lawsuits, an immunity which has never been permitted in any other national labor relations statute.

It is our view that the congressional grant of exclusive representation powers to the union in the federal sector, coupled with the unreviewable discretion of the general counsel of the FLRA here, mandate jurisdiction, subject matter jurisdiction, in the district court just as exactly those same factors compelled jurisdiction in this court's decision in Vaca v. Sipes 20 years ago.

Unidentified Justice: Well, suppose the general counsel issues a complaint and then there's a... there is a provision for an administrative hearing on unfair representation.

Mr. Duffy: That's correct.

Unidentified Justice: So, Congress certainly anticipated that there would be an administrative remedy.

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

And--

Unidentified Justice: So, what would happen if there was an administrative proceeding on an unfair... and there's a ruling that there wasn't any unfair representation?

Can you go to court?

Mr. Duffy: --I think that's exactly the wrong which was addressed by the Court in Vaca v. Sipes.

The problem is in the focus which the administrative remedy has and the strength of--

Unidentified Justice: But could you go to court in my... in my question?

Could you go to court after that?

Mr. Duffy: --In the private sector, Your Honor?

Unidentified Justice: Would you... yes.

Would you just then go up on appeal, or would you start all over in the federal district court or what?

Mr. Duffy: As it's currently structured, Your Honor, I believe that you can go to district court.

I believe that's the doctrine announced... enunciated by the Court in Vaca v. Sipes.

And I think that the reason for that is that the Court recognized in Vaca that the administrative remedies... the focus which the administrative agency has in fashioning remedies, even given an unfair labor practice finding, is a remedy which isn't necessarily suited to redress the wrongs done to the individual employee.

For example... and the facts here I think provide a cogent demonstration of that.

Here the administrative remedy fashioned by the agency, by the Authority's general counsel, in reaching a settlement, a settlement reached, it bears noting, over the objection of the charging party, over the objection of the injured employee... the administrative remedy reached here was to achieve a settlement with the union which required the union to post a notice on its bulletin board saying we're not going to repeat the conduct which was wrongful.

And that administrative remedy may well have been furthering the institutional goals of the Federal Labor Relations Authority, as similar notice-posting remedies further the institutional goals which the NLRB has in the private sector.

And the problem addressed by the Court in Vaca is that that administrative remedy, given the strength of the duty of fair representation doctrine... that administrative remedy does not provide any relief... that administrative focus does not provide any relief for the injured employee who is wronged by his union.

We believe that the--

Unidentified Justice: Although in that case there had previously been... before the administrative remedy was adopted, there had previously been judicial relief available though.

Mr. Duffy: --In the Vaca v. Sipes case.

Unidentified Justice: Yes, in that situation.

Mr. Duffy: It was an open question in Vaca whether or not the availability of unfair labor practice review was sufficient to allow preemption of a judicial remedy.

Unidentified Justice: No, but hadn't the judicial remedy been... been available before the administrative remedy was provided?

Mr. Duffy: Certainly, Your Honor.

Unidentified Justice: It was... there was no question that... that... that you have the judicial remedy before the administrative remedy.

So, the... the issue was whether the furnishing of the administrative remedy eliminated a judicial remedy that had previously been available.

And that's not the question here.

Mr. Duffy: Well, I'm not certain that that... that's actually the case here.

Here I think we're working in a very similar setting.

In the private sector when Vaca was decided, we had a judicial remedy well recognized in Steele and Tunstall, in... in that line of cases.

Nevertheless, after Vaca we have a setting where we have an administrative remedy and a concurrent judicial remedy.

And I think that's the contextual setting in which Congress was passing the CSRA here, and that's what Congress was looking to when it said it wanted to make federal sector labor relations more like the private sector.

In other words--

Unidentified Justice: Which came... which came... which came first in the Vaca situation?

The administrative remedy or the judicial remedy?

Mr. Duffy: --Well, the judicial remedy was established in Steele and Tunstall some 20 years before the... the Vaca remedy.

Unidentified Justice: And it had been before the board decided this would be an unfair practice, didn't it?

Mr. Duffy: That's correct.

The board decided that... that duty of fair representation cases would be prosecuted as unfair, labor practices in Miranda Fuel in 1962.

But what we have here is a setting where these cases, Vaca v. Sipes, and its progeny, Bowen, Foust, Mitchell... these cases are some of the absolute, fundamental principles that we see in our scheme of private sector labor law.

And it's our position that, with these principles in mind and with the acknowledged legislative statement that Congress was attempting to fashion a federal sector labor relations setting in the Civil Service Reform Act which more closely approximated private sector collective bargaining, since the principles in Vaca lie at the... at the absolute base of private sector collective bargaining, that Congress must have intended these principles to apply also in the Civil Service Reform Act.

Unidentified Justice: But you... you still have to be implying a cause of action.

Mr. Duffy: Well, I think that--

Unidentified Justice: There is no express provision for it.

Mr. Duffy: --Well, there's... there's no question that it's not set forth in the statute, Justice White.

And I think that the appropriate analysis here though is not the Touche Ross analysis.

Here we're working in a setting, where Congress tells us in the legislative history the objective that we're working towards is a private sector model.

True, it has some public sector management differences.

But what we want to do is we want to achieve a private sector model.

We want to achieve a more efficient way to handle our various employee grievances, and we believe that efficiency can be achieved through... through channeling those grievances through the grievance and arbitration mechanism.

Unidentified Justice: Of course, what the statute says, as opposed to what the... what you're reciting from the legislative history, is that there will be an administrative remedy.

It doesn't say anything about a judicial remedy.

Mr. Duffy: That's correct, Your honor, and--

Unidentified Justice: Which makes it different from... from the National Labor Relations Act, does it not, and the Railway Labor Act?

Mr. Duffy: --I don't believe so, Your Honor.

The National Labor Relations Act had no provision for district court jurisdiction over duty of fair representation actions.

Unidentified Justice: No, but was there the express administrative remedy provided in those acts?

Mr. Duffy: Certainly in the Notional Labor Relations Act, there was.

In the RLA, no, that's not the case.

There's not the corresponding NLRB counterpart and unfair labor practice counterpart.

And... and perhaps the better model to look at here or the closer model to look at here is the National Labor Relations Board.

And, indeed, the congressional history tells us to look to the National Labor Relations Board to determine what the Federal Labor Relations Authority is all about.

There's express congressional history, which we cited in our brief both from the House and from the Senate indicating that the role of the Federal Labor Relations Authority, and in particular the role of the general counsel in the Authority, is to be modeled after the private sector National Labor Relations model.

And it's our view that that model, the private sector model, which grants two things which are particularly troubling in this situation... first it grants exclusive representational powers to the union.

The union... the majority representative has exclusive access to the bargaining mechanism, which may be less significant in the federal sector, but it has the same access, exclusive access, to the arbitration mechanism which is so very troubling in a case like this.

Should the union decide for arbitrary, bad faith or discriminatory reasons not to take a case to arbitration, what remedy does the employee have?

And is the administrative focus of the institution with the... the FLRA, that is... with the institutional goals which it has in fashioning unit-wide remedies, as opposed to individual remedies... is that institutional focus sufficient to allow us to say that the duty of fair representation in the federal sector is less significant and less worthy of protection than in the private sector?

It's our feeling that had Congress wanted to depart from the principles of Vaca, the reasonable thing for Congress to have done would be to say something about it.

The legislative history is actually... is absolutely bereft of any mention that Congress wished to fashion different rules in this setting.

Moreover, the legislative history is ripe with mention of the things that Congress wished to change, places where it wished to depart from the National Labor Relations model.

And those are clearly set forth in the management rights provisions and so forth.

But here--

Unidentified Justice: Fairness is not... it's not just the legislative history that's rife with that.

It's the terms of the statute.

You wouldn't have needed the legislative history's reference to those differences.

Mr. Duffy: --Well, surely, Your Honor--

Unidentified Justice: Management's rights are set forth in the statute with some specificity.

Mr. Duffy: --With a great deal of specificity.

Surely, we'd look to the language of the statute first.

My point here is, of course, there is no statutory discussion--

Unidentified Justice: My point is that the departure that the legislative history refers to... the other departures that the legislative history refers to are departures that are contained in the text of the statute.

Right?

Mr. Duffy: --That may well be the case, Your Honor.

However, I don't think where we have no indication in the statute that Congress wished to depart from the principles in Vaca, then we look to the legislative history, and what does the legislative history tell us?

The legislative history tells us nothing about Vaca, no indication that... there's no indication in the legislative history... in fact, there's an implication to the contrary... that the role of the FLRA and the role of the FLRA general counsel is to be modeled after the NLRB.

Surely, if Congress wanted us to change from that model in this significant respect, given the number of decisions of this Court enforcing the duty of fair representation, there would have been some discussion in the legislative history describing the role of the National... of the FLRA sayings look, we intend the FLRA to have greater jurisdiction or exclusive jurisdiction.

We intend to depart from the principles enunciated in Vaca, and that didn't happen here.

If there are no further questions, I'll reserve my time.

Unidentified Justice: Thank you, Mr. Duffy.

Mr. Gordon, we'll hear now from you.

ORAL ARGUMENT OF H. STEPHAN GORDON ON BEHALF OF THE RESPONDENT

Mr. Gordon: Mr. Chief Justices and may it please the Court:

In this case the Court is once again called upon to decide whether a private remedy is implicit in a statute which does not expressly provide for it.

And in recent years, but starting long before the enactment of the Civil Service Reform Act, this Court has held in a considerable body of case law that the creation of an implied private cause of action to enforce a particular statute... a statutory duty is the function of the Congress and not of the Court, and that the ultimate issue before the Court in deciding this issue is whether the Congress did, in fact, intend to create such a private right.

To discern this congressional intent, the Court has said it will look to the language of the statute, the structure of the statute, the legislative history of the statute.

And unless a congressional intent can be discerned from these factors or from some other relevant source, the essential predicate for implying a private remedy simply does not exist.

The Petitioner asserts in his brief that the Court's task in ascertaining this matter in this case is simplified because the Congress modeled the Civil Service Reform Act on the Labor Management Relations Act in the private sector, where the Court long ago fashioned a private remedy for the judicially developed doctrine of the duty of fair representation.

And Petitioner asserts that Congress, therefore, must be held to have incorporated this private cause of action into Title VII of the Civil Service Reform Act.

This argument, I respectfully submit, is misdirected.

I think from the outset it must be emphasized that the Civil Service Reform Act is not an extension of the Labor Management Relations Act.

It is, indeed, a new law designed to regulate for the first time labor-management relations in the federal government, labor-management relations, incidentally, with problems and issues which are unique unto themselves and which differ materially from those to be found in the private sector and particularly wherein the role of the union is far more circumscribed than the role of labor organizations in the private sector.

And moreover, while the Labor Management Relations Act may well have acted as a backdrop to the enactment of the Civil Service Reform Act, the Civil Service Reform Act is far more closely related to the executive orders which governed labor-management relations in the federal government for 18 years prior to the enactment of the Civil Service Reform Act.

And, indeed, the language of the duty of fair representation which is at issue here is taken almost in haec verba from the executive order.

Indeed, if the Civil Service Reform Act is related to anything, it is a codification of the executive orders rather than the Labor Management Relations Act.

Unidentified Justice: I must say I've never heard a union argue this before, but it's... it's an interesting [inaudible] to hear from that side.

Mr. Gordon: Thank you, Justice Scalia.

[Laughter]

Now, with respect to the language and structure of the legislative history of the Civil Service Reform Act, the Act differs materially from the Labor Management Relations Act, and while there are certainly some similarities between the two acts, the differences far outweigh the similarities.

But with respect to the duty of fair representation, which is the issue before the Court today, this difference is particularly cognizable.

Thus, unlike in the private sector, the Congress here expressly treated with a duty of fair representation, which was never done in the private sector.

And it did so by expressly codifying the duty into the statute.

And moreover, even more importantly, it expressly provided an administrative... administrative enforcement scheme including an effective remedy for the breach of such duty.

Unidentified Justice: xxx but they... but any complaint against a union made administrative could... could just be stopped dead in the water by the general counsel.

Mr. Gordon: That is correct, Justice White.

That is true of many aspects--

Unidentified Justice: And the Court, made quite a bit.

about that in Vaca, didn't it?

Mr. Gordon: --That is correct, Justice White.

The Court did speak to this issue in Vaca.

But this issue was one of several which the Court considered in Vaca and why it maintained the private cause of action in Vaca.

I respectfully submit that the other factors on which the Court relied in Vaca, which may have been equally and even more important to the Court at the time, are not present in the Civil Service Reform Act....

Unidentified Justice: Such as any equivalent to Section 301.

Mr. Gordon: What is one of them, Your Honor, yes.

The absence of the 301 section, yes, is certainly one of the considerations and a consideration which the Court took into great consideration in... in Vaca.

And I, I respectfully submit, Justice White, that if there is only one leg of Vaca remaining, namely, the unreviewable power of the general counsel to dismiss charges and not issue complaints, that this would not warrant an inference that Congress intended to create a private cause of action when the remainder of the statute makes it so eminently clear that Congress, indeed, wanted to limit the... the role of the judiciary in this respect.

I think what the Congress has done here is that it picked up the very pieces that were missing in the private sector in Steele and in Syres, and it injected them into this statute in order to prevent and foreclose the necessity of judicial... of a judicial private cause of action.

Nor is the language of the structure of the legislative history of the statute uninformative regarding judicial involvement.

Quite to the contrary.

The... Section 7123 very specifically limits the courts' intervention to three instances: one, that an aggrieved party... party aggrieved by a final order of the Authority may petition in the appropriate circuit court for review of the Authority's final order.

Secondly, the Authority itself may petition an appropriate circuit court for enforcement of its order.

And the district courts come into play only in one instance, namely, in the third instance whereupon the issuance of a complaint by the general counsel, the Authority may petition United States district court for temporary injunctive relief.

These are the only instances in which Congress has provided any judicial intervention in the enforcement of the statute.

And as I said before, Congress certainly was aware... Congress certainly must have been aware that the existence of 301 in the Labor Management Relations Act which empowered the district courts to enforce labor-management collective bargaining agreements, that this was an intensely... intensely practical consideration, if I may use the words of Vaca, for maintaining a private cause of action.

And yet, the Congress, when a somewhat similar provision was proposed, specifically rejected it.

Moreover, it left it to the... with the... not only rejected it, but it transferred the duties which district courts had under 301 directly to the Federal--

Labor Relations Authority.

Thus, for example, where... in the private sector under 301 federal courts, of course, will review arbitration awards.

When this was proposed during the enactment of this law, the Congress rejected it and placed this power into the hands of the Federal Labor Relations Authority, indeed, a nonreviewable power.

And I am sure these compromises were not accidental.

This was not done by any oversight by the Congress.

These... this limitation of the judicial function was the product of extensive debate and of legislative compromise.

Now, with respect to the legislative history, which is, of course, another consideration, as I've mentioned, which the board... which the Court will take into consideration, I must agree with my brother that there is, indeed, a paucity of legislative history which is directed directly to the duty of fair representation.

And Petitioner asserts that this very paucity leads to the inference that Congress must have intended to include the private cause of action which is prevalent in the private sector under the judicially developed doctrine.

Again, I think this kind of an argument is misplaced because the legislative history certainly is not silent regarding the way this Act is meant to be administered.

It... the legislative history may be sparse with respect to the duty of fair representation, but it is quite specific regarding the administration and the enforcement scheme of the statute itself.

I've already spoken, of course, to the legislative compromise regarding the limited judicial involvement.

And in this context, the House report specifically said that it is the Federal Labor Relations Authority which shall make the final decision regarding the issuance of unfair labor practice complaints.

And the only matters specifically referred to in Section 7123, which I just mentioned, shall be judicially reviewable.

Similarly, the Senate report also said that all complaints of unfair labor practices that cannot be resolved by the parties shall be filed with the FLRA.

And the conference committee which rejected the... which rejected the proposal to include a similar... a... a... a clause somewhat similar to Section 301 also said that these matters shall come to the... for the consideration first of the FLRA.

In the face of this congressional intent to create a comprehensive and administrative enforcement scheme, I submit it is difficult, indeed, to attribute to the Congress an intent to incorporate by silence a private cause of action.

Unidentified Justice: You say the administrative remedy is not only comprehensive, but adequate I suppose.

Mr. Gordon: Yes, I believe, Justice White, it is adequate--

Unidentified Justice: What kind of... what kind of--

Mr. Gordon: --since the... since Section 7118 specifically provides that the authority is authorized to issue back pay orders, for example, where back pay is indicated.

Unidentified Justice: --Against whom?

Mr. Gordon: Well, the... the... the Authority has broad remedial powers which I submit are quite adequate and which the Authority has exercised.

Unidentified Justice: Can the... can the... can the Authority order the union to pay anything?

Mr. Gordon: Yes.

Yes, it may.

Unidentified Justice: What?

Mr. Gordon: Whatever... whatever damages the Authority will seek.

There could be back pay, for example.

Unidentified Justice: Well, back pay normally runs against the employer.

Mr. Gordon: Well, under Vaca v. Sipes, it runs to the employer, but since Vaca and Bowen, the... the Court has extended this so that unions have become equally liable to pay back pay--

Unidentified Justice: So, you think--

Mr. Gordon: --the Court--

Unidentified Justice: --the administrative remedy would include any remedy that might... a court might give.

Mr. Gordon: --Well, it would certainly not include punitive damages, for example, since the Authority would not be authorized to issue any orders which... which are punitive in nature.

But in all other respects, the Authority has very broad authority, if I may use that term, to fashion adequate remedies.

And in the light of this, as I say, it... it is very difficult to attribute to the Congress an intent, to incorporate by silence a private cause of action.

Indeed, the result of this would be that an individual employee could completely bypass not only the substantive and procedural provisions of the Act, but also he could bypass the very agency which the Congress has created to administer this Act.

And in the light of the decisions of this Court as recently as a year ago in U.S. v. Fausto and even as recently as six months ago in Schweiker v. Chiilkee where... wherein the Court reaffirmed its holding in Bush v. Lucus, I... I submit that such a remedy could not be implied.

In conclusion, I only want to say that as in the private sector, the duty of fair representation is alive and well in the federal sector and serves in the words of Vaca v. Sipes as a bulwark to prevent arbitrary union conduct.

However, the injection of a private cause of action to enforce the duty would, indeed, circumvent the congressional intent to create a comprehensive and integrated administrative enforcement remedial scheme and might well create the duplication of litigation and inconsistent remedies which the Congress intended to avoid and which this Court has cautioned against.

If there are no other... and I believe that the holding of the court below should be affirmed.

If there are no other questions, this concludes my arguments Mr. Chief Justice.

Unidentified Justice: Thank you, Mr. Gordon.

Now, Mr. Taranto, we'll hear from you.

ORAL ARGUMENT OF RICHARD G. TARANTO AS AMICUS CURIAE SUPPORTING THE RESPONDENT

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

Virtually the whole of Petitioner's case rests on the assertion that just as there is a private right of action for breach of the duty of fair representation under the RLA and the NLRA, there surely must also be an implied right of action under the CSRA in the federal sector.

Like the Respondent union, the government believes that is wrong.

I want to summarize why we think the evidence is simply not sufficient for Petitioners to sustain their claim that the 1978 Congress that enacted the CSRA intended to authorize suits against unions for breach of the duty of fair representation.

The principle factors that this Court's decisions rely on as counting against any implied right of action are present here.

The statutory language is duty imposing rather than right creating.

The statute, far from failing to address remedies, expressly sets up an elaborate remedial scheme.

There is no evidence in the legislative history of any intent to create an implied right of action, and the legislative history in fact reflects a commitment of collective bargaining agreement disputes to the FLRA and not the courts.

But I want to focus my argument on why it is wrong to suggest that Congress must have meant to borrow the implied right of action from the NLRA, as explained in Vaca v. Sipes.

To begin with, there is no mention of Vaca or of any private sector analogue in the statute or the legislative history.

It was from the pre-1978 federal sector labor law, the executive order, that the express provision imposing the duty of fair representation along with the unfair labor practice remedy was taken.

Under the executive order.

Respondent had the same duty of fair representation rights and Petitioner had... and Petitioner had the same administrative remedy as he has here, though without judicial review.

In fact, there are also affirmative reasons to think that Congress did not intend the private sector analogy in this setting.

It's worth noting first that if there was a borrowing from the NLRA, it's significant that it seems to have been a very carefully limited borrowing, because the CSRA took the duty which was only implied in the private sector and made it express, but it didn't take the right which was also only implied under the NLRA.

But in any event, the... the and analogy to the NLRA remedial scheme simply does not fit well with the CSRA scheme.

The... the two statutes are sufficiently different in crucial respects, both substantive and remedial, that the rationale of this Court's decision in Vaca does not carry over in significant degree into the federal setting.

First, in the NLRA context, Vaca noted the private right of action was found to be implied in the statute before there was any administrative enforcement mechanism, and there was no evidence of a congressional intent later to preempt that judicially recognized right.

In the FLRA context, the question is not one of congressional displacement of a preexisting right of action for there was no right of action prior to 1978.

The question rather is of congressional intent to create the right of action.

And in the CSRA setting, the administrative enforcement scheme was created in the very same act that contains the duty, a key basis for both Vaca and Steele, therefore, namely, the absence of... of an administrative remedy is missing in this setting.

Vaca also emphasized a closely related practical aspect of that point.

Most duty of fair representation cases involve questions about labor contract negotiating positions or the handling of grievances.

But Vaca pointed out that those matters are generally outside the jurisdiction of the NLRB and therefore outside its expertise.

The situation is quite different in the federal sector.

The FLRA does have jurisdiction to resolve negotiability disputes, and it also has jurisdiction to review the arbitration awards that result from grievance procedures.

Those matters, therefore, are already within the authority of the FLRA; and it makes good sense for Congress to have relied on the agency's expertise.

Vaca rested as well on the idea that the private right of action serves as a necessary counterweight to the union's power to strip employees of preexisting rights and forms of redress, but in the federal sector, unions do not have anything like that kind of power.

Perhaps most important, the CSRA expressly provides that a labor contract cannot strip federal employees of their appeal rights under statute or regulation.

In addition, while in the private sector recognition of an exclusive bargaining representative deprives individual employees of their right to make individual contracts with the employer, in the federal sector, most employees do not lose any such right because they are not employed pursuant to contract in the first place.

They are appointed under terms set by statute and regulation.

And the matters that are actually determined by labor contracts are themselves far more limited in the federal sector.

Those matters do not include wages, hours or any of the matters covered by certain regulations or the broad statutory management rights provision.

Finally, Vaca stressed that employee suits against employers for breach of the... of collective bargaining agreements are already in court under Section 301 of the LMRA.

And those suits typically require as a precondition to upsetting the finality of an arbitration award that the employee show that the union representing him breached the duty of fair representation.

The issue, as Vaca said, will therefore already be resolved in court, and it makes sense to ensure that relief can be had against the union for its share of the harm.

Again, the federal setting is entirely different.

There is no analogue to Section 301.

Instead, in the situation addressed by Vaca, after compulsory arbitration, an employee may challenge the arbitral award only before the FLRA, and there is generally judicial review of FLRA decisions.

Thus, a private right of action in the federal sector cannot be supported as an adjunct to an employee/employer case that is a already in court.

Unidentified Justice: I would think the reverse argument would be true, that if you want one place to settle... to settle a claim against the employer and the union, you ought to do it where you can get the employer.

Mr. Taranto: Well, you... you can get an employer for unfair labor practices before... before the FLRA.

Unidentified Justice: Exactly.

That's what I mean.

Mr. Taranto: That's right.

And... and in an unfair labor practice proceeding, there would eventually be judicial review.

In fact, recognizing a private right of action would run counter to the decision by Congress to keep collective bargaining agreement disputes out of the courts, except where they are tied up with unfair labor practice questions.

As Delcostello noted, most duty of fair representation claims involving grievances require as a precondition to relief that the employee show not only that the union breached the duty, but also that the employer breached the contract.

Thus, if the courts were to recognize the private right of action that Petitioner requests, other than through an unfair labor practice proceeding, they would be addressing precisely the... the collective bargaining agreement questions that Congress decided to keep out of the courts.

For those reasons, we think that there is no sufficient reason to believe that the 1978 Congress intended to borrow the private sector enforcement scheme as a supplement to the administrative scheme it set forth expressly in the statute.

The judgment of the court of appeals should, therefore, be affirmed.

Unidentified Justice: Thank you, Mr. Taranto.

Mr. Duffy, you have 16 minutes remaining.

REBUTTAL ARGUMENT OF THOMAS R. DUFFY

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

The point made by the Solicitor General's Office is that... and by the union is that the role... the role of the union may well be circumscribed somewhat in the federal labor relations scheme.

That role... the critical difference is that that role has to do with the union's relationship with the employing agency.

The union, as I think everyone recognizes, has less power than in the private sector with regard to certain issues of bargaining which would normally be reserved in the private sector for the adversarial parties.

What the union's argument ignores are what we feel are the crucial similarities between the statute and those are the similarities which we believe are the underpinning of the Court's decision in Vaca.

And those similarities again: exclusive representation and unreviewable discretion of the general counsel.

The fact that there's not a Section 301 direct analogue or analogue of any sort in the Civil Service Reform Act is not, we believe... doesn't advance the inquiry before the Court significantly.

And the reason for that is, after Vaca, the Court has recognized in Delcostello that the basis for the duty of fair representation is not Section 301, but the need for the duty of fair representation is implied from the structure of the entire collective bargaining framework, which grants such exclusive powers to the majority representative, even over the most unwilling minority, grants exclusive access to the arbitration mechanisms and may not have an adequate administrative remedy through the FLRA or the NLRB.

And those we think are the... the underpinnings of the Vaca decision.

The duty of fair representation is implied as a necessary implication once those sorts of powers are granted to a majority representative.

We have to put something in the system that assures that there will be an adequate remedy when the majority representative abuses its power or abdicates its position as the representative, which happened here below when the union told the employee we're not going to consider the merits of your arbitration because we're bound by what we did in our previous arbitration.

There's no indication in passing the CSRA that Congress evinced any more or any reluctance to have judicial review of FLRA actions than of NLRB actions in the National Labor Relations Act.

Section 7123, with the exception regarding arbitrability, is essentially what we have in Section 10.

We have appellate court review in the... in the federal circuit courts of appeal for those sorts of activities.

Even the exception with regard to arbitrability, going in the first instance to the FLRA... even that exception is not the case where we have unfair labor practices, and those are reviewable just as they are reviewable in the private sector model.

So, there's no indication from the legislative history that Congress was dissatisfied with the national labor relations system or wanted less judicial review than what we have long experience with in the... in the private sector.

The union makes the point that the Federal Labor Relations Authority has broad remedial powers which may well include back pay.

We... I think that everyone recognizes that the Authority, in fact, does have broad remedial powers.

It has broad remedial powers which parallel the NLRB, and those same broad remedial powers are what the Court was looking at in Vaca v. Sipes.

And I think that the problem which Vaca recognizes is that it's not the existence of the remedy that's in question.

It's the application of the remedy and the access to the remedy.

If the individual employee who has been injured by his union's breach of the duty of fair representation through actions, unreviewable actions, of the general counsel's office can't get into the system where he has those sorts of remedies available to him, then the system doesn't work very well.

And it's that wrong about which we believe Justice White was writing in Vaca v. Sipes when he wrote that the existence of even a small group of cases in which the union would be unwilling or unable to remedy the breach of the duty of fair representation would frustrate the very purposes of the duty.

The Solicitor General's Office suggests that there is a danger here of inconsistent results that you might have a different... a different result before the FLRA than possibly before the... the courts, and that the FLRA ought to be given the primacy for developing the duty of fair representation in this area.

I... I... I think that, first of all, it doesn't recognize that the duty of fair representation... the contours of that duty have been well developed for over 40 years of federal court jurisprudence since Steele.

We know what the duty of fair representation is.

The Authority, in fact, looks to the private sector duty of fair representation, and well it should.

We have the... the law library is full of examples upon which it may draw to determine what is a preach of the duty and what remedies are appropriate.

So, we believe that far from reaching inconsistent results, that the Authority will, in fact, look to the private sector law and should, in fact, look to the private sector law to determine the contours of the duty.

Unidentified Justice: Is the... under... under the federal law in the federal sector, is the violation of the duty of fair representation... is that an unfair labor practice?

Mr. Duffy: The Federal Labor Relations Authority has taken the position that it is an unfair labor practice.

One of the things--

Unidentified Justice: What did the statute say in giving... in... in putting it... it expressly puts a duty on the union, doesn't it?

Mr. Duffy: --That's correct, Your honor.

Unidentified Justice: But it doesn't say expressly that it's an unfair labor practice?

Mr. Duffy: No.

Interestingly enough, the statute... if... the statute doesn't say anything at all about whether or not the duty of fair representation is an unfair labor practice.

That's no more clear than it is in the private sector.

Unidentified Justice: Yes, but the... the... the board has held that it is an unfair labor practice.

Mr. Duffy: The Authority has taken the position, much like the National Labor Relations board--

Unidentified Justice: Has that been subject to judicial review?

Mr. Duffy: --I--

Unidentified Justice: I mean, it is subject to... to judicial review... that--

Mr. Duffy: --Yes, it is subject to judicial review, and I--

Unidentified Justice: --And its decision in any fair representation--

Mr. Duffy: --Yes.

Unidentified Justice: --case is subject to judicial review.

Mr. Duffy: That, would be reviewable in the courts of appeal--

Unidentified Justice: Yes.

Mr. Duffy: --much like in the National Labor Relations Act.

And to answer your question, yes, that question has been addressed in Judge Bork's decision in the National... the NTEU v. FLRA case cited in our brief at 800 F. 2d.

Unidentified Justice: And it affirmed... affirmed the Authority?

Mr. Duffy: Yes, it affirmed the Authority.

I'm not certain that it... no, it did not affirm the Authority.

It reversed the Authority because what it held was that the Authority was attempting to impose a broader duty of fair representation with regard to that particular issue, and it, said, no, you've got to go with the [inaudible] private sector duty--

Unidentified Justice: But it didn't disagree with the notion that it was an unfair labor practice.

Mr. Duffy: --It did not disagree with the notion that it was an unfair labor practice.

Judge Bork felt that the language of 7114, in which the duty of fair representation is found, was sufficient to have the duty of fair representation treated as an unfair labor practice.

Interestingly enough, though, the fact that Congress did not specifically provide a remedy for duty of fair representation breaches as unfair labor practices is further... a further indication, we feel, that Congress intended no different result here in the CSRA context than in the FLRA context.

Certainly, this was an opportunity when Congress went through and enumerated the list of unfair labor practices in... in the Civil Service Reform Act, it had an opportunity to say one of those enumerated practices is breach of the duty of fair representation and, in fact, it didn't.

The only reason that the Court of Appeals for the District of Columbia has found that is that there is a catch-all provision in the unfair labor practice provisions under the Civil Service Reform Act, and the duty of fair representation has been treated as part of that catch-all jurisdiction.

But there's certainly no specific legislative indication that Congress wished to... wished a specific unfair labor practice remedy which was somehow different than in the private sector.

Unidentified Justice: The D.C. Circuit didn't make that decision on its own.

I mean, it was... it was in... in effect, validating the FLRA's determination that there... that there was such a... a right.

Mr. Duffy: I think that's correct, justice Scalia.

I don't... I might be wrong, but I don't believe that the FLRA has taken the position in any of the cases of which I'm aware that there is no duty of fair representation... unfair labor practice jurisdiction.

I... in facts, I think quite the contrary is true.

One of the assertions, one of the arguments, by the Solicitor General's Office is that the Federal Labor Relations Authority will somehow develop greater expertise through its determination of arbitrability than the courts, and that therefore we should give such questions solely to the FLRA where the duty of fair representation is concerned.

I think that that argument has an essential fallacy as a premise.

And the... the fallacy is that only employer... only duty of fair representation breaches will come up where employer conduct is implicated.

And that's certainly not the cases, nor was it the case in two out of the three breaches of duty of fair representation here where the union acting by itself, totally without regard to employer conduct, breached its duty of fair representation.

And with regard to those issues, we're not involved with contract administration whatsoever.

With regard to those issues, we're involved with the basic substantive duty of fair representation law.

Was the union discriminating against this employee?

And again, here below, two out of three cases, the... the union was in this case.

Unidentified Justice: But in most unfair representation cases, aren't you really complaining about the union's failure to... to take his case against the... against the employer?

Mr. Duffy: Certainly I think that the bulk of such cases are contract breach cases.

Unidentified Justice: And you're not about to win an unfair labor... unfair representation case unless you prove that the employer was at fault, too.

Mr. Duffy: I think that's a necessary corollary--

Unidentified Justice: Yes.

Mr. Duffy: --in the breach of contract cases.

It's certainly not a necessary corollary or even part of the analysis in situations where the duty of fair representation doesn't have any employer conduct implications whatsoever.

Unidentified Justice: For example--

Mr. Duffy: xxx--

Unidentified Justice: --[inaudible] something in this case about that.

Mr. Duffy: --Oh, in this case?

In this case, the union decided to arbitrate for another employee, notwithstanding the fact that this employee Petitioner had... who had been employed for almost 20 years by the federal government had been functioning in this job.

The union decided to arbitrate for the other employee without any consideration of Petitioner's merits whatsoever, and in so doing, held the district court, breached its duty of fair representation.

A second example of that was when the union went to arbitration on behalf of the other employee.

When the union went to arbitration on behalf of the other employee, it provided no notice that there was an arbitration going on over Petitioner's job.

It provided no opportunity for him to be heard, and it failed to present any of his views to the arbitrator.

No employer conduct involved whatsoever there.

Yet, nevertheless, the union had failed and we believe failed abjectly in its duty of fair representation.

In summary, we believe that the... the grant here of the powers which lie at the heart of the duty of fair representation, the grant of exclusive representational powers, the grant of... of majority rule, the grant of exclusive access to the grievance and arbitration mechanisms, to the union necessarily compel district court subject matter jurisdiction to provide a judicial forum for employees who are injured by their duty of... by the union's breach of the duty of fair representation, just as in the private sector.

There are no salient differences between the private sector model and the public sector model which Congress is intending to create.

Congress directed us to look to the private sector model when it was fashioning this system.

I don't think there is a departure here which is warranted.

If Congress had wanted to change... if Congress had any dissatisfaction with the Court's ruling in Vaca, the... the... with the essential premises in any of the duty of fair representation cases under the National Labor Relations structure, we would have seen some congressional mention of that, I'm sure, in the 20 years since Vaca.

And instead, we've seen nothing to indicate that Congress in any way is displeased with the necessary implication of a judicial forum where the union has breached its duty of fair representation.

If there are no further questions, we would urge that the decision of the Ninth Circuit be reversed and the case remanded for further proceedings.

Chief Justice William H. Rehnquist: Thank you, Mr. Duffy.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Thompson v. Thompson - Oral Argument

Wed, 13 Apr 2011 20:12:13 +0000

Case:

Thompson v. Thompson

Media File:

86-964_19871006-argument.mp3

Related Transcript:

86-964_19871006-argument.xml

Transcript:

ORAL ARGUMENT OF RONALD W. WEISS ON BEHALF OF PETITIONER

Chief Justice William H. Rehnquist: We will hear argument now on No. 86-964, David A. Thompson v. Susan A. Thompson.

Mr. Weiss, you may proceed whenever you are ready.

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

What we have here is a question as to whether the Paternal Kidnapping Prevention Act of 1980, which is 28 US 1738A, furnishes a private cause of action in a Federal Court to determine which of two sister states' conflicting custody decrees has failed to comply with the jurisdiction requirements of what I will call the PKPA.

The primary issue of all the reported cases appears to be the Congressional intent.

Since there is neither an expressed jurisdiction or a prohibition against it, the question is whether there is an implied intent to give a private cause of action.

Before we get to that particular point, I feel that it is appropriate to discuss the background of the PKPA, itself, in order to determine what Congressional intent was.

First, I think we would have to recognize and discuss what the problem was as Congress saw it.

In joint hearing before the Subcommittee on Criminal Justice, Senator Malcom Wallop stated as follows: Every year between 25,000 and 100,000 children of broken marriages are kidnapped by a parent attempting forcibly to obtain custody over a child living with the other one.

The emotional cost of child snatching which must be borne in large measure by young persons who have already watched their parents' marriage fail and their family split asunder is overwhelming.

What the Congress saw was 25,000 to 100,000 cases of people who were unhappy with custody decrees of one state taking the children from that state and fleeing to other states and obtaining custody decrees.

In that situation, there was either no enforcement or little enforcement due to the cost involved in travelling to the new state.

These are real problems.

In my case, my client hasn't seen his son in seven years.

This Court had a case similar to this on a different legal issue in front of it last term: the Samolian case.

And that case brought to this Court the issue was a writ of extradition which the California Supreme Court did not honor, the writ being issued by the State of Louisiana.

The rationale given by the Supreme Court of California was that there could not have been a criminal act because Mr. Samolian, who was a public defender... a deputy public defender, excuse me, in San Bernadino, had a valid California custody order.

This Court held that the writ of extradition had to be upheld.

And Mr. Samolian now is free from the Louisiana Court on a $20,000 bond and faces a criminal trial in less than two weeks.

This is the type of issue that Congress wanted to address and wanted to solve.

Unidentified Justice: Mr. Weiss, in your application here and your presentation of the question to us, you appear to have raised only the issue of whether there is an implied cause of action on behalf of your client under this Federal Act.

Right?

Mr. Weiss: Yes, Your Honor.

I'm sorry.

Yes, Justice O'Connor.

Unidentified Justice: You did not raise below or raise in your cert petition, I gather, that there is Federal question jurisdiction in any event quite apart from any implied cause of action.

Mr. Weiss: Well, we raised under 28 US 1331 that there is Federal jurisdiction.

Unidentified Justice: You raised the issue of whether there was Federal question jurisdiction quite apart from an implied cause of action?

Mr. Weiss: Yes, we did, Justice O'Connor.

Unidentified Justice: You didn't present that question to us in the cert petition; did you?

Mr. Weiss: I don't believe we did, no.

Unidentified Justice: No.

Mr. Weiss: We raised it--

Unidentified Justice: And, yet, most of the cases below dealing with this question have gone off on the theory of Federal question jurisdiction: its existence or the lack of it.

Mr. Weiss: --Existence or the lack of it, but most of the cases, as I read them, dealt with the implied provision as opposed to the actual because of the fact that it is a state cause of action.

Unidentified Justice: Well, isn't that a form of Federal question jurisdiction and implied cause of action?

Mr. Weiss: That is a form of Federal question... yes, Chief Justice.

Unidentified Justice: Well, I have the same concern Justice O'Connor has.

Did you raise Section 1331 jurisdiction in so many words below anywhere?

Mr. Weiss: Yes, we raised it in our original complaint to the lower court.

Unidentified Justice: Did the courts below deal with that?

Mr. Weiss: As I recall, the lower court just summarily dismissed it saying that there was no jurisdiction whatsoever because it was within a domestic relation exception.

And the court, the Ninth Circuit Court held that there was no implied intent on Congress to create a Federal cause of action and further held that the domestic relation exception was involved herein.

Those were the two holdings of the Ninth Circuit.

The next thing that I think should be looked at is what did Congress do or what approach did they take once they defined the problem.

Quoting Senator McGovern in the Congressional Record at Senate page 758 on January 23, 1979, he states that the PK will cause all states will be required to enforce with very few modifications allowed the custody decree of the state that jurisdiction according to the provisions of the bill.

And, at present, a parent can take a child, flee to another state and begin court proceedings in that state to regain custody.

For several reasons, custody is usually granted.

States treasure their independence to make such decisions.

The other parent is not present to make the case and the absconding parent may be surrounded by supporters willing to testify on his or on her behalf.

Under this bill, the kidnapping parent could not be granted custody of the children by any other state court.

This provision would serve a possible childnapper from taking the child across state lines as there would be no hope of gaining custody of the child in another state.

Unidentified Justice: But that is quite consistent with the Ninth Circuit's majority's view that what this is... the PKPA is a rule of decision for state courts, like the AVLA, rather than creating a separate cause of action in Federal Court.

Mr. Weiss: Yes, Mr. Chief Justice, if you read it literally, the problem is the Act, itself, speaks in a positive affirmative manner.

"The state shall".

They shall do this to obtain jurisdiction.

They shall not modify if this exists.

"It shall".

If you take the word, "shall", with the Senator's belief that the states cannot grant custody under this Act, I think it is reasonable to interpret that he meant that this should be a Federally enforced act.

Unidentified Justice: All that means is that... that might make it very clear that... the Louisiana court, is that the one?

Mr. Weiss: Yes.

Unidentified Justice: That the Louisiana court made a mistake.

That could be corrected by coming up through the state system.

Mr. Weiss: That's one of the arguments raised that a person should travel to the other state court and go through the state system.

That does... that creates a couple of problems.

(1) is that you have the practical problem of the total lack of following of the PKPA.

The second is that it is almost an impractical problem for most people involved because of the cost.

The third problem is that the going to the other state, you submit to their jurisdiction.

If you read the UCCJAs in like Louisiana, you submit to their jurisdiction.

And then you have a difficult-time in challenging the UCCJA of Louisiana.

Unidentified Justice: Well, the legislative history, though, is really pretty clear, isn't it, that Congress directly considered this and recognized the problem and simply decided to go slowly in this area and not to make it a matter of Federal question jurisdiction.

Mr. Weiss: Well, there was discussion of Federal--

Unidentified Justice: You seldom see a legislative history this clear, I think.

Mr. Weiss: --There was some discussion by Senator Cranston referring to the attention being directed at the problem in the Federal level.

There was some discussion by Congressman Duncan to that effect.

There was nothing that I read that specifically rejected the concept of Federal jurisdiction.

Some of the cases talk about Congressman Fish's proposal.

But, if you look at Congressman Fish's proposal, it is one of five proposals in this area and it is the only proposal that suggests that the Federal courts take jurisdiction to make child custody decisions.

It further suggested that we do away with the $10,000 diversity requirement.

This was the only proposal that directly talked about Federal jurisdiction, but it was rejected because the Congress did not want to burden the Federal court with custody determinations.

But we are not asking for custody determination here.

What we are asking the Federal court to do is to make a determination based on the PKPA as to who properly and correctly applied it.

I believe the minority decision in Merrell Dow Pharmaceutical v. Thompson said that the Federal courts are the best equipped to make a decision or an interpretation of the Federal legislation, since they do it on a regular basis.

And they further stated the state courts are not as well equipped to do that.

Unidentified Justice: Wasn't this Federal suit dismissed for want of personal jurisdiction, also?

Mr. Weiss: No, it was not.

Unidentified Justice: Well, how were you going to proceed in California to get jurisdiction over somebody in Louisiana?

Mr. Weiss: Well, the Ninth Circuit addressed that problem and talked about the type of acts that Dr. Clay had committed in the jurisdiction.

And they concluded on the following: (1) that she and the child resided there for most of the child's life; (2) that she had made use of the California Superior Court by bringing the domestic action in that court; (3) that Dr. Thompson's request was based on the California decree; and, (4) that Dr. Clay left the State of California and went to Louisiana and allegedly enforced the California decree there in Louisiana.

Based on that analysis, they felt that there was jurisdiction.

Unidentified Justice: Again, in California?

Mr. Weiss: The child?

Unidentified Justice: Yes.

Mr. Weiss: That is a problem that the PKPA can solve.

If we do not get Federal determination of the construction and who properly applied that, we could travel to Louisiana, as was suggested, and we could go through the whole court and then Dr. Clay could then move to another state--

Unidentified Justice: How could we get it to the Federal court in California?

Mr. Weiss: --Hopefully with a Federal court order that will be obeyed.

Unidentified Justice: What is the order going to be?

Mr. Weiss: I'm sorry?

Unidentified Justice: What kind of order is it?

Mr. Weiss: Well, if it is determined that California was the appropriate jurisdiction and Louisiana is restrained, then California would, in all probability, issue an arrest warrant like was done in Samolian by the Louisiana State.

Unidentified Justice: You would have extradition?

Mr. Weiss: For Dr. Clay, probably.

Unidentified Justice: You would have extradition?

Mr. Weiss: Yes.

Unidentified Justice: To the Federal court?

Mr. Weiss: No.

We can do that through the state court.

Unidentified Justice: You don't have extradition in the Federal court.

You have removal.

Mr. Weiss: Through the state court.

See, if the court... if the Federal court finds--

Unidentified Justice: I just want to know how you are going to get a hold in.

Mr. Weiss: --We are going to do it by trying to get the state court to issue a writ of extradition for Dr. Clay and, hopefully, she would bring the child rather than go through that.

I mean we have tried self-help.

Self-help is--

Unidentified Justice: The only thing we have here is the jurisdiction of the Federal court.

Mr. Weiss: --That's correct.

Unidentified Justice: And I am asking you how can the Federal court pick him up in Louisiana and bring him to California.

Mr. Weiss: They cannot, but the Federal court can determine that California was the proper court for jurisdiction of the custody case.

And once they determine that, then California can issue the child stealing warrant.

Unidentified Justice: Well, this is unbelievable to me.

I guess I went to school too far back.

I mean I thought jurisdiction was on boundary line.

Mr. Weiss: Well, now, as discussed, what the Congress did was they passed the Parental Kidnapping Prevention Act and they passed it in positive terms.

While a state... state courts shall enforce and state courts shall cooperate.

They made those mandatory requirements.

If the Federal court does not take jurisdiction, the Federal Act, the PKPA, has become nothing but an advisory or an optional act that the states can follow or not follow at their choice.

Unidentified Justice: I don't think that is entirely true, Mr. Weiss.

Take the example of the Federal Employer's Liability Act.

Suits there are brought under that Act in the state courts, but there was a period of time when this Court reviewed a number of state court judgments that came up to through the state court system, laid down some rules as to what the FLEA required.

And the state courts henceforth followed those rules.

I think the same thing could happen here.

Mr. Weiss: The problem is that the PKPA, if as some of the writings have suggested is strictly advisory, are an extension of the UCCJA, then in a lot of states there will be a conflict between the UCCJA and the PKPA.

Unidentified Justice: But the PKPA is an act of Congress.

Is the UCCJA also an act of Congress?

Mr. Weiss: No.

Unidentified Justice: I would think the PKPA would prevail then.

One is a state act and the other is an act of Congress.

Mr. Weiss: That would be my assumption, but it would be up to the interpretation of the state court.

Unidentified Justice: Well, not ultimately.

As the Chief Justice said, those interpretations, if they are in conflict', can be resolved by the Supreme Court.

In other words, there is an intermediate position between saying it is advisory on the one hand.

And, on the other hand, it is mandatory and enforceable in Federal courts.

That is it is mandatory, but enforceable by the state courts with review of erroneous state court decisions by the Supreme Court.

Why doesn't that work?

Mr. Weiss: I have heard that argument.

Unidentified Justice: From the Ninth Circuit.

Mr. Weiss: From the Ninth Circuit.

[Laughter]

And from the D.C. or most recent case.

The problem there is you are dealing with child custody and you see if a... if a party steals a child and goes to another state, and we go through your procedure of going to that state and going up through their appellate process and eventually ending up here five... four or five years have passed.

And it becomes almost a worthless act not... I do not mean that in any derogatory sense, but to the person who is pursuing his child, because he has lost all contact with his child.

The child doesn't know him.

Very few state courts would say after five or six years,

"I'm going to give you custody. "

Unidentified Justice: Yes, but you cannot presume that every case will be a test case.

You can't presume that every case will require resolution by this Court.

If you presume that generally state courts will follow the governing law, presumably in this case the Louisiana appellate courts would have corrected the error.

And that would not have taken five or six years.

Maybe there will be an exceptional case where there is ambiguity in the law and this Court has to lay down the rule of law.

But in most cases, why don't you presume that state judges will obey the law?

Mr. Weiss: Well, in this particular case--

Unidentified Justice: Maybe they made a mistake in this one case, but does that mean that they always are going to make mistakes and rule in favor of the local parent?

Mr. Weiss: --Well, it is not even a mistake.

It's if you look at the UCCJA of Louisiana, it says that you are not supposed to take custody... jurisdiction for custody purposes until the child has been there for a period of six months.

Looking at the joint appendix--

Unidentified Justice: Well, Mr. Weiss, maybe we just need a test case from Louisiana, but I think for you to make the assumption that no state court is going to apply the Parental Kidnapping Act properly is unwarranted.

Mr. Weiss: --I will agree and I am sorry if I made that assumption.

My primary concern is that the PKPA sets a Federal standard for a jurisdiction and modification of custody acts.

And it is a method whereby if it is applied properly, we will get a uniform standard for jurisdiction between the states.

But in order to apply it in a standard manner and an expeditious manner, in order to create what is necessary in the custody, the immediacy of the custody issues, it has to be determined in a standard way by a court that can bind two state courts.

Suppose you get conflicting interpretations of the PKPA in two different states.

You are no different than you are with the UCCJA.

Unidentified Justice: Well, that's why this Court sits: To resolve conflicts like that.

Mr. Weiss: I understand that, Justice O'Connor.

Unidentified Justice: All right.

Mr. Weiss: Well, if you review the minority decision in the Ninth Circuit, Justice Alcorn makes some comments about the failure to recognize a Federal jurisdiction and I think the comments reflect that he found an intent of Congress to create the Federal jurisdiction.

He says, otherwise, it converts an act of Congress into barren rhetoric.

The Third Circuit said basically the same thing.

Why would the Congress from 1973 to 1980 study and attempt to pass legislation on this problem to correct the problem, acknowledge that the problem exists, that the states will not uniformly apply the UCCJA, which is supposed to be a uniform act, and then not give the courts, the Federal courts the ability to enforce it.

Unidentified Justice: Full faith credits that there in the same way.

Mr. Weiss: Well, full faith, Justice Scalia, the full faith credit statute is a little different in that the PKPA 1738A sets standards.

It says, "The state shall".

Unidentified Justice: Is not the full faith and credit statute, indeed the full faith and credit provision of the Constitution which says that each state shall give full faith and credit to the judicial decrees of the other states.

And, yet, we do not allow for enforcement of that in Federal courts.

Mr. Weiss: On the full faith and credit, you also have the problem that this is a child custody determination and full faith and credit only has to be given by one state to the other state to the same enforceability that other states order.

By that, if there is a change of circumstances, it can be modifiable.

So, there is never really a full faith and credit argument.

Unidentified Justice: But that is what Congress sought to change in the PKPA; is it not?

Mr. Weiss: That's... if you take that position, Chief Justice, then what are we going to do with the modifiability aspect of the child custody decision because full faith and credit is given to a final judgment.

And the child custody judgment is never final because it can be modified all the time.

Unidentified Justice: But here Congress... as I understand it, Congress has said in the PKPA,

"Even though you don't give full faith... even though full faith and credit does not permit you to recognize a custody judgment from another state because it is always subject to modification, we now tell you that you should. "

Is that a misstatement of what the PKPA says wherever it is to be enforced in Federal or state court?

Mr. Weiss: No, it is not, Chief Justice.

One last point, since I see the white light is on.

The Merrell Dow Pharmaceutical v. Thompson case talks about implied jurisdiction.

In that case, the majority starts with that there is no implied jurisdiction.

And they run the four-pronged test of cort, C-O-R-T.

Now, the court case has been briefed... the court test has been briefed by myself, starting with page 8.

I believe that the minority and majority decision in that case are very close.

They both say that the Smith v. Kansas City Trust is an applicable valid test and that it should be applied.

The difference is that the majority found that there was no implied jurisdiction here.

I believe if you look at the intent of Congress there is an implied intent here and, as such, the Court should allow the lower Federal courts to hear this matter.

I would have nothing further.

Are there any questions, Chief Justice?

Chief Justice William H. Rehnquist: Thank you, Mr. Weiss.

We will hear now from you, Mr. Rigby.

ORAL ARGUMENT OF KENNETH RIGBY ON BEHALF OF RESPONDENT

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

The basic question is the intent of Congress in the Court v. Ash, Touce Ross, Northwest Airlines, Merrill Lynch, Merrell Dow cases.

What was the intention of Congress?

Was it to create a private remedy?

Now, that private remedy has been interpreted and diagnosed in different terms in terms of Federal question jurisdiction, Rogers v. Platt, the Court of Appeals Circuit, in terms of a private cause or right of action in Thompson v. Thompson, some cases call it a cause of action.

Some call it a right of action.

But the fundamental threshold question is whether Congress intended to create any private remedy, whether it is called Federal question jurisdiction or whether it is called a private cause of action.

Unidentified Justice: Well, do you think that is really the correct way of putting it?

Isn't it whether Congress intended to create a private cause of action in the Federal courts?

Mr. Rigby: That is the way Thompson, the Ninth Circuit interpreted.

The Court of Appeals Circuit in Rogers v. Platt interpreted it in terms of whether Congress intended to create Federal question jurisdiction.

Unidentified Justice: Well, I know, but do you agree that this Federal act would be enforceable in a state court?

Mr. Rigby: Yes.

And it was intended to be enforceable in the state court.

Unidentified Justice: How would a parent who claims the benefit of that Act get into a state court to enforce it without having... without being able to say that: Congress intended me to have the right to enforce this statute in a state court?

Mr. Rigby: Because it is a direction to the appropriate authorities of each state: shall enforce and shall not modify.

Unidentified Justice: But a parent who claim is a benefit of the Act would have to be able to get into court.

Mr. Rigby: Yes, sir.

Unidentified Justice: And be able to say the Federal Act intends me to have the right to enforce this in a state court.

Is that right?

Mr. Rigby: Yes, sir.

That's correct, sir.

But it is a question of whether or not Congress intended to create a Federal private right of action, not just a right of action.

Obviously, Congress intended to create a right of action and somebody to enforce its provisions.

Unidentified Justice: Is that even right?

Isn't the right of action a suit for custody created by state law and merely the Federal law imposes certain standards to be applied in state causes of action.

Mr. Rigby: That may very well be a correct analysis.

When you compare it to full faith and credit, itself, because this is an addendum to the full faith and credit statute.

Unidentified Justice: In this case, there has been a Louisiana custody order; hasn't there?

Mr. Rigby: Yes, sir.

Unidentified Justice: And if this parent is told you must enforce this Act if you have any right under it at all in the Louisiana court, he's going to have to go down there and assert some right under this statute to get that custody order overturned.

Mr. Rigby: Yes, sir.

Unidentified Justice: I don't understand this discussion.

You don't have a Federal cause of action just because you have a Federal right.

Mr. Rigby: No, sir.

Unidentified Justice: For example, it is a Federal right to have Federal... Federal law supersedes state law.

Federal pre-emption.

Correct?

Mr. Rigby: Right.

Unidentified Justice: But that doesn't give me a cause of action to sue for Federal pre-emption.

My suit is whatever, whatever the state cause of action or other Federal cause of action might be: for custody of the child, for torque, for contract and so forth.

And in the course of that suit, I am entitled to have Federal pre-emption rules applied.

Right?

Mr. Rigby: That's correct, sir.

Unidentified Justice: We are talking about here whether there is a cause of action to have the PKPA applied or rather whether that is just a rule of law which will be applied in other suits: custody and torque, contract or whatever.

Mr. Rigby: I would agree with that analysis.

I was not espousing these analyses by the courts, but in addressing Justice O'Connor's original question about whether it is a jurisdictional issue or a cause of action issue, to point out that differing Federal courts have analyzed it differently.

It is our position that Congress did not intend that Federal courts enforce PKPA except through seriary to this Court after the exhaustion of state of remedies.

Unidentified Justice: So, I suppose then the answer would be to this person that if you wanted to prevent the issuance of this Louisiana custody decree because of this Federal statute, you should have gone to Louisiana and a time and defended on the grounds of the Federal statute.

Mr. Rigby: That's right.

Defended it--

Unidentified Justice: And now, it is too late.

Mr. Rigby: --No, sir.

It's not too late.

Unidentified Justice: Well, how will he enforce it now, the statute?

Mr. Rigby: Dr. Thompson can bring an action in the Louisiana court based upon his California decree, contend that the Louisiana court lacked jurisdiction under PKPA to enter its decree, which, incidentally, was the--

Unidentified Justice: So, he will be asserting his right in that action.

Mr. Rigby: --That's correct.

Unidentified Justice: Under the Federal statute.

Mr. Rigby: That's correct.

And Congress specifically intended, we submit, from the very exhaustive legislative history, that PKPA, that the onus of enforcement of PKPA be placed on the state courts, not the Federal courts.

If I may, very briefly: There were seven factors that have been outlined which I believe all Members of this Court agree upon in one way or the other with respect to discerning Congressional intent in this issue.

And that is Congress' perception of the law it was shaping or reshaping.

Secondly, the problem which Congress perceived that was not being adequately addressed by that law, the language of the statute, itself, the legislative history of the statute, the likelihood that Congress intended to supercede or to supplement existing remedies and whether implication of a Federal cause of action is required to accomplish Congress' purpose in enacting the statute.

The state of the law was this, as Congress perceived it, as shown exhaustively by the legislative history that this Court had not definitively ruled whether or not custody cases were subject to full faith and credit.

States had commenced adopting UCCJA, Uniform Child Custody Jurisdiction Act, on a voluntary basis.

At the time the Federal legislation was originally suggested, only about 19 of the states had adopted the Uniform Act and the states that had not adopted the Act were still in the language of the legislative history, havens for child snatchers.

As the PKPA progressed through Congressional hearings, more and more states adopted UCCJA so that at the time of the adoption of PKPA, nearly all the states had adopted UCCJA.

Now, all have adopted it.

So, Congress was looking at this legislative history and they were concerned about states that had not adopted UCCJA being admittedly havens for child snatchers.

Secondly, the language of the statute, itself, as the full faith and credit statute, itself, provides is directed not at parties but, in this instance, directed at the appropriate state authorities, not courts, as in full faith and credit.

All of the language of PKPA is directed at state authorities and what they shall and they shall not do.

The statutory scheme was this: Originally, it was proposed to exempt parental kidnapping from the Lindberg Kidnapping statute.

Congress reacted to that.

The Federal courts should not be in Federal parental kidnapping cases.

The Wallop proposal came along originally with three proposals: (1) to impose Federal jurisdictional standards on the state in custody cases; (2) to make the Parent Locator Service, the Federal Parent Locator Service available not to parties, but the language says to the states, make the Federal Locator Service available to the states to locate kidnapping parents and kidnapped children; and (3) was to make it a Federal offense to kidnap your child in violation of a proper court judgment.

The third prong is the one that received most of the attention.

All the courts and the legislative history is full of the letter from Assistant Attorney General Wald in which the Justice Department opposed it, the FBI opposed it.

HEW opposed it.

They did not want the Federal courts involved in, to this extent, in this process.

So, it was as the sponsors time and time again talk about.

A delicate balance between solving a problem which was a legitimate Federal interest and a minimum of Federal intervention in what is traditionally a pure state affair: custody cases.

The Federal judiciary does not want to be involved, nor should it be involved in custody cases.

So, a committee, the final resolution was that instead of the third prong of the three-pronged legislation being a Federal offense that the Federal Fugitive Act would be made applicable to cases in which a child was taken by a parent from one state to another state in violation of a proper custody award ended in accordance with PKPA.

So that under the Federal statute, the party could be brought back and prosecuted under state law.

So, as the sponsors themselves said, not in connection with the rejection of the Fish Amendment, which is a different proposition, in which Senator Cranston, for example, said: By reserving the Federal role to the creation of a Federal Parent Locator Service and FBI investigation after a sufficient lapse of time, we hold Federal interference to a minimum.

And it is very clear from an extensive legislative history that right or wrong, that Congress deliberately, made a deliberate decision to limit the Federal interference in the process to these two things: making the use of the Federal Parent Locator Service, which at that time was available only for child support purposes, not custody purposes, and, secondly, to permit the use of the Federal Fugitive statute in custody cases.

Professor Coombs, who wrote most of this legislation and assisted a great deal in its formulation, said that the legislation in it shows respect for the proper division of roles between the state and the Federal Government and between civil and criminal approaches to the problem.

In the exchange between Mr. Conyers and Representative Fish, who had introduced a bill... there were two bills pending, to confer diversity jurisdiction on Federal District Courts in custody cases so that a Federal District Court could enforce a valid custody award.

And in that exchange, the differing approaches and the deliberate Congressional restraint is very obvious.

Mr. Conyers, actually Mr. Bennett, that's PKPA.

Mr. Bennett would impose the obligation on state courts and you would require Federal courts to give full faith and credit to the decision.

And, again, we would be imposing the responsibility of the enforcement upon the state courts.

Now, what could be clearer with respect to Congressional intent when the... when Congress is presented with the contrary proposal that Federal courts be granted... I grant you it was not Federal question jurisdiction, but diversity jurisdiction, and they expressly rejected it saying at the same time: It is our purpose to impose the enforcement of PKPA on the state courts, not the Federal courts, as you, Mr. Fish, would have it.

And in the statutory scheme to explicitly limit the Federal participation to the use of Federal Parent Locator Service and the use of the Federal Fugitive Act for the purposes of doing what?

To assist the states in their enforcement of PKPA.

To allow them, when they have issued a valid custody decree under the PKPA Federal standards to go to the Federal Parent Locator Service and request that the kidnapping parent and the abducted child be located and when located to then be able to have the FBI to bring the abducting parent back for prosecution in the state court.

And that whole statutory scheme is obvious in the legislative history of PKPA.

Nowhere, I suggest, did... has any commentator or court said that the state courts have not done their... performed their constitutional duty in enforcing the Full Faith and Credit Clause.

And this is a form of full faith and credit.

It is an addendum to full faith and credit.

Congress, many years ago, made a deliberate decision that the implementing statute to the Full Faith and Credit Clause of the Federal Constitution would impose the obligation of enforcing the acts, statutes and so forth of another state on the state judicial systems, not on the Federal judicial system and this Court and the other courts on many occasions have concurred in that deliberate decision.

The decision of Congress in PKPA is the same kind of careful deliberate decision.

That there was a problem that needed to be addressed by the Federal legislative branch.

And it addressed it in a very careful and a very deliberate and a very balancing manner between the Federal intervention and what is traditionally a state... you know, just uniquely a state problem, custody is.

It is... not just traditionally, but by its very nature is a state problem.

And Congress has made that very deliberate decision.

What happens if Federal courts get involved?

It has been suggested by Flood v. Bratton, which is the Third Circuit case that holds there is Federal jurisdiction, that Federal courts need not get involved in the underlying custody issues in order to resolve conflicting jurisdictional assertions by states.

I suggest that that may reflect not a sophisticated understanding of custody cases because as has been pointed out by the District of Columbia Circuit in their very recent Rogers v. Platt, that is the very thing the District Court in the District of Columbia had to do in order to resolve a conflict between the District of Columbia court and a California state court.

It had to determine factual issues that go to the question of custody.

In the present case, Louisiana recognized and enforced the California decree but suspended the visitation rights of Dr. Thompson because of physical cruelty by Dr. Thompson to his son occurring in Louisiana during the exercise of a visitation privilege.

That is permissible both under UCCJA and PKPA.

Professor Coombs, whom I have quoted in my brief on the subject, says there is concurrent jurisdiction.

Whether there is jurisdiction or not jurisdiction in Louisiana in this case is going to depend upon whether Dr. Thompson did what we claimed he did.

And, therefore, whether Louisiana correctly exercised jurisdiction under what has been called the Emergency Provisions of both UCCJA and PKPA.

So, courts aren't necessarily going to get involved in the underlying, undergirding factual issues with reference to custody in order to determine which court has jurisdiction under PKPA.

Another consideration is... and I have asserted it in brief and assert it, again.

This honorable Court's decision in Webb v. Webb and its thoughtful analysis of why state remedies ought to be exhausted before this Court is called upon to resolve Federal issues in what are basically state causes of action.

Questions of comity, maintenance of a delicate balance between Federal and state judicial systems.

And, more importantly, the opportunity for state courts to perform their duty and the suggestion that state courts, as a system, will not perform their constitutional duty, I think is reprehensible.

There is no suggestion in this case that Louisiana courts will not perform their duty.

In fact, I have cited a case in which I lost under almost the identical facts in which a state court enforced PKPA to my client's detriment.

Louisiana courts will do their duty.

State courts will do their constitutional duty.

The opportunity for state courts to develop the record, the Court of Appeal in this case footnotes time after time the incomplete nature of the record.

And the state courts ought to have the opportunity to develop the record, to decide, for example, the case on a non-Federal ground.

These cases are quite frequently decided by state courts on non-Federal grounds: not PKPA.

A state court may say: Under our version of UCCJA, we have no jurisdiction to modify a Texas decree or a New Jersey decree and so forth.

And the matter will never get into the Federal courts because it has been decided on a state ground.

All of this, of course, reduces the workload of the Federal judicial system which is a consideration.

It may not be the paramount consideration.

I recognize in this case that Dr. Thompson in brief has argued: It would be useless for me to go to Louisiana.

That it is hostile territory.

I don't believe it is hostile territory.

Our courts administer justice as do the state systems of other states.

And I think particularly appropriate is the opinion of this Court in Texaco, in which this Court said that it did not... when a litigant hasn't presented his Federal claims to a state court, the Federal court should assume the state procedures will afford an adequate remedy in the case... in the absence of unambiguous authority to the contrary.

Remember, Dr. Thompson has not made the first attempt to enforce his California decree in Louisiana.

The only thing he did was try to, with an armed accomplice, come to Louisiana and try to kidnap his boy instead of following judicial procedures: bring an action on his California decree in the State of Louisiana.

He doesn't come with great grace to say: Louisiana won't give me a fair shake.

Until he has come to Louisiana and seen what kind of a shake that he is going to do.

Secondly, Rogers v. Platt has pointed up an argument which we have advanced as to the peculiar nature of the jurisdiction asserted here.

All of the circuits that hold there is jurisdiction concede that there is no jurisdiction to enforce a state custody decree in the first instance.

They all concede that because Congress specifically rejected that proposal, the Fish Proposal.

They say that Congress intended to confer jurisdiction only when there is two conflicting state custody decrees.

That is quasi-appellate jurisdiction.

State A, State B, a Federal District Court decides which one is correct as a matter of Federal law.

It is appellate jurisdiction of being asserted by a Federal District Court.

And at no time, with the one exception of criminal habeas corpus has Congress ever even expressly granted to Federal District Courts appellate jurisdiction over state court judgments.

That appellate jurisdiction rests in this Court and this Court, alone.

Does the Court have any questions?

Chief Justice William H. Rehnquist: Thank you, Mr. Rigby.

Mr. Weiss, you have two minutes remaining.

You are not required to expend them, however.

Mr. Weiss: Thank you, Chief Justice.

Chief Justice William H. Rehnquist: The case is submitted.

Attribution:

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Featured:

Gwaltney v. Chesapeake Bay Foundation - Oral Argument

Wed, 13 Apr 2011 20:10:57 +0000

Case:

Gwaltney v. Chesapeake Bay Foundation

Media File:

86-473_19871005-argument.mp3

Related Transcript:

86-473_19871005-argument.xml

Transcript:

ORAL ARGUMENT OF E. BARRETT PRETTYMAN, JR., ESQ. ON BEHALF OF THE PETITIONER

Chief Justice William H. Rehnquist: Cause Number 86-473, Gwaltney of Smithfield v. Chesapeake Bay Foundation, Inc.--

Mr. Prettyman, you may begin whenever you're ready.

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

This case is here on certiorari to the 4th Circuit Court of Appeals and it involves the question of whether citizens can sue for purely past violations as opposed to ongoing violations under the Clean Water Act.

Congress has set up a rather interesting dual system of regulating effluent discharges into the nation's waterways.

The states adopt these plans, which are approved by the Administrator of EPA, the states issue permits, which set forth the effluent limitations and standards under which the permit holders can discharge, and then to demonstrate that he is operating within the ambits of his permit, the discharger is required to constantly test the effluents and to fill out DMRs or discharge monitoring reports which are on public file and which anyone can go see.

These DMRs show on their face when the permit holder is operating within the parameters of the permit and they also show on their face if, in fact, the discharger is exceeding those limits.

Thus, citizens groups like Respondent can review these DMRs on the public record and then give sixty day notice if they're going to sue for alleged violations and if the suits are not settled, then you... they can collect $10, 000 a day, which has now been upped to $25,000 a day, except when I say collect, I really mean that that money, of course, goes to the United States and not to them.

They allege in their allegations the permit holder to be in violation.

They usually attach these DMRs to their complaints and as I say, in theory at least, the recovery goes to the United States.

When Gwaltney of Smithfield purchased a meat rendering and packing plant from ITT toward the end of 1981, it found after the purchase that it had inherited some problems, principally with the biological treatment system.

Unidentified Justice: It had no prior knowledge?

Mr. Prettyman: They did have knowledge that ITT had had problems.

They thought the problems had been solved.

They found after they purchased that the problems had not been solved.

These problems involved primarily chlorine, fecal coliform, and total kjeldahl nitrogen or TKN, and it thereafter experienced various excedences and various parameters of its permits.

However, it then installed two new systems and it's undisputed that all of the excedences had, in fact, stopped prior to this suit.

The Court of Appeals so held.

It was so stipulated between the parties and the Respondents even conceded in their question presented before this Court that this case involved only past violations.

First, as to chlorine, I'll touch on these just briefly, as to chlorine, we have found many problems in installing a new automatic chlorinator, but that finally fell into place in October of '82, so that there were no excedences for some twenty months or almost two years prior to the trial in this matter.

With the exception of start-up excedences, which I'll talk about a little bit more later, the same is really true for fecal coliform; that is, that they substantially ended in 1982.

We had more problem with the TKN and had to install largely a new system and there were various fits and starts, including six-month delay by the State Water Control Board itself, but the system was finally approved by the state and it began operation in October of '83 and it was fully on line in December.

So that the only TKN excedences between then and--

Unidentified Justice: Is that a coined word or something?

Mr. Prettyman: --Yes, Your Honor.

It's the alternative to violation because if you use violation, there seems to be some import--

Unidentified Justice: Is it coined for this industry or something?

Mr. Prettyman: --Pardon?

Pardon me?

Unidentified Justice: Was it coined for this statute?

Mr. Prettyman: No, It is my understanding it is regularly used in the industry.

It's not just for this case.

What it means is, Your Honor, that you have exceeded the limits in your permit, but an excedence, of course, could be a permissible upset or could be for other permissible reasons.

Therefore, it's not necessarily a violation.

And as I was saying, the excedences here, as far as TKN is concerned, were the unavoidable start-up excedences before suit.

The District Court held that there is no way to start-up a biological treatment system without violations.

But the important point here, really, to focus on is that the last fecal coliform excedence was four months before suit, TKN was a full month before suit, and, of course, the chlorine was twenty months ago.

So, the case comes to you with the rather pristine question of whether citizens can sue for purely past violations, those which have abated prior to suit.

The Court of Appeals held that they can.

We say that they can't.

The Solicitor General interprets the Act as we do, as to past violations.

We disagree with him only in respect as how he interprets the word "alleged" in the statute and, therefore, with his recommended disposition.

Unidentified Justice: Mr. Prettyman, did the District Court have an alternative holding below that there were continuing violations?

Mr. Prettyman: What it had, Justice O'Connor, was--

Unidentified Justice: I was under the impression that it did, and that that holding was just not reviewed by the Court of Appeals.

Mr. Prettyman: --That alternative holding, which was in a footnote, was that even if you couldn't sue for past violations, that there was a good faith allegation of on-going violations.

I would emphasize in regard to that, first of all, as you point out, the--

Unidentified Justice: So, even if you were right, what, at best, what would happen?

It would be vacated and remanded so that that could be considered?

Mr. Prettyman: --Well, if you reach that question because you don't have to reach it, of course, if you reach that question.

I would certainly think you would want to remand to the Court of Appeals for its consideration, but you shouldn't have to reach that question at all because in view of the fact that it is quite clear, both from the facts, the holding and the stipulation, that everything had stopped, had abated prior to the suit, it really didn't make any difference whether the allegations were good faith or not.

Unidentified Justice: Well, unless the trier of fact thought that there was, indeed, a likelihood of some continuing problem, for example, with the TKN-type discharge.

Mr. Prettyman: In that regard, Justice O'Connor, I wonder if I could call your attention to Footnotes, I think they are, 25 and 26 of the District Court's opinion because he very well addressed those particular matters.

25 and 26, where he, in effect, said some question has arisen as to whether these problems would continue, but I regard that as entirely too speculative to find.

He, in effect, holds in these two footnotes that the problem has entirely ceased and I want to point out to you that the Respondents are not here arguing anything about good faith allegations or that these were on-going violations.

What they are here arguing is that they can sue for past violations period.

They posed the suit because--

Unidentified Justice: Mr. Prettyman, can the EPA Administrator bring a civil penalty action for purely past violations?

Mr. Prettyman: --That is an interesting question, and we really don't know the answer to that yet.

The Government said yes, but it's interesting that xx--

Unidentified Justice: The language is the same.

Mr. Prettyman: --No, With great respect, Your Honor, it is not the same.

The language in regard to the Government is in Section 309 or 1319, and the language is quite different.

It is so different that the Government, when it seeks to bring a suit for past penalties, doesn't even rely on this statute.

It relies on the judicial code.

Unidentified Justice: The Government relies on statutes outside because of the similarity of the language perhaps.

Mr. Prettyman: Right.

And the reason they do that is the language is really not clear in this statute itself as to whether... it's a very convoluted statute when it comes to the Government's rights, but certainly even if the... the point I want to make is that even if the Government can sue for past violations, it is quite clear that the language and the rights are very different from those that relate to a citizen and the Solicitor General is very strong on that point, that he does not believe for a moment that a citizen has the same rights as, and comes under the same language as, the Government does.

Unidentified Justice: Mr. Prettyman, the language governing private civil actions doesn't say has violated, but it doesn't say is violating either.

It says is in violation of.

Mr. Prettyman: Yes.

Unidentified Justice: Now, that, it seems to me, means something quite different from is now violating.

If you're caught by radar exceeding the speed limit and a police car pulls along side you after you realized that you've been caught and you've lowered your speed, he doesn't say into your window, you are violating the speed limit, you were violating it five miles back.

He will say, you know, you were in violation of the speed limit.

Mr. Prettyman: That would be very fair, Your Honor, if that's all the further we went, but the fact is that this statute, two things go to that.

First of all, this statute uses the present tense in at least four other places in this same 1365.

Unidentified Justice: But the present tense speaking of a status, the status of being in violation.

Now, what if I think that that status means you violated it in the past and you haven't done anything that seems likely to eliminate that possibility of violation in the future?

What if I considered that to be what in violation of means?

Mr. Prettyman: You may then be engaged in an on-going violation and, in fact, under our definition, you may be able to xx because an on-going xx present non-compliance because of a failure to correct an underlying difficulty, and if you have in fact, violated for several times, you have done nothing about it, and the suit is brought, that may be an on-going violation, may be perfectly proper to sue.

That's not what happened here.

In this suit, what happened was there were a series of excedences and we did something about it.

We put in place with a new systems which were supposed to deal with it.

After the systems were in place, we had unavoidable start-up excedences, which could not be avoided, the District Court so held, they were no more normal, the District Court again held, than you would expect in an ordinary xx the xx end of this, knowing that the situation had abated, knowing that it had been corrected and had come to a close, that Respondent come in and sue.

Unidentified Justice: Is had knowledge clear?

You said that the last violation, the TKN violation was, excedence, if you want xx way was one month before suit was filed.

But at the time suit was filed was it clear that the new equipment you had put in would do the job?

Mr. Prettyman: I don't think there's any question about xx An the District Court ultimately held and the xx pointed out to you and where he said we were xx compliance and also.

Unidentified Justice: I didn't ask whether you were; I asked was it clear at the time that the suit was filed that the new equipment was effective to do the job.

Mr. Prettyman: I think so, and this is the reason that I say so, Your Honor.

First of all, they knew that the new equipment had been put in Secondly, they knew that it had been completed.

They attended a meeting in March of the State Water Control Board at which this was discussed, and the State Water Control Board said, look, we've seen it, it looks to us like you're getting this thing under control.

There's no need for any further action.

Then, there were some unavoidable start-up excedences.

I keep emphasizing that because you cannot start a new plant, much less fix an old plant, without having some of these unavoidable start-up excedences.

Unidentified Justice: But the fact it's unavoidable doesn't get you off the hook.

I mean, the statute doesn't require negligence or wilfulness to make it an excedence.

Mr. Prettyman: Well, let me say two things to that, Your Honor.

First of all, even the unavoidable start-up excedences had ceased prior to suit, but, secondly, even if they had been going on, it may well be that a start-up excedence would be a past violation that, for example, the state could xx after.

But by definition, it cannot be an on-going violation.

An on-going violation is something where something is going on because of a problem and you are not fixing it, you are not doing anything about it.

This is a situation where we've done everything about it.

We put in a new system.

We spent $265,000 putting it in.

It is now... the crust is starting to form on the lagoon which takes a long time.

That's a problem getting that into shape, and those excedences cannot possibly constitute an on-going violation by their very nature.

They are the tail-end of abatement.

The whole purpose of the statute is abatement.

The statute, you've got to remember, follows directly upon the Clean Air Act, and the Clean Air Act, as you will recall, had only an injunctive provision in it, and it related only to compliance, only to on-going, only to abatement.

The one thing that this statute added to the Clean Air Act was the remedy of penalty, and that, by adding the penalty, what, it seems to me, Congress clearly did was to say we're going to add an extra incentive for you to stop sooner because by saying that you're going to get penalties and not just an injunction, it becomes very much to your advantage to stop at the earliest possible moment during the sixty-day period, for example.

You get your sixty-day notice.

If you can abate in there and stop, you have avoided your penalties and that's what the Act is entirely about.

Unidentified Justice: Well, Mr. Prettyman, what's the test for violation and to get into court in this citizens suit?

You don't really take the position, as I read your brief, that there has to be a violation on the day the suit is filed.

Mr. Prettyman: Correct.

I'm not sure I can define it any better than I did a little while ago, and that is present non-compliance for failure to correct the situation.

Our definition would be that if there... the 5th Circuit pointed this out in Sierra Club v. Shell Oil that you can't just take an excedence here, an excedence there, and kind of bunch them all together and say this is an on-going violation.

What you do is you kind of look behind them and you see is there a reason for this, is it on-going, do you have here somebody who has just turned off the spigot in order to avoid a suit, is it a periodic episodic violator who is just trying to avoid suit.

In other words, the District Court can look at the facts very much as he does in a regular injunction proceeding to determine whether there is a problem which is creating excedences which you have not corrected, you have not done anything about.

If you have not, then it is an on-going violation.

Unidentified Justice: And if there's any question about the efficacy of the so-called correction, is that something that would xx the citizen to sue and litigate about?

Mr. Prettyman: Might well.

Now, for example, let's suppose you have taken some action, but it's the improper action, it's ineffective action, it's not enough action, it won't work, that's something that the court would be entitled to look to to see whether, in fact, there is an on-going problem that you have not properly addressed.

Unidentified Justice: So, possibly, the Plaintiffs below had at least that much of a complaint with regard to the TKN problem.

Mr. Prettyman: With great respect, Justice O'Connor, that just isn't possible in this case because they knew that we had installed a system.

They knew that the system had been approved by the state.

They knew that thereafter the state met and said we think we've got this under control.

They knew--

Unidentified Justice: Mr. Prettyman, didn't the District Court find, I think this is the word they used, that the attempt to correct was lackadaisical and exceedingly unconcerned attitude toward correcting anything, and in the thirty-one months prior to the suit, the plant was in compliance with permit conditions only four months?

Mr. Prettyman: --That, Your Honor, related to the prior period, when we were still wrestling with getting this whole thing into place, and we may well have been in violation, in an on-going violation at that time.

It may be that we could have sued at that time, but he's not referring to the later period where, if you'll see, I think this Joint Appendix 115, in that area, where he says that at the end, which is the period we're talking about, just before they brought suit, these were unavoidable and were anticipated.

As a matter of fact, in all the plans that the state had looked at prior to that, they had always put in a period for excedences after the system went into effect because they knew that even after you put the system into effect, you're going to have a period of excedences that you can't avoid.

Unidentified Justice: Mr. Prettyman?

Mr. Prettyman: Yes, sir.

Unidentified Justice: If they put it in twelve months ahead of time, they wouldn't have had that problem, would they?

Mr. Prettyman: If they had put the new system in before they did, it would have stopped sooner?

Unidentified Justice: Yes.

Mr. Prettyman: There's no question about that, Your Honor, and I'm not--

Unidentified Justice: There would have been no possibility of filing a suit.

Mr. Prettyman: --That's--

Unidentified Justice: But they didn't.

Mr. Prettyman: --Well, I wouldn't say that there's no possibility of filing a suit, depending upon how quickly they did it and what xx but this suit is not about, and even Respondents do not say it is about, whether the penalties were correct, assuming that penalties should be issued because we didn't move quickly enough.

What the suit is about is whether you can get penalties at all for purely past violations as--

Unidentified Justice: Mr. Prettyman, suppose there is an on-going violation under your own definition at the time the suit is filed, but within two or three months, the whole matter is cleared up, now, you would say the suit was proper at the outset, but does it then... should it then be dismissed when there is compliance?

Mr. Prettyman: --If there was jurisdiction at the time that the suit was brought because there was an on-going violation at that time, the District Court got jurisdiction.

Unidentified Justice: Got jurisdiction and the citizens suit was proper at that time.

Mr. Prettyman: Correct.

Unidentified Justice: What happens then when there is compliance?

Mr. Prettyman: Well, first of all, I assume if he was satisfied with the compliance, he would not issue an injunction, but he may well issue penalties.

Unidentified Justice: For what?

Mr. Prettyman: For the period up until the time that they stopped.

Unidentified Justice: Why could he... well, why should he be able to issue penalties for violations prior to the filing of the suit?

Mr. Prettyman: Because, Your Honor, at the time the suit was filed, there was jurisdiction and the reason that there was jurisdiction was that this statute required an on-going violation at the time suit was filed and in your hypothetical, there was an on-going violation.

Unidentified Justice: So, you essentially agreed with the Government in that regard?

Mr. Prettyman: Absolutely.

The Government and we are very close on our interpretation of that, and perhaps I ought to turn then to one difference between us and the Government before I come back to other matters.

Unidentified Justice: Mr. Prettyman, I take it your answer to one of Justice White's questions, however, is, or is it, that under those circumstances, the District Court should dismiss the complaint?

Mr. Prettyman: No.

Unidentified Justice: Jurisdiction and then there was compliance, what happens to the lawsuit?

Mr. Prettyman: No.

What I would say under those circumstances is that he should not issue an injunction if he's satisfied that there is true compliance and abatement, but that he may well decide to issue penalties because he had jurisdiction at the time that the suit was brought.

Now, I want to say just one thing before I get to this business of allegations.

I just want to point out to you that, really, this statute makes no sense if you're going to treat it as going to past violations.

Let me just give you two brief examples.

The citizen would be giving notice of something that's already abated.

All the courts that have looked at this agree that one of the purposes of giving sixty-day notice to the permit holder is to allow him to get himself into shape and to abate, to get rid of the problem.

Here you have a situation where somebody is suing for penalties five years old, maybe fifteen years old, because we don't know what the statute of limitations is.

There is none in the statute.

So, you're suing for fifteen years old and you're giving the man sixty days notice for what?

It doesn't make any sense.

The only thing that makes sense is that you're giving him sixty days notice of an on-going violation.

One other example.

The citizen couldn't sue for past violations when the Administrator is already suing for on-going violations.

I realize this is a little difficult, but if you will look at the language in 1365, you will see that what it says is that when the Administrator is actively prosecuting a suit for compliance, the citizen can't come in and sue.

Now, the only way that makes any sense at all is if they're both trying to sue for the same thing; that is, the citizen is trying to sue for an on-going violation, and the Government is suing for an on-going violation.

If you have the citizen stopped from suing for past violations because the Government is suing for present or the Government is not suing for present and they are both suing at the time, same time, for past, it doesn't... the statute doesn't hang together.

It makes no sense.

But let me move then to the one point of difference between us and the Solicitor General, and that is this business of the allegation.

He puts a great deal of stress on the word "alleged", and he feels that a good faith allegation of on-going violation gets the citizens past the jurisdictional requirements of an on-going violation.

Now, I want to emphasize, as we've already pointed out, that the Court of Appeals never passed on this, and that even the District Court said that the good faith allegation related only to TKN and, Justice O'Connor, TKN was the smaller part, as you know, of the award.

A million dollars was for chlorination, which stopped twenty months before.

But even as to TKN, that's very confusing because the Government concedes that once you make an allegation and we contest it under 12(b)(1), the Court can go behind it, and all we're saying is here you xx allege all you want to that something is on-going but if, in fact, we challenge you, you have the burden of proving that it's true.

This is true in any kind of a suit.

It's true in a suit where I file a suit against you on diversity grounds in Pennsylvania and I attach all of your prior reports to show you were there and you file a motion dismissing saying I'm sorry I moved into your state of Maryland since my last report.

Unidentified Justice: Isn't the Government's position that it should apply something like Rule 11 of good faith belief?

Mr. Prettyman: Yes, but look what that does, Your Honor.

Someone who files a group of DMRs just as someone who files your last ten quarterly reports would, in good faith, believe that we are in the midst of an on-going violation or that you are located in Pennsylvania.

But if that is attacked and, in fact, you have moved from Pennsylvania into Maryland and if, in fact, our violations have come to a halt prior to suit, they have been abated, they have been cleaned up and stopped, which is the purpose of the Act, then all we're saying is that you can't go ahead with a suit where a mere allegation gets you to trial.

If the allegation is wrong, it doesn't make any difference what your good faith is, it is wrong.

I see I don't have much time left, and if I could, I'd like to save just a few moments for rebuttal.

Thank you.

Chief Justice William H. Rehnquist: Very well, Mr. Prettyman.

We'll hear now from you, Mr. Claiborne.

ORAL ARGUMENT OF LOUIS F. CLAIBORNE ON BEHALF OF RESPONDENT

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

It may be useful to begin by indicating the degree to which both the District Court and the Court of Appeals did deal with the question of whether there was a risk of repetition of the violations which it had noticed for the past.

I simply want to draw the Court's attention to two footnotes, both reproduced in the Appendix to the Petition.

The first one is from the District Court Opinion and appears on page 38(a).

It's Footnote 8, and there one finds the District Court's holding, alternative holding, that at the time the complaint was filed, there was sufficient ground to believe in good faith that the problem had not been cured.

What is more, the Court itself indicates--

Unidentified Justice: Is that in Footnote 8, on page 38(a)?

Mr. Claiborne: --Yes, Your Honor.

The problem of determining whether a violation is continuing is highlighted.

Well, in this case, skipping a bit, with the history of violations, its TKN violations, in the winter time, Gwaltney had just experienced another winter of repeated violations, despite the change it had implemented in its waste water treatment system.

At the time of trial in December 1984, now that's six months after the complaint was filed, one of Gwaltney's own witnesses expressed doubt as to whether Gwaltney would meet its TKN violations... limitations.

It was not until Gwaltney had experienced a full winter, the following winter, after the trial, without problems that it could make its motion to dismiss based on its present compliance with a secure belief that it was, indeed, in compliance.

Now, the Court of Appeals, and here I refer the Court to page 7(a) of the Appendix and Footnote 9, looking at the second paragraph of that footnote, and the second sentence of that paragraph, the Court of Appeals says

"a very sound argument can be made that Plaintiff's allegation of continuing violations were made in good faith despite the fact that Gwaltney had not actually violated the Act since May 15th, 1984. "

Unidentified Justice: Well, Mr. Claiborne, what about the Footnotes 25 and 26 that Mr. Prettyman referred to in the District Court Opinion, which basically say the District Court believes that to conclude there were continuing violations would be too speculative on the present record?

Mr. Claiborne: I think those, Justice O'Connor, those two statements can be reconciled.

What the Court is saying is that at the time of filing and at the time of trial, there was ground to fear that there would be repetition of the excedences, so called; that is to say, violations in winter time.

By the time this opinion is written in June of 1985, the Court, having experienced a winter without violations, is now saying we don't have ground to fear for the future any longer.

They are different times we are talking about.

Unidentified Justice: You don't think the District Court Opinion reflects the situation as of the conclusion of the trial?

Mr. Claiborne: I do, Your Honor.

Unidentified Justice: And that these footnotes indicate that the Court found that too speculative to find an on-going violation at that time?

Mr. Claiborne: That is exactly... Justice O'Connor, I may have mis-spoken.

What I meant to indicate was that the Court found that in June of 1984, when the complaint was filed, and in December of 1984, when the trial was held, there was still ground to fear that the system, the new system, would not handle the problem during the winter.

When this opinion is written and that is what the ultimate footnotes are addressing now, judgment being entered, it would be speculative to suppose that... the winter having gone by without incident, it would be speculative to suppose that there would be problems for the future.

Unidentified Justice: Once the trial was over, how does the Court know what's happened between the time the record is closed and he writes the opinion?

Mr. Claiborne: I don't know, Your Honor, I, frankly, don't know whether the Court was made aware of the absence of violations between December and June.

Unidentified Justice: Well, I would suppose that he was reflecting in these footnotes what was true at the termination of the trial.

Mr. Claiborne: Well, I'm attempting to tax the District Judge with--

Unidentified Justice: That would be the normal... wouldn't that be the normal assumption?

Mr. Claiborne: --Well, Your Honor,--

Unidentified Justice: That he'd be writing his opinion based on the record that was made.

Mr. Claiborne: --the footnote to which I have referred, Footnote 8, very clearly indicates that not only in the Court's view, but in view of the expert for the Defendant there is ground to fear that the problem had not been solved as of the date of trial in December 1984.

Unidentified Justice: Well, why shouldn't the rule be for this jurisdictional argument or the citizen bringing suit, at the time of filing the suit, which in a lot of courts will be an awful long time before the trial.

Mr. Claiborne: Your Honor, xx is only a preamble to xx is Your Honor has indicated, xx is perhaps a little logic in focusing on the state of mind of the Plaintiff and the grounds for objective belief at the time of filing as opposed to the time of judgment, and, yet, my learned friend, seem to indicate that he would condone the assessment of penalties entirely for the past provided that at the time of filing there were an on-going violation, even though it had been demonstrated that the problem was cured before judgment was entered.

Now, that, to us, highlights the reason why it is not sensible to focus on the notion of on-going violation at all, whether at the time the suit is filed or at the time when judgment is entered, and it is for that reason that we cannot embrace either the 1st Circuit's decision or the Government's brief here, albeit they might resolve this case favorably to us, because it seems to us that the logic must be that if it matters whether there's an on-going violation, the time when that matters is when penalties are being assessed, not when the suit is being filed.

Unidentified Justice: So, you want us to take the case as it comes to us and decide whether the Court of Appeals is right or wrong?

Mr. Claiborne: Indeed.

Unidentified Justice: On its theory?

Mr. Claiborne: On its theory.

Unidentified Justice: On your construction of the statute, what do you make of the purpose of the sixty-day notice provision, which your opponent says doesn't make sense unless it's given opportunity to abate?

Mr. Claiborne: I'm grateful to the Chief Justice for having focused my attention on that question.

Legislative history as to the reason why that sixty-day provision was inserted never mentions one reason being to afford the violator an opportunity to get off the hook.

That is no where suggested in the legislative history as a reason for the notice.

The reason for the notice is to allow the Government, indeed, both Governments, federal and state governments, to take this opportunity to decide whether they wish to enforce the Act and thereby preempt the citizen's suit, and that is--

Unidentified Justice: But the notice doesn't just go to the Government; it's notice both to the Government and to the violator.

What's the reason for the notice to the violator?

Mr. Claiborne: --I suppose, Justice Scalia, that there are two reasons for the notice going to the violator.

The first is that when a violator or an alleged violator is being reported to the authorities as such, as violating the Act, it seems only fair to give him notice of that, not so that he can get off the hook for the past violations, but perhaps so that he will more quickly come into compliance and afford himself an opportunity to be liable for fewer penalties for a shorter time.

It does have that effect of goading the violator into ceasing more quickly, not in order to be totally absolved for the past, but to shorten the period for which he will owe penalties.

If, indeed, penalties are appropriate and we do not maintain that penalties are always appropriate no matter how isolated the violation, no matter how old it may be, no matter how quickly it was corrected, those are matters which the District Court in its discretion may determine at the penalty phase it had no bearing on the jurisdiction of the Court to entertain the case--

Unidentified Justice: Well, Mr. Claiborne,--

Mr. Claiborne: --and ever bearing on the--

Unidentified Justice: --I'm troubled by suppose we have a situation of two or three isolated violations, five years before the suit is filed, and the citizen files the suit seeking only civil penalties for those prior violations.

Now, you want us to hold that that kind of a suit is perfectly permitted and that the Court has jurisdiction, right?

Mr. Claiborne: --I would say, Justice O'Connor, there may be a question about whether five years is beyond--

Unidentified Justice: Well, there's no statute of limitations.

Mr. Claiborne: --Well, that's not entirely clear.

There is a suggestion that the statute--

Unidentified Justice: Well, let's not go off on that.

Let's assume there is none.

Mr. Claiborne: --It so happens the statute of limitations would be applicable as a five-year one which is the only reason I mentioned it.

But let's say it's four years ago and otherwise the matters are as Your Honor suggested, that is a case in which we would say there is jurisdiction in the District Court to entertain the citizen complaint.

Unidentified Justice: Well, now, the penalties go only to the Government, is that right?

Mr. Claiborne: That is so.

Unidentified Justice: And how does the citizen have standing in a constitutional sense to come in and get those?

Mr. Claiborne: Well, let me say, first, that the question of standing had not been taken to this Court.

Unidentified Justice: Well, I know, but doesn't that form an interpretation of the statute?

Mr. Claiborne: Well, it may be that because the standing in strict sense is jurisdictional, it's before this Court in any event, and I'm not trying to avoid the question; I'm just giving a preparatory explanation.

In our view, standing in the citizen complainant, and he must be under the statute not any citizen but one who is aggrieved by the pollution which occurs, that means, and as is true in this case, that a member or more members of the organization must live on or near the affected water and be injured by its pollution, either in his commercial or recreational activities there.

That shows that he has injury in fact.

Now, it is perfectly true that the assessment of penalties will not immediately and directly redress that injury, but it will have a substantially beneficial effect on his interest in that river in the following three ways: first, the threat of the imposition of such penalties is likely as the EPA policy on penalties is at pains to indicate to deter him from violating in the first place.

But even after he has violated, if he has been assessed substantial penalties, it is an assurance that he will not return to his old ways.

Even in circumstances where injunction would not have been necessary, the assessment of penalties against him does obviously deter him from doing it again.

Unidentified Justice: Well, it seems to me--

Mr. Claiborne: But, thirdly,--

Unidentified Justice: --that really is stretching any traditional notice of standing.

Mr. Claiborne: --Your Honor, I think not.

It has a very particular effect on the particular river and the particular injury that this individual Plaintiff is concerned about, and the third way in which it relieves his concern is that it deters not merely that same violator but others on the same river or river system who would otherwise feel free to pollute the river until enjoined.

Unidentified Justice: On that analysis, you would say that Congress would have the power to confer standing upon any citizen to prosecute violations of crimes within his community, right?

Congress could pass a law saying the United States Attorney shall no longer be the sole person who can prosecute crimes, but any person in the community in which a crime occurred may bring a prosecution?

Mr. Claiborne: Justice Scalia, there are, I assume, independent reasons not related to standing why an individual ought not be permitted to prosecute criminally.

So far as the answer on standing, I suppose the answer must be yes, that prosecuting for crimes and prosecuting for penalties would serve the interest and protect the values in that river to the same degree, but--

Unidentified Justice: But I thought your answer to Justice O'Connor's question was that you had to be affected by the particular pollution in question before you could sue as a citizen and, therefore, it seems to me your answer to Justice Scalia ought to be the logical counterpart would be to allow victims to bring a prosecution for crime but not just anyone in the community.

Mr. Claiborne: --Well, I suppose that Justice Scalia was really asking me, and I shouldn't be making such assumptions, whether this same citizen who lives on or near the river would have equal standing to bring a criminal prosecution as he does in my submission to bring an action for civil penalties, and put that way, my answer is yes, he's got equal standing, but the privilege of prosecution is one that, for other constitutional reasons, not standing, are not available to the ordinary citizen.

Unidentified Justice: You never got to your third reason, the third way that a citizen... that this person is affected.

Mr. Claiborne: Justice White, the third way is in deterring others--

Unidentified Justice: I see.

Mr. Claiborne: --on the same river who would otherwise feel sanguine about polluting the river, and I must say that we are talking here about the imposition of civil penalties, not a marginal peripheral unimportant sanction.

It is, as the EPA policy has made clear, probably the most important sanction in government enforcement.

One would suppose that when the citizen is given the privilege of standing in for the Government, provided he has standing or personal interest in the matter, he ought to have as much as possible the same weapons.

Now, he cannot issue administrative orders.

He cannot institute criminal prosecutions, but when it comes to civil actions, one would expect him to be able to obtain like relief and this relief, the imposition of penalties, is the most important instrument because, otherwise, a polluter has every incentive to delay compliance and to profit by his advantage over complying competitors and to delay the expenditures.

Unidentified Justice: Are attorneys' fees available in these suits?

Mr. Claiborne: They're available in both directions, Your Honor.

Congress was well aware that there might be a tendency to abuse the citizens supervision, so it provided and the legislative history notes it that attorneys' fees are available to the Plaintiff, but they're available against him if he files frivolous, vexatious or harassing litigation, and that, of course, is a deterrent to the frivolous plaintiff who--

Unidentified Justice: Mr. Claiborne, what is the status of the civil plaintiff who's a property owner along the river who says his property was damaged by the pollution?

Does he have any remedy?

Mr. Claiborne: --Under this Court's holding that there is no action for damages in federal law, he would not be able to invoke either the Clean Water Act or the Federal Common Law in order to make himself whole, but he would be free to invoke state damage remedies.

Unidentified Justice: Isn't that sort of anomalous?

Mr. Claiborne: It would be state law to obtain damages.

Unidentified Justice: Isn't it sort of anomalous that there's no federal remedy for the direct injury, but there's standing to sue on behalf of the Government for penalties?

Mr. Claiborne: Well, it isn't--

Unidentified Justice: Not really on behalf of, but--

Mr. Claiborne: --It would be extraordinary if the solution to the standing problem were to have a Treetom action, which the Court has more than once indicated presents no constitutional problem, which Congress only last year reaffirmed and widened with respect to the False Claims Act, thereby if we had a Treetom action in which the informer had a pecuniary interest because he got a share of the assessment and, yet, he would widen the class of potential plaintiffs to include any citizen, as is true under the False Claims Act, now that simply cannot be a way one solves a constitutional standing problem and, yet, it would seem to be, if this Court were to hold that there is such a problem, a simple remedy for Congress at the next session.

Now, I want to... I am making a very disconnected argument, but I want to stress that Congress did not use language in this statute with all the precision that one might have hoped for.

There is loose language.

There is misuse of language.

That is easily demonstrated by anyone who reads the Act.

It seems to us that the Court ought to prefer to tax Congress with loose language, a lapse of tense perhaps, not clearly but perhaps, even somewhat illiterate sentences here and there, rather than to attribute to Congress a scheme which is downright nonsense.

It is downright nonsense to say there shall be penalties assessable in citizen suits.

As to that, there can be no question.

The statute says so.

It certainly works.

And then to say oh, but, that means only in those rare cases, because they must be rare, in which despite having been notified sixty days before, the polluter is so perverse and so improvident as to continue his evil ways until the day of filing or perhaps the day of judgment, maybe that's the Government's position, I'm not sure, because otherwise he is excused from all penalties and the Court has no power to impose them.

One thing or the other.

It is conceivable to hesitate to give the power to assess penalties going to the Treasury for private payment.

One can understand that, but once you do give a plaintiff that power, you don't take it all back from him and make it available only in that rare case that it will almost never occur; that is the case where the polluter is so perverse and so improvident as to continue his violation long enough to give the Court jurisdiction to enter these awards.

That simply cannot have been the intent of Congress.

The... it was mentioned that Section 505(1)(b), this is reproduced in Petitioner's brief at page 3, refers to an action to require compliance and that is an action to require compliance by a citizen which would be barred if the Government had previously filed.

And the suggestion is that an action for penalties is not an action to require compliance; therefore, Congress is telling us here that it never intended to authorize an action for penalties.

Now, we know it did.

So, we're a bit at a loss, but the other thing to be noticed about this provision is that it doesn't use language quite so fastidiously.

The words are that the Federal or State Governments, the citizens suits will not lie if the Federal or State Governments has commenced and is diligently prosecuting a civil or criminal action in a court of the United States to require compliance with the standard of limitations and so forth.

Let me say a criminal action is not, strictly speaking, an action to require compliance any more than an action to collect penalties.

What is proved here is simply that Congress was not punctilious in its use of language, not that it meant that there was no action by the citizen to secure an assessment of penalties.

Indeed, the Congress, in 1985-86 and '87, made quite clear that it understood itself some years earlier to have authorized citizens suits in respect of wholly past violations and to the assessment of penalties without an injunction in those circumstances.

I draw the--

Unidentified Justice: --Mr. Claiborne, that section may bring the realization of the question I asked you because it permits the citizen to intervene as a matter of right in the criminal action apparently.

Mr. Claiborne: --Again, Justice Scalia, I wonder whether they really meant it.

I think that is rather a lapse.

We do not claim that right.

The Section 309(d) was added in 1987.

It had been prepared in 1985 and 1986, the provision, for quite independent reasons, was vetoed by the President, and, so, was not enacted in its final form until 1987.

Its purpose, so far as we're concerned, was to add to the Clean Water Act an ability for the Administrator to assess penalties administratively.

He had already issued cease and desist orders administratively, but he could not assess penalties in this way.

Having given the Administrator that authority and we are clear on both sides that this authority relates solely to past events, solely to past violations, which attract the civil penalties, Congress went on to say that a citizens suit would lie in respect of the same violations only if notified or filed before the Administrator acted.

Now, according to the Petitioner, that was unnecessary to say because there could be no citizen suit notified or filed in respect to purely past violations.

Here is Congress indicating that it understood otherwise.

I may say that the Petitioner himself obviously understood otherwise during the eleven months before the filing of the motion to dismiss on this ground and when it took the trouble to seek amendment of the summary judgment that had been entered in August 1984, to absolve itself in respect of the violations that had occurred before it acquired the property, what was the point of that, except that it feared that penalties would be assessed in respect of those old violations.

It was only eleven months later that, and only when the 5th Circuit handed down its Hamford decision that anybody for the first time focused on the present tense in 505 and said, oh, this qualifies, the entire statute, we had it wrong, no penalties can be assessed in a citizen suit, except only, when for reasons not easy to understand, when they are, in effect, combined with an injunction.

The one time you don't need penalties because the injunction serves the purpose and its violation will, of course, attract civil and criminal contempt penalties of its own.

For these reasons, we pledge affirmance of the judgment of the Court of Appeals.

Chief Justice William H. Rehnquist: Thank you, Mr. Claiborne.

Mr. Prettyman, you have two xx--

ORAL ARGUMENT OF E. BARRETT PRETTYMAN JR., ESQ. ON BEHALF OF PETITIONER -- REBUTTAL

Mr. Prettyman: Just a few very quick point, Your Honor.

I would urge that you read the end of Footnote 9 which my good friend for the Respondent xx did not get to, and call your attention to the first part of it.

We filed a motion to dismiss almost a year after the last violation, which clearly alerted the District Court Judge that there had been no violations during the course of that year when he ruled he was fully familiar with that.

I have to go outside of the record to make the following statement, and that is that there have been none for now four years, and I say that with equanimity because I am sure my Respondents won't dispute it.

There was one hurricane upset, but other than that.

The problem with the Article 3 is that I think it may be directed to your question, Justice Scalia, to perhaps the wrong point.

The real problem with Article 3 is redressability; that is, when all of the penalties go to the Government and you don't have an injunction going to the underlying fact, you have an injury that is not redressed by any remedy and that xx the Article 3.

xx the Court to be very careful here if it's going to open the flood gates to these past suits because you know you're not only going to have these federal suits for going back we don't know how many years, maybe fifteen, but we're going to have many state claims, you're going to be trying state claims in federal courts going back fifteen years, which is going to be attached to these federal claims, which is going to cause great hazard to the federal courts.

Thank you very much.

Chief Justice William H. Rehnquist: Thank you, Mr. Prettyman.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Wright v. Roanoke Rede v. & Housing Auth. - Oral Argument

Fri, 09 Jan 2009 14:48:31 +0000

Case:

Wright v. Roanoke Rede v. & Housing Auth.

Media File:

85-5915_19861006-argument.mp3

Related Transcript:

1986_85_5915_argument.xml

Transcript:

Argument of Henry L. Woodward

Chief Justice Rehnquist: We'll hear arguments first this afternoon in No. 85-5915, Brenda E. Wright et al. versus the City of Roanoke Redevelopment and Housing Authority.

You may proceed, Mr. Woodward.

Mr. Woodward: Mr. Chief Justice and may it please the Court:

The petitioning public housing tenants in this case and the Roanoke Housing Authority agree on one critical point of the case: Where a Section 1983 plaintiff has a substantive right under federal law, we are in agreement that there arises a presumption that Congress intended for a private enforcement action to be possible rather than precluded.

The major issue before the Court is how that presumption operates.

Unknown Speaker: Mr. Woodward, from what you say I gather that's a somewhat different test than the test for an implied cause of action under a federal statute?

Mr. Woodward: We believe that it is, Your Honor.

It has some elements in common, but I believe that the experience of the Fourth Circuit in trying to address the preclusion inquiry here shows that the traditional Cort versus Ash four-step approach is not really going to serve the express Congressional purposes of 1983 adequately.

Unknown Speaker: And why do you say that?

Mr. Woodward: Well, looking specifically at the pieces of the Cort versus Ash test, some of them just don't seem to fit very well.

The first, which has to do with identifying a substantive right really, is in the 1983 context presumed, if we've gotten that far, by the Pennhurst sort of analysis.

If there is no substantive right, then we don't get to the preclusion question.

So that part of the traditional four-part test for the implied right is not directly a part of the preclusion inquiry for 1983.

The other piece that just doesn't fit very well with the nature and purpose of 1983 is perhaps the fourth step of the Cort versus Ash test, that which would have us look to whether the matter is one in which state law has something to say.

And that doesn't fit very well because of the traditional federalism concerns of Section 1983.

It has traditionally been viewed by this Court as a supplemental remedy to whatever the state may provide.

Unknown Speaker: Certainly it is as a practical matter kind of awkward to have two different tests for such closely related things, isn't it?

Mr. Woodward: Well, there is some awkwardness.

On the other hand, unless some specific method is found of addressing the particular nature of Section 1983, then the demands of that statute and the intent of Congress expressed in that statute are just not likely to be recognized.

Now, we concede that there is some similarity in sort of the middle and the core tests of the implied rights inquiry, that is the inquiry into Congressional intent, and the Section 1983 inquiry about preclusion.

But there is a difference of where they're coming from as well.

The implied rights inquiry is really traditionally applied in the context of a plaintiff trying to meet a burden of establishing Congressional intent, from whatever evidence is available.

In the 1983 context, the Congressional intent that you start with is the expressed intent, express intent in 1983 itself.

Unknown Speaker: Where there is a state involved.

Mr. Woodward: Where a state or a state actor is involved, yes.

Unknown Speaker: This is the class of cases that 1983 applies to?

Mr. Woodward: That is correct.

It is defendant-specific, in that sense, and it is only in that context that this area of examination of Congressional intent would be different from the implied rights inquiry.

The nature of Section 1983 is such that the sort of evidence that will suffice to justify preclusion has to be substantially greater than that which would defeat a plaintiff attempting to establish an implied right of action.

And the reason for that is that there is, after all, in 1983 that express intent that private parties have that remedy against that certain class of defendants.

And so it should not be, that express grant of authority to proceed, should not be really impeachable, except by equally strong evidence.

Unknown Speaker: It's only if there is some identifiable federal legal right involved?

Mr. Woodward: That is correct, Your Honor.

We would concede that you have to identify a right secured by the Constitution and laws, as Section 1983 requires.

But I think that the chief problem in this case was not the identification of a right.

The Fourth Circuit may have been a little reluctant about it and they never really examined the Brooke amendment, but they seem to concede that there was a right involved there and to focus instead on the enforceability.

Unknown Speaker: Well, your opponent certainly challenges that.

Mr. Woodward: Well, I think in some respects he does.

He challenges only whether the right extends to the reasonable allowance of utilities, as we say that it does.

He doesn't appear to challenge that the Brooke amendment itself establishes some rights in tenants.

Unknown Speaker: Well, your opponent thinks that the right ought to appear in the statute.

Mr. Woodward: Well, I think it does, Your Honor.

It doesn't appear expressly in the Brooke amendment, but the Brooke amendment does limit the portion of tenant income that can be applied to rent.

What you have to do, since that doesn't say what you get for your rent, it only says how much rent you pay, you have to look elsewhere in the statute to see what you get for the rent.

And the elsewhere that we would recommend is the definitional part of what was originally 1437(a), that says--

Unknown Speaker: You don't think you have to rely on the regulations?

Mr. Woodward: --Pardon?

Unknown Speaker: You don't think you have to rely on the regulations?

Mr. Woodward: We don't have any reservations about reading that together with the statute, but we think that there is adequate strength in the statute itself if we had to do that.

This is not a case where we have to separate the regulation and the statute, because they are closely tied.

But I'm trying to point out that there is in 1437(a) a definition of low income housing that includes not only the dwelling, but also embracing the necessary appurtenances thereto.

Now, both before and after Congress passed the Brooke amendment HUD's regulations interpreted specifically or prescribed specifically what tenants were supposed to get for their rent.

And in those regulations, HUD said not only the dwelling, but also the equipment that's included in the dwelling, necessary services, and reasonable amounts of utilities.

That was the standard before and after the Brooke amendment was adopted, and that was the standard that the Housing Authority and the tenants and HUD and everybody agreed on.

So that when the Brooke amendment was adopted, that limitation of 25 percent, now up to 30 percent, of family income that could be charged was to include those things which the Housing Act had previously and was in the future to contemplate being provided in exchange for rent.

It should be no mystery that the Brooke amendment itself doesn't say utilities.

The Brooke amendment doesn't attempt to say what's covered.

It only says what the tenant pays, and what he gets is clear from the other part of the statute and from the regulations.

Now, it was only in 1980 that HUD went beyond its previous approach of non-mandatory guidelines to establish a firm and binding and mandatory regulation that explained how utilities allowances were to be calculated.

And it did so in no uncertain terms, and it made a... it mandated that the housing authorities receiving public housing subsidies begin to implement that regulation immediately, and set an outside deadline of 120 days for doing so.

The regulation provided both procedural steps to be followed in calculating the allowances and it set a substantive standard, the intent being that not more than ten percent of the tenants in a given size of housing unit should have to pay anything more than their 25 percent maximum of income rent in order to enjoy the utilities allowance established.

When that happened, the Housing Authority was duly notified by HUD, as the record shows, and told to implement it not later than 120 days from the date of promulgation, and the Housing Authority simply refused to do it.

The Housing Authority continued to use an allowance of utilities which was so low that they could no longer explain how it was calculated.

And instead of it providing adequately for 90 percent of the tenants, it seems to have resulted in the charging of additional surcharges to 90 to 100 percent of the tenants in most of the sizes of apartments, for most of the quarters.

This state of affairs continued even after the 120 day deadline had passed, even after tenant demands had been made for recalculation, even after the filing of this suit.

So there is simply no question that the Housing Authority in this case simply refused to follow the mandate of HUD.

Now, the tenants complained in the district court that this was illegal and they sued to get their money back that had been collected in excess of their maximum Brooke rent during the period in which these surcharges were in effect.

They sued under both 1983 and under their leases with the Authority.

The Fourth Circuit, focusing chiefly on the 1983 question, found that Congress had intended to preclude such private actions for enforcement, notwithstanding the specificity with which the Brooke amendment identifies the tenants as the beneficiaries, in fact the sole beneficiaries, of the rent limit in that statute.

And the way in which the question was approached I think suggests the weakness of trying to apply uniformly a Cort versus Ash sort of inquiry, because it led to what is definitely a wrong conclusion.

Despite the fact that in this context there is no Congressional express preclusion of private suits... there is nothing in the statute, there is nothing in the legislative history that says private parties may not sue... and despite the absence of any express private remedy effective in these circumstances, such as was present in the Middlesex County Sewerage Authority versus National Sea Clammers case, the Fourth Circuit reached out to find from the very, very modest evidence of the granting of administrative authority to HUD over this program that that represented Congressional intent to preclude a Section 1983 remedy.

Now, when you examine that evidence you have to conclude that this is fairly modest administrative authority even relative to other federal grant programs, such as the AFDC program for instance.

It does not extend, according to HUD itself and to the wording of the statute, to withdrawal of operating subsidies from a noncomplying housing authority, except in very narrow circumstances.

The administrative authority of HUD operates only through the annual contributions contract, and that section of the United States Housing Act which specifies what is to be enforced through the annual contributions contract does not even specify the Brooke amendment.

The Brooke amendment occurs in a different portion of the Act, suggesting that that's not one of the explicit things to which the contributions contract must be addressed.

It is also the case that HUD itself apparently does not believe it has the enforcement authority that the Fourth Circuit ascribes to it here.

While we believe that HUD may be overreading the extent of its lack of power here, HUD has taken the position in several cases which are cited in our brief that it itself has no authority to enforce the Brooke amendment.

That may be extreme, but it certainly appears to be the case that it was not given anywhere in the Act or in its administrative authority over housing authorities an exclusive sort of right to enforce the Act.

The degree to which the Fourth Circuit went astray here suggests to us the importance of returning to a more demanding standard for when a Section 1983 remedy may be precluded.

It is simply too great a derogation of Section 1983 to accept evidence so far afield as that in this case of HUD's authority as evidence of intent to preclude.

Where Congress has expressly established in 1983 a right for individuals to vindicate their federal rights, then we think it should take at least an equally clear expression in the program statute that invests the substantive right to bar the beneficiaries of that substantive program right from exercising the 1983 remedy.

Unknown Speaker: Well, Mr. Woodward, that's assuming that there is a substantive right enforceable by these plaintiffs at all, isn't it?

Mr. Woodward: That is quite correct, Justice O'Connor.

Unknown Speaker: And are we really locking here only at an alleged right that HUD itself created with regulations in 1980 and then withdrew in 1984?

Mr. Woodward: I think not, Your Honor.

I think that the Brooke amendment itself, the statutory enactment of 1969, ties in the right that we're talking about here.

Unknown Speaker: You don't rely, then, on the HUD regulations for the creation of this so-called right?

Mr. Woodward: We don't rely solely upon them.

What we think is happening here is the statutory creation of a right, which is refined, as it necessarily must be in the fine detail, by the regulations.

Unknown Speaker: Well, there certainly isn't anything in the Brooke amendment very specifically about these utility costs, is there?

Mr. Woodward: That's correct.

Well, what we are--

Unknown Speaker: So we really have to focus on the regulations, and that was for a very short span of time, wasn't it?

Mr. Woodward: --Well, it was for a four-year period, Your Honor, during which there was discussion about whether to change them, during which at any time HUD had the authority to waive these regulations as applied to this particular housing authority or as to housing authority generally... housing authorities generally... and did not do so.

So it is for a rather extended period of time, actually.

Unknown Speaker: If the regulation was consistent with the statute, it had the force of law, didn't it?

Mr. Woodward: That is our position, Your Honor.

It had the force of law because it was entirely consistent with the statute.

Unknown Speaker: Has there been any claim that the regulation is invalid?

Mr. Woodward: There has been no claim whatsoever of that, Your Honor.

The Housing Authority has suggested in various ways that the regulation was not a great idea, but it has at no time challenged its validity.

It has simply said that it could have thought of a better regulation, and it also contends that HUD eventually did.

And we don't challenge the decision of 19--

Unknown Speaker: So I suppose you would, or do you... if you say that the statute itself requires the inclusion of utilities, HUD would not be free to say that it doesn't?

Mr. Woodward: --I believe that's correct, Your Honor.

Unknown Speaker: But you don't think, you don't think HUD would have the authority to take a contrary position under the statute?

Mr. Woodward: I think that is so, Your Honor, because of the nature and purpose of the Brooke amendment.

Unknown Speaker: Of course, it isn't fatal to your case, I don't suppose, for you to answer the way, if you answered the other way and said that HUD could interpret the statute either way.

Mr. Woodward: Well, it may not be fatal to our case because they have not done so, of course.

But I think that the purpose of the Brooke amendment may create some problems for HUD if it sought to do so.

Unknown Speaker: I see.

Mr. Woodward: And the reason is that the legislative history contemporaneous--

Unknown Speaker: So you think a contrary regulation would very well be invalid?

Mr. Woodward: --I believe that's correct, Your Honor.

In the absence of any regulation, there is the legislative purpose, really, of assuring that only 25 percent of a low income family's meager income is allocated for the purpose of shelter.

That's repeatedly in the legislative history, and that purpose of shelter includes obviously more than just a roof over your head.

It includes all those things which housing authorities traditionally had provided.

That I think is what we are trying to show at page 24 of our brief, where we relate the Brooke amendment itself, Justice O'Connor, to the traditional HUD interpretation of what a tenant was to get for rent.

It is that combination of the amendment with the regulations of HUD explaining what you get for your rent that we think imports the utilities allowance to the Brooke amendment.

Unknown Speaker: Mr. Woodward, if you... you're suing for money as I understand it in this case?

Mr. Woodward: That is correct, Your Honor.

Unknown Speaker: And if you prevail in this case, would your opponent have a claim over against HUD?

Mr. Woodward: I'm not sure of that, Your Honor.

There is a recognized mechanism in HUD regulations for an adjustment to be sought or for special funding to be sought from HUD.

It is not entirely clear to us at this point that we or the Housing Authority would have the--

Unknown Speaker: I'm not suggesting you would.

But it seemed to me, as I understood the picture, what your clients don't pay HUD has to pay the difference.

Mr. Woodward: --That's correct.

Unknown Speaker: So that if you get a little more money out of your opponents, it seems to me they have to get that money from HUD.

Mr. Woodward: That is probably the case, Your Honor.

It is not entirely clear whether we get it, but that's the likely source.

Unknown Speaker: So they're not the typical trustee in this situation then, are they?

Mr. Woodward: Pardon?

Unknown Speaker: They're not a typical disinterested trustee insofar as they might have views on what should be done?

Mr. Woodward: Certainly not, and they're hardly a trustee as to the tenants' own money, which is really what's at issue here.

We're not talking about some tax, state tax base money.

We're not talking about something the Federal Government paid or didn't pay.

What we're talking about is tenant money in excess of what the Brooke amendment permits being returned to the tenants.

Unknown Speaker: And HUD has never actually tried to take a formal position in this litigation, have they?

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

We believe that wasn't necessary as far as getting an understanding of what the regulations mean, because the regulations really quite clearly say what they mean.

It might be a more difficult case if the Housing Authority had attempted compliance with the regulations and could show, other than by some ingenious speculation on the part of their counsel, what the difficulties might be in implementing the regulations.

But that is not the case here.

We don't have--

Unknown Speaker: Has HUD taken a position whether or not 1983 is available to your client?

Mr. Woodward: --I don't know that they have taken a position specifically with regard to this issue, Your Honor.

What they have done that's very important is--

Unknown Speaker: To say that they don't have much authority themselves at all.

Mr. Woodward: --That's it.

And they also said in comments upon the 1984 promulgation--

Unknown Speaker: And hence, the Congress could never have intended their regime to displace 1983?

Mr. Woodward: --Well, we would prefer not to be held accountable for the extent of their authority, but only for the extent of our clients'--

Unknown Speaker: Well, I know.

But if HUD has that limited an authority, you would say therefore Congress couldn't have intended to preempt 1983?

Mr. Woodward: --That certainly points in that direction, Your Honor.

It would require more than the very limited authority shown here, certainly.

The implications of the way the Fourth Circuit has treated this, of course, are substantial.

If with this very modest grant of administrative authority, whether you read it as the statute says or the way HUD reads it... either way, it's a fairly modest grant of administrative authority and what we believe is a very clearly vested sort of right in the individual.

If that combination in this case presents preclusion problems, then there will be preclusion problems or perhaps an insurmountable preclusion barrier in virtually any case in which an individual tries to vindicate their individual rights in a grant program, without regard to how specifically, how concretely, or how strongly Congress in the program statute vested the individual rights.

Unknown Speaker: Of course, one of the questions here is whether there is a vested individual right, isn't it?

Mr. Woodward: That is a legitimate question, Your Honor.

We think it is not hard to find the individual right that the Pennhurst inquiry calls for here, because of the specificity of the Brooke amendment itself, which both in its legislative history and in its original wording talks about the family's income, the fact that nobody else benefits from that limit... while it may operate as a standard for what HUD pays, it's only the tenants that benefit from that limit... and from the fact that the regulations that tie into the statute are themselves phrased in terms of the shalls and the mandatory elements of a right and focus very specifically, again, on what the tenant is to get for his rent.

Unknown Speaker: It's phrased in terms of what HUD will contribute to the local housing authority, not in terms of just an across the regulation, across the board regulation, isn't it?

Mr. Woodward: Now, I believe that ultimately it is tied into that, but my recollection of the regulation is that it does give absolute sort of legislative commands to the Housing Authority about how it must perform its duties.

And again, we're not talking here about an ambiguous performance of a duty or a discretionary performance.

We're talking about no performance at all.

This in that sense is the classic core application of 1983, where federal statutory provisions for the benefit of an individual have been absolutely defied.

Unknown Speaker: Mr. Woodward, excuse me for interrupting you, but I'd like to ask whether, is your position that any individual tenant could bring a Section 1983 action about any complaint he had?

Let's say the tenant felt the heat was inadequate or the maintenance was inadequate or the air conditioning wasn't working.

Could the individual go to federal court and bring a suit in 1983?

Mr. Woodward: That would be a very broad assumption, Justice Powell.

Unknown Speaker: Yes, but I want to know where the limits of your argument lead us.

Mr. Woodward: I don't think we need to go that far.

Unknown Speaker: I understand that.

Mr. Woodward: And the reason is this.

I think we're tied in this case to the very specific grant of substantive right which the Brooke amendment represents.

Now, the Fourth Circuit at least has held that other provisions of the Housing Authority... I mean, I'm sorry, of the Housing Act... don't go so far and don't grant a substantive right.

Without conceding that those decisions are correct, we recognize that the case... the issue must be addressed in each case.

It will not follow from a holding that the tenants may vindicate their Brooke amendment rights that any tenant may vindicate any right that he asserts against a housing authority.

It still must be specifically tied into some provision of the Housing Act which grants a substantive right.

Another important point about that--

Unknown Speaker: You mean these tenants have a right to get the utilities paid for, but they don't necessarily have a right to have the utilities working?

Mr. Woodward: --Well, I'm not going to assume that they might not, Your Honor.

I think that what I'm saying is only that, as far as the regulation goes, it doesn't... that we're relying upon, it doesn't address that.

Unknown Speaker: That's not a very appealing argument in the next case.

I mean, if we find a right here, won't you be arguing in the next case that, you know, what's the use of having utilities paid for--

Mr. Woodward: If they don't work.

Unknown Speaker: --if they don't work?

Mr. Woodward: If in that case it can equally be shown that that's tied... and I think it probably can, to follow the implication of your question... that it is tied to a right, then in fact we may have an enforcement problem.

But I think it's important to note that we have had that perhaps all along.

Since the Brooke amendment was passed in 1969, it has widely been assumed that tenants may sue under the Brooke amendment to enforce the rental limitation in that amendment.

The Fourth Circuit's decision precluding any suit under the United States Housing Act is really an aberration in terms of what has happened in the last 15 years.

It has been assumed that tenants could sue.

In fact, as the cases cited in our brief show, they have sued.

They have not sued in such overwhelming numbers as to flood the courts, but the assumption that they had suit available has been operative, and they have used those suits.

Unknown Speaker: You say "sue".

Now, of course your claim could be asserted in state court, if I understand you, could it not?

Mr. Woodward: Well, it is my understanding state courts have an obligation to entertain any federal claim.

The real question here is whether the federal courts also must entertain the claim.

Unknown Speaker: And as I understood the Fourth Circuit, it assumed that, A, there was a substantive right and, B, it was enforceable in state court.

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

We don't think that that addresses the question, though, of the problem that 1983 poses here, of course.

If there is a right to bring a 1983 claim, then it is also true that it can be brought in federal court.

Unknown Speaker: Well, why the preference for federal court over state court here?

Why not bring an ordinary landlord-tenant action in state court?

Mr. Woodward: It just wouldn't work in this particular context, Your Honor.

Perhaps in some it might, but in the courts of Virginia the court that would have jurisdiction over amounts of $200 and $300, such as is the case here, is the very lowest level of the courts and not of record.

And since there is no class action provision in Virginia, we'd be talking about 1100 individual tenant suits in that court to try to vindicate this right and get these damages back.

Totally impractical.

In other circumstances, in other courts, it might be possible.

But where Section 1983 permits this sort of suit in federal court and where the remedies are appropriate, we believe the Fourth Circuit should have addressed that.

I'll reserve the rest of my time, if there are no other questions, for rebuttal.

Argument of Bayard E. Harris

Chief Justice Rehnquist: Thank you, Mr. Woodward.

We will hear from you now, Mr. Harris.

Mr. Harris: Mr. Chief Justice and may it please the Court:

Perhaps if I might begin at a place that is an uncommon beginning, at the end.

The end of the case as presented to this Court is an end that we do not believe was anticipated by Congress in 1937, nor was it anticipated through the course of the legislative history of this statute.

Mr. Justice Powell has noted the question of whether or not an individual tenant can bring a complaint over other things.

Justice Scalia has rightly questioned whether the utilities might not be working and you might have a right to the money but not the utility to work.

We would submit to you that the regulations of HUD in this instance are identical to the Brooke amendment utility regulations, whether you view them from the question of maintenance and repair of the facilities, the ventilation, the plumbing, the heating, the electrical, or whether you view then merely from the narrow attempt of Petitioners to achieve utilities in the form of electricity.

Please allow me to be more specific.

24 CFR 966 had a precursor at 24 CFR 866 and had a precursor at the HUD handbook.

In each and every one of those instances, HUD has uniformly held that housing authorities, in order to be able to operate under the scheme envisioned by Congress in 1937, a scheme envisioning a lease and a relationship of landlord-tenant sorts of things, that under those provisions the PHA could charge maintenance for everything over ordinary wear and tear.

That is by regulation.

Moreover, they may charge late charges, they may charge for security deposits, they may also, incidentally... and this is true prior to the Brooke amendment... charge for excess utilities, particularly where those utilities are incurred through the use of major tenant-supplied appliances.

Congress has embodied those regulations in the very same statute upon which Petitioners rely in this instance.

Petitioners rely under what is commonly known now as the Brooke amendment, found at Section 1437a(a) of the Act, previously found at Section 1402, and embodied in the Housing Act in one form or another as a definition of low rent housing, which I might transfer into a definition of what you get for your dollar, ever since 1937.

In 1983 the Congress, realizing that HUD was about to repeal its regulations pertaining to the maintenance of the lease action, amended the Act at 1437L.

And interestingly and curiously enough, L happens to coincide with "lease".

1437L of the Act says that every PHA lease shall have a reasonable term, shall provide for decent, safe, and sanitary housing, shall provide for a time for eviction and notice of cause for eviction, things which HUD had before regulated.

Now Congress, recognizing that they were an essential part of that program enacted in 1937 and amended in 1947, '49, '59, '69, '74, and through the course then of the eighties in '81 and '83, Congress had linched its entire scheme of landlord-tenant proceedings on a lease, a lease which they had now, realizing that HUD might back away from the regulations, Congress enacted an amendment which said, no, you may not do it.

And so if it can be said that the Brooke amendment limit to rent under 1437a(a) and the regulations under 24 CFR 865, now 965, if these rise to a right or to a remedy, then so does every term of every lease in every PHA, for every one of millions of families in this country.

Unknown Speaker: Mr. Harris, let me just interrupt you with a question.

Do you agree that these people have a remedy in the state courts for the very thing they're claiming here?

Mr. Harris: Yes, sir.

Unknown Speaker: So there is a substantive right involved, then?

Mr. Harris: Yes, sir.

Unknown Speaker: I see.

Mr. Harris: There is a substantive right under the lease, if it please, Justice Stevens, to the extent that that relationship landlord-tenant, gives rise to a lease right.

The lease in this case, for an example, gives rise to a utility right.

The HUD regulations give rise to the same regulated utilities.

But that action under the Congressional scheme was a lease, a lease between the landlord and tenant, that ensured that the tenant would have no lesser rights in public housing in this country than would tenants in any housing in this country, nor, concomitantly, would they have greater rights.

And depending upon how we might view the federal judiciary, the remedy of the federal forum differs only.

But if you look at Congress' intent in 1937, it was a lease arrangement.

Unknown Speaker: Let me put a little different question.

Do the regulations regulate the amount of the rent?

Get away from all these fringe things like the utilities and the heat and so forth.

But they do impose a limit on the amount of rent that can be charged based on the person's income, is that right?

Mr. Harris: The statute does that--

Unknown Speaker: The statute does that.

Mr. Harris: --Your Honor.

Unknown Speaker: And if the Housing Authority should charge more than the permitted statutory rent, would there be a remedy in federal court for that kind of thing?

Mr. Harris: No, sir.

Unknown Speaker: There would not, even if it's a very simple, flagrant case?

You'd have to go to state court, would be your view?

Mr. Harris: Yes, sir.

The lease provides the amount of rent, and that section 5, I believe, of the lease, which is found in the record, it also provides for redeterminations of that.

And there has been perhaps confusion in the courts over that very issue, and hence the many cases cited, never to reach this Court as yet, over that very issue.

Unknown Speaker: 0 xxx.

Mr. Harris: Yes, sir.

Unknown Speaker: xxx state court if you simply did not execute a proper lease.

If the amount specified in the lease is below the amount... is above the amount that the federal law allows, you would have neither a right in the state court nor a right in the federal court.

Mr. Harris: The lease, Your Honor, would I believe provide for a fixed amount of rent, which by statute can be no more nor no less than 30 percent of income.

Unknown Speaker: I know, that's the way it's supposed to be.

Mr. Harris: Yes.

Unknown Speaker: But if you have a housing authority that executes different leases, there would be no remedy for that difference.

Mr. Harris: The remedy in that instance would be the remedy of HUD's enforcement of the annual contribution contract, through which the other side of this tripartite arrangement between the tenant and the PHA and HUD are regulated.

And indeed, when the Brooke amendment was passed--

Unknown Speaker: But the individual lessee would have no remedy, either in state court nor in federal court, so long as the defect is that the form of lease that the authority uses does not comply with what federal law requires, right?

Mr. Harris: --Yes.

Unknown Speaker: And if HUD were to sue, it would have to pay for whatever it recovered on behalf?

Mr. Harris: I haven't figured out the answer to that one, Justice Stevens, and would that I could, because I at one time had decided, as I had argued and moved in this case originally, that it ought be dismissed since HUD was an indispensable party and had not been joined.

And subsequent to my having the bonus of making that motion, the decision of this Court in Heckler was rendered and there became some serious question as to the wisdom of my motion at that moment.

The district court having taken it under advisement, I was never forced to belabor it greater, although I had some concern because as a practical matter under the annual contribution contract it's what I would describe to this Court as my mother ship.

If you can see the mother ship and its auditors and its control and the fact that the PHA indeed exists by reason of its relationships on a daily basis with HUD, and so it would be tough.

Next year I'd have to go to the subsidy meetings and say: Gosh, I've lost all this money and I've got to pay all these folks, and what are we going to do about it, HUD?

And I don't know the answer to that, except to pose it back.

Unknown Speaker: Let me ask one other question, following up on Justice Scalia's.

Supposing you had a form lease that you used that did contravene the statute, so that we have an argument then about whether the tenant could sue for the excess rent.

Would he have a forum in which he could get equitable relief to have a different lease executed to conform to the statute, and if so could he do that in federal court, as he did I guess here?

Mr. Harris: I don't know, Your Honor, that he would have a right even in federal court--

Unknown Speaker: For equitable relief.

Mr. Harris: --to revise a lease.

I believe that--

Unknown Speaker: Well, to compel the Authority to comply with the federal regulations, would be the way to phrase it.

Mr. Harris: --No, sir, I believe that transcends the intent of Congress in that instance, and I would think that that would be up to HUD, realizing that they had a derelict PHA on their hands, to exercise Section 1404 of the Act, which explicitly gives HUD the right to sue and, interestingly enough, also gives the right to sue HUD.

And whether or not that would get me out of the Heckler dilemma or not, I would not want to land flat-footed on that in this Court.

I think I might wind up back on my heels a bit.

But I do wonder whether 1404a would give me a right to sue HUD.

It certainly gives HUD the right to sue me, and I have very little doubt that they would come round to me and say... if they allocated the conflicting interests in that manner, then I believe they would come round to me and say: You know, get in line, PHA; get in line now; and if you don't want to get in line, we want to meet with your board of commissioners, because they'll get you in line, Mr. Executive Director or Mr. Staff Member.

The Practical reality of the relationship is very tight, Your Honor.

Unknown Speaker: Do you think the state was obligated to follow the regulation?

Mr. Harris: That the Housing Authority was obligated to follow the regulation?

I think the Housing Authority followed the regulation, Your Honor.

And I believe that they had an obligation under the VCC--

Unknown Speaker: So your answer is yes, you were obligated to follow the regulation and you did?

Mr. Harris: --Yes, sir.

But our obligation is under the annual contribution contract.

Unknown Speaker: Yes.

But you're following the regulation?

You are bound to follow the regulation?

Mr. Harris: Yes, sir.

Unknown Speaker: And the regulation is consistent with the statute?

Mr. Harris: Yes, sir.

Unknown Speaker: And has the force of law?

Mr. Harris: Yes, sir.

Unknown Speaker: Thank you.

Mr. Harris: The interesting analysis of the conflicting interests which was suggested by my answer to Justice Stevens' question brings to mind a point that I think is particularly interesting and is not treated in the briefs.

If I might share it briefly with this Court.

The HUD regulations at 24 CFR 865 et seq.

, and at 965 in their current form are a little different.

But the ones at issue in this instance are a consumption set of regs.

They are based on, the more you use the more you get, if you adopt the Petitioners' view.

And in response to my question to you, Justice White, I'm not sure that I agree with Petitioners' view of what these regs may mean in terms of whether or not all of these very nice steps on the... in fact, the interrogatory answers say, as I'm sure the Court is aware, that we deemed our compliance in compliance with the regs.

But nevertheless--

Unknown Speaker: Part of your argument, as I understand your brief, is that the state has never understood its obligation under the contract or under the law or under the regulations to make it liable to cover utilities.

Mr. Harris: --provide utilities, free utilities in a reasonable amount, to the tenants of the PHA in this instance.

Unknown Speaker: But you've never understood your obligation to be any more than what you say it is?

Mr. Harris: No, sir.

Unknown Speaker: And so you in effect say there really isn't any clearly enough expressed right under the statute or regulations to found a 1983 suit?

Mr. Harris: That is correct, sir, although I am troubled somewhat by going back, as Mr. Woodward has pointed out, that I somehow have said that there might be some sort of right.

The question in this instance is how much utilities, and when you get into the regs and you start finding things like wasteful, individual circumstance, higher use by reason of tenant-supplied appliances, when you get into the new regs which speak of luxuries versus necessities, when indeed as you get to the conflicting allocation, which I was about to mention.

The regs also provide that in fiscal year 1981 and 1982, if the PHA does not effectuate a five percent... a reduction, excuse me... a reduction in energy use, then it will be penalized five percent of its operating subsidy in the subsequent year.

This is at Section 990 of the regs as subsection 116.

The contradictory reality is that at the same times those regs were in force the other regs were saying the more the tenant... if you believe Petitioners' arguments, and I do not subscribe to that, Your Honor.

But if you adopt it, the more you use the more you get, but if you give away more we're going to take five percent of your money.

Now, this was HUD speaking out of all of its regulations simultaneously.

And it illustrated to me that HUD has got responsibility under this scheme to render its discretionary judgment over the conflicting interests that have got to be reconciled in order to deal with how do you allocate the moneys available and how do you provide for tenant housing.

Unknown Speaker: Well, do you draw the line essentially, Mr. Harris, as to what the tenants can sue for and what is left to these considerations you're just mentioning, what's in the lease the tenants can sue the PHA for if it's not furnished, but the section you just mentioned is left to some sort of other kind of adjustment between the PHA and HUD?

Mr. Harris: Yes, sir.

It is... the regulatory... the part of the regulations that a tenant may sue for is that part which is embodied in the lease, which ironically is regulated in itself in all of its detail.

And yet, there are myriad other regulations pertaining to housing that do not have any relationship perforce with the tenant, but have an indirect impact in that the PHA and HUD also have an annual contribution contract which says in small part in Section 5 that the PHA will abide by the law.

And that gives yet another part of this tripartite relationship of HUD, PHA, and tenant.

Unknown Speaker: Suppose there was either a provision of the statute or the regulation that was perfectly clear and the Housing Authority had just been ignoring it.

Just suppose that.

I know you have an argument that there are utilities and then there are utilities.

But let's just suppose that it was perfectly clear.

Do you suppose a 1983 action would be available then?

Mr. Harris: No, sir.

Unknown Speaker: Why not?

Mr. Harris: Because I believe that the remedy at that point, given the tripartite scheme, would be for HUD to come in and say either, as a practical matter let's get together because next year we've got to renew your subsidy and we may not, or to--

Unknown Speaker: Well, what about Maine against Thiboutot?

Wasn't there a holding that 1983 is available to enforce statutory rights?

Mr. Harris: --Yes, sir.

And I can't read Maine without also reading the decisions of the Court subsequent, particularly the Sea Clammers case, in which if it has found that by the Congressional scheme there was evidence of a Congressional intent to foreclose... and Congress when it set up the lease arrangement in 1937 certainly did not envision a federal remedy, as one certainly did not exist in 1937.

When the Brooke amendment was passed in 1969, Congress certainly, I would submit, did not envision a federal remedy at that juncture.

Unknown Speaker: Well, I would suppose you'd make the same argument in any of these spending power grant programs.

Mr. Harris: I have difficulty with that for one reason, Your Honor, and that is simply because some of the language in some of the opinions which has reference to the fact that if you can't forfeit the money there isn't a right.

And quite frankly, I think it is not a pragmatic response for any PHA to come into this Court and say that, as a practical matter we built these projects 30 years ago and now we're going to forfeit that money and leave the state with 1100 low income tenants sitting in these 30 year old buildings that are going to fall down if there isn't money to take care of them.

And I'm very reluctant to try to come in here with that kind of argument.

I think it is much more the pragmatic response to say that there's not going to be anything of that sort to happen.

Quite the contrary, HUD's going to come down and it's going to say: Look guys, we've got--

Unknown Speaker: Straighten up.

Mr. Harris: --Yes, or I can freeze your money, I can sue you.

But more importantly, I own you.

I've owned you ever since your inception.

And the fact of the matter is that an active, aggressive HUD can solve that problem, has full legal remedy to do so, and I believe would do so.

But to get into... one of the things that's bothered me, I think, most of all about this case, is I've wondered a little bit why I'm here.

The real complaint these Petitioners have is not with the PHA.

The real complaint they have is with HUD, HUD that they contend did not enforce the regulation.

Moreover, they admit, as I believe was pointed out earlier by question, that if I lose HUD is going to pay the bill.

I don't know that's true.

Would that I knew it was true.

I'm sure that I could reassure my client, who is a little bit more local and a little bit more removed.

But nevertheless, that's the Petitioners' point, that they'll get the money from HUD; that if I win I'll just get less subsidy or less money from the tenant... or more money from the tenant and less subsidy.

I have no interest therefore in winning.

I would be just as well off to lose.

And I think the truth of the matter is that the Petitioners have revealed their hand by suggesting to this Court that, while they cannot under Heckler perhaps sue HUD, notwithstanding my attempt to stand in quicksand of 1404a and maybe get around Heckler... and I reserve that for another day on the ill-begotten chance that you may remand me and I have to try, and I don't really want to come back, as much as I've enjoyed it--

[Laughter]

Unknown Speaker: Mr. Harris, if you're correct in saying that the tenants' real complaint is with HUD, I suppose they might have some sort of an action similar to that which we recognized last term in Brook versus United Auto Workers, to sue HUD over some interpretation of the regulation they claim was wrong but HUD was adhering to.

Mr. Harris: Yes, sir.

As a matter of interpreting a regulation, I believe they would.

I'm afraid that they would style it or that HUD would try to restyle it as a failure to enforce the regulation pertaining to utilities.

If they did that and they walked full into the teeth of Heckler, I can only imagine that I have had difficulty distinguishing the two cases, although, as I've indicated, I've left myself, on the chance that this is transcribed and I'm back in the district court, room to run, because I certainly want to talk to HUD about it in that event.

My concern is that if my hypothesis is correct and if indeed the complaint is directed toward HUD, then Petitioners do the Heckler case an injustice by suing me and attempting to get money from HUD.

And that bothers me a little bit about this case on just a very basic level.

I think that, most importantly, one of the things that we have said throughout is that the idea of jurisdictional kinds of claims of this sort or remedies of this sort is something that I have referred to before and would leave with this Court for its consideration as what I call screen door jurisdiction.

Screen door jurisdiction is not the flood and the torrent, the flood gate of 1983 cases, and that's where the idea came to mind.

I'm not sure that even Petitioners would bring us a floodgate of major litigation.

But they would certainly bring us litigation on every screen door kicked in in every housing authority across this country, because the right to collect for that maintenance over ordinary wear and tear is the very self-same right that they urge to you as supports the claim for free electricity in a specific amount.

Screen door jurisdiction might be lightbulbs in hallways, it might be failure to cut lawns.

Unknown Speaker: Mr. Harris, do you have a lot of screen door litigation in state courts in these projects?

Mr. Harris: Yes, sir.

As a matter of fact, that's the prototypical place that they ought to go and do on numerous occasions.

I'm uncertain of my breadth of knowledge, but I feel comfortable to say that most, if not all, of the 50 states have passed extensive landlord-tenant statutes.

Unknown Speaker: No, I'm not talking about just general landlord-tenant litigation.

Of course there's a lot of that.

But in these housing projects, is there a great deal of litigation brought by tenants against your client in state court?

Mr. Harris: Most of it... to answer your question, it is no more than ordinary litigation in any landlord-tenant, Your Honor, and not that many cases.

Most of them--

Unknown Speaker: How much of a burden is it?

I mean, is there hundreds of these cases every year?

Mr. Harris: --I don't know how many.

I do know that most of these cases are handled under the tenant grievance mechanism, which is also mandated by HUD and is provided for as a part of the lease, under section 13 of the lease in this particular instance and as a part of the prototype lease required by 1437k of the Act.

Unknown Speaker: Are you suggesting that if a federal remedy were available, the tenants would no longer use this grievance procedure that the regulations provide for?

Mr. Harris: No, sir.

I do not believe a federal remedy is available, but I do believe they would use the grievance mechanism.

I believe that if a federal remedy were available, that that's where they would go, because it does have class action impact and because every screen door and every broken light bulb is a part of what someone has once referred to me as the typical seething undercurrent of discontent that you might find among tenants generally.

And I do not mean to characterize any particular sort of tenancy, but I am comfortable to believe that people who don't own their own property sometimes get unhappy with the people who do.

And they'll take the best and shortest route to take on that landlord they can.

Unfortunately, if that landlord right is not in the forum where it really belongs, where it can be processed expeditiously and by people with that kind of expertise, if... they will, in the words of some friend of mine, who said don't make a federal case cut of it, they will, given that right or given that remedy.

And I think that that's outside of the ambit of what the Congress intended when it set up a virtually unique situation 50 years ago with a lease arrangement with a landlord-tenant relationship, recognizing that they were dealing in leaseholds.

The principle that we suggest with regard to the cases is really quite simple.

There's no need to make a federal case of this.

There is a grievance mechanism, there is a leasehold remedy in state court, and most importantly, taken as a whole under the Sea Clammers tests, that that is the remedy anticipated.

Unknown Speaker: Would you summarize the grievance procedure?

Mr. Harris: Yes, sir.

Unknown Speaker: Let's take an individual tenant and he or she has this complaint.

Mr. Harris: It is processed through ultimately to a panel, which is--

Unknown Speaker: What's the first step?

Mr. Harris: --The first step is to lodge a complaint with the Housing Authority.

Unknown Speaker: That's in Roanoke?

Mr. Harris: Yes, sir.

Unknown Speaker: Right.

Carry on from there.

Mr. Harris: That ultimately goes through two levels, I believe, and perhaps three, of management within the staff of the Housing Authority.

At that point a panel is appointed, and I frankly can't recall right now how it is constituted.

But it encompasses not only management representatives, but tenant representatives.

There are due process rights attached to that.

There is opportunity to be heard, to be represented by counsel.

Indeed, that has happened as recently as a few weeks ago over a twelve dollar claim with which I am familiar.

And those panel members sit and hear a full-fledged discussion of whether or not something has happened according to the way it ought, according to the lease, according to the other regulations of the Housing Authority.

It terminates at that point, although it is enforceable in my view in state court because the grievance procedure itself is a part of that same lease at section 13.

So I believe they have a lease entitlement to the grievance remedy, as well as to the HUD regulatory remedy.

And consequently, while none that I know of have gone to state court, I believe were you to say you had been denied the grievance mechanism you could seek declaratory relief in the state forum.

Unknown Speaker: Does a tenant ever get to HUD in Washington?

Mr. Harris: Not to my knowledge.

I don't know that he sought that.

The lease demonstrating this adequate remedy I think brings you squarely to the simple question of, why make a federal case of this if you have the potential of what I have referred to as screen door jurisdiction and where you have an adequate remedy at state law.

The lease demonstrates this Congressional intent, coupled with the administrative regulation.

If there are no other questions from the Court, I would ask you to affirm.

Rebuttal of Henry L. Woodward

Chief Justice Rehnquist: Thank you, Mr. Harris.

Mr. Woodward, do you have anything more to say?

Mr. Woodward: I do, Your Honor.

Chief Justice Rehnquist: You have about four minutes.

Mr. Woodward: If I may accept the invitation of Justice Stevens to expand a little bit beyond the record with regard to the screen door cases, I would like to say that if those cases are brought with regard to the Housing Authority in Roanoke we would probably be bringing them, and in fact there are very few.

What happens in fact is that the grievance mechanism does work in individual cases to some extent.

It's not a marvelous thing, but if the problem of the tenant is with the question of who kicked in the screen door and who should pay for it, the grievance mechanism is a way to address that.

What the grievance mechanism is specifically not available for, according to HUD and in the regulations it promulgated to implement it, is for challenges to the policy of the Housing Authority.

And that makes some sense.

If the problem is a project-wide or authority-wide policy problem with the Housing Authority, then taking it to a panel is not only impractical but it's specifically contrary to the regulations.

And it certainly never gets beyond the panel in that mechanism to HUD itself.

So in fact, some matters are specifically appropriate for grievance mechanisms and some aren't.

What makes this case particularly a federal case is that the Brooke amendment, as the Sixth Circuit has recognized, is the backbone of the public housing program.

It just isn't right for a state court to be making critical determinations of what the Brooke amendment means and how it affects 1100 families in public housing in Roanoke as a matter of policy.

And that is I think the ultimate reason this is a federal case.

Unknown Speaker: Do you have any doubt that a suit against the federal agency would lie?

Mr. Woodward: For non-enforcement or for--

Unknown Speaker: For non-enforcement.

Mr. Woodward: --damages?

I think it probably would.

I think in trying to decide where to sue, though, you try to identify where the breach is clearest.

And I think in this case we need not get beyond the non-compliance with the regulations to find out where the real, the ultimate fault lies.

Unknown Speaker: Is the complaint the non-compliance by the PHA or the non-compliance by HUD?

Mr. Woodward: In our case, our complaint is clearly non-compliance by the PHA.

HUD has done what it could to say what the Housing Authority should do.

That it didn't do it, there may be some remedy that somebody can come up with from HUD, but we have no way to invoke it.

There is no mechanism for us to invoke that remedy.

What we can do is we can exercise--

Unknown Speaker: No way to invoke what?

Mr. Woodward: --To invoke a remedy from HUD.

I mean, perhaps we can sue HUD.

Unknown Speaker: I thought you said you could sue them.

Mr. Woodward: Well, it's always possible to sue, but winning is another question.

Unknown Speaker: Well, I know.

But didn't Justice Scalia ask you--

--I meant sue and win.

I know you could sue them.

[Laughter]

I'll have to be more careful.

I meant sue and win.

Mr. Woodward: Well, I think the enforcement question does leave an avenue open.

We're not there yet.

But I think that under--

Unknown Speaker: Well, now you've answered the question three ways.

Mr. Woodward: --Underlying the question, though, is the... I mean, underlying the pursuit is the question of whether these folks have done something wrong in the first place.

And I think it's putting first things first to establish that.

Unknown Speaker: Well, don't they have your money, too?

Mr. Woodward: Pardon?

Unknown Speaker: Don't they have your money, too?

Mr. Woodward: They have received the benefit of our money as well.

Unknown Speaker: I mean, they actually have the money, don't they?

Mr. Woodward: Well, it's not clear, frankly, at this point whether they still have it or not, Your Honor.

Unknown Speaker: I see.

But you paid it.

Mr. Woodward: We paid it, we know that.

We know that.

And over a period of--

Unknown Speaker: And they haven't given it back.

Mr. Woodward: --They certainly haven't given it back.

A question was asked earlier, what HUD's position is with regard to the private remedy of 1983 in these situations.

I failed to recollect that in a couple of cases, the Stone case in the District of Columbia Circuit and the Brown case in the Eleventh Circuit, HUD has taken the position in briefing that the individual tenants may assert the 1983 remedy to redress utilities problems.

Unknown Speaker: Your time has expired, Mr. Woodward.

Thank you.

The case is submitted.

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Merrill Lynch, Pierce, Fenner & Smith v. Curran - Oral Argument (No. 80-757)

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Merrill Lynch, Pierce, Fenner & Smith v. Curran

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Transcript:

ORAL ARGUMENT OF WILLIAM E. HEGARTY, ESQ., ON BEHALF OF THE PETITIONERS

Chief Justice Burger: We will hear arguments next in New York Mercantile Exchange against Leist and others on the consolidated case.

Mr. Hegarty, I think you may proceed when you are ready.

Mr. Hegarty: Mr. Chief Justice, and may it please the Court, let me begin by going back to 1936, to the era that Justice Powell referred to.

In the Congressional debates, the Senate debate concerning the 1936 amendments to the Commodity Exchange Act, a decision of this Court was read into the record.

That decision had held that the pre-existing Act could not provide a remedy against someone who was accused of having manipulated the market because the statute was framed in terms of is manipulating, present tense.

This Court said that the proceeding could not go forward.

It affirmed the lower court, which it so held.

It said, and this, as I say, was read into the record, the entire decision by Justice Brandeis, a unanimous decision of this Court, to supply omissions transcends the judicial function.

I don't believe that the perception of the role of the Congress and of the judiciary in 1936 and earlier, and even since has been... has gone through the sea changes that are suggested by the Respondents and by the CFTC.

Indeed, much mention has been made of Rigsby.

In that decision, it seems to me, as I read it, that Justice Pitney was very, very careful to have two bases for his decision.

One indeed was for the use of the remedium, but immediately thereafter he said the inference is made irresistible by the language of the statute, and I don't think that is very different from Cort v. Ash, if one thinks about it.

Now, the argument in the earlier case is different in two respects from the questions presented presently.

That case involves a section of the Commodity Exchange Act, Section 4b, which is for the benefit by claim of a customer and it provides that his broker may not defraud him.

That language might suffice for the first factor in Cort.

Representing a contract market, I am addressing different sections, Sections 5d, 5a(8), and perhaps 9b, which is the general criminal statute against manipulation.

5d is the licensing statute.

It says that boards of trade will be designated as contract markets if they satisfy certain criteria, one of which is to have a system to prevent manipulation... not to prevent manipulation, but to have a system to prevent it.

5a(8) is prescriptive.

It says that one of the things the contract market must do is enforce its rules.

These are quite patently for the general benefit of the... well, it certainly goes far beyond the futures market.

It goes to the cash market, as it is called, the production, the handling, the use of commodities.

The other very significant distinction between the 4b question and the question posed as against a contract market is a practical distinction.

It is a question of practical consequences, and implicit, if I can use the word in this general context, holding of the Second Circuit or the court below was that a cash trader, that is, a person not trading in the futures market at all, but holding cash potatoes, had a claim against the contract market because of an alleged failure on its part to act in an emergency.

That opens up, it seems to me, the picture of not only which we would have in the Securities Acts functioning on the trading in a particular security or something of that sort.

It goes beyond that.

It is trading in a futures contract, but then the impact of that trading, that alleged manipulation might have on the cash product.

In other words, manipulation in wheat in the Chicago Board of Trade, the price fixed in the Chicago Board of Trade is used, as they call it, for price discovery by those who are actually delivering wheat to mills.

This is, as Judge Mansfield said in dissent below, what is involved is literally hundreds of millions of dollars.

Now, I don't cite that in a kind of interorum way.

I cite it for this purpose.

It seems to me that when the consequences are such, when the possible result is such, it bears very directly on whether one can assume that Congress intended such a result or chose not to say so, which after all is the fundamental question.

I regret that the Solicitor General's office did not choose to argue in this case, to deal with questions of that sort, although they briefed them, I suppose.

Now, the three sections that interest the contract markets are Section 5d, as I said.

That was enacted in 1921.

At that time, a companion statute enacted the same month was the Packers and Stockyards Act, which provided both for reparations and private damages against the stockyard and others, and I think it is suggested that the two statutes go in tandem, and no such remedy is provided in the Commodity... as it was then called, the Grain Futures Act, I think.

9b was enacted in 1936, and as I say, in Wallace against Cutten, a case which I quoted from, it was before Congress, very much before Congress at that point.

5a(8), as I say, Subdivision a(8) was added to 5a in 1968, at a time when Congress did not enact a bill which would have provided an action against contract markets.

Now we come to 1974, and a unanimous panel of the Fifth Circuit said that the legislative history was emphatically equivocal in that that was not a sufficient basis to predicate a private right of action.

Unidentified Justice: That is an interesting expression, isn't it?

Mr. Hegarty: It is.

I think it was very well chosen.

Unidentified Justice: Interesting expression, "emphatically"--

Mr. Hegarty: "Equivocal".

0 [Generallaughter.]

They said also, to substantiate their point, Justice White, that the evidence as to whether or not Congress was aware of the one appellate court decision--

Unidentified Justice: --It is like saying the Congressional silence was very loud indeed.

Mr. Hegarty: --That is what the court below said, Your Honor, but the Fifth Circuit thought that the evidence was dubious, if you will, that Congress as a whole had any awareness of the one decision, one appellate decision that upheld a cause of action against a contract market.

They said there was no evidence that Congress had approved it.

In the opinion from the majority below, it was described as implicit approval by Congress, and I think to premise an implied right of action upon an implicit approval by Congress in emphatically equivocal legislative history piles too much on too shaky a foundation.

In 1974, if you look at objective evidence again as to contract markets, they did not enact a private action against contract markets.

They did enact the reparations remedy from which contract markets are excluded.

They did specifically authorize the CFTC to bring injunction for suits in district courts against contract markets, and they added to the penalty provision the direction to the CFTC to consider whether the amount of the penalty would materially impair the contract market's ability to carry on its operations and duties, and I don't think a possible exposure to hundreds of millions of dollars could be said to be consistent with that.

If there was a dramatic overhaul of the statute in 1974, it is similar to that which occurred and was the subject of this Court's decision in City of Milwaukee.

There had been a federal common law cause of action for nuisance.

The Seventh Circuit had held here that there was a common law cause of action against contract markets, the one appellate decision.

I think it would follow that such a contract... common law cause of action had been supplanted by the legislation.

Finally, let me say this.

The question posed is, is there a private right of action, is there an implied private right of action, but that is a very, very narrow question.

The question really should be, is there a private right of action having certain dimensions?

For example, there is no guidance whatsoever in this statute for a determination, as was present in the case of Ocville, as to what standard of liability should exist, what measure of culpability is required for this action.

If we go back to the District Court in this case, where negligence is alleged, I would move to dismiss on the grounds that bad faith had not been alleged.

But I have no guidance.

The District Court will have none It is too simplistic a question to ask whether a private right of action is implied, I submit.

I will say one final point, if I may, in answer to the question posed by Mr. Justice White earlier on.

I think there must be affirmative evidence to create the action.

We cannot invert the burden of inquiry, as occurred here.

I don't wish to intrude upon the time of counsel to argue for the brokers, unless there be any questions.

Perhaps I should say further intrude.

Chief Justice Burger: Mr. Sandweg?

ORAL ARGUMENT OF GERARD K. SANDWEG, JR., ESQ., ON BEHALF OF THE PETITIONERS

Mr. Sandweg: Mr. Chief Justice, and may it please the Court, the question to be decided by the Court is in what forum under the Commodity Exchange Act as enacted by Congress can a private party obtain redress for alleged violations of the Commodity Exchange Act?

Unidentified Justice: Against whom?

Mr. Sandweg: Against, in this case, a futures commission merchant, and in the consolidated cases that we have here also an exchange.

Unidentified Justice: Right.

Mr. Sandweg: Otherwise stated, the issue is whether Congress created a private right of action for violation of the particular sections of the Commodity Exchange Act.

I think first we have to focus on the statute as it now exists, and see its application to the facts here at issue.

Unidentified Justice: Could I just make sure--

Mr. Sandweg: Yes, sir.

Unidentified Justice: --with these parties involved, was there a reparations remedy?

Mr. Sandweg: No party filed for reparations.

Unidentified Justice: But is there one under the statute or not?

Mr. Sandweg: Your Honor, we believe that there is one.

Unidentified Justice: Your colleagues on the other side are to the contrary, I take it.

Mr. Sandweg: My colleagues are to the contrary.

Unidentified Justice: All right.

Thank you.

Mr. Sandweg: The statute here expresses Congress's decision as to how to regulate the nation's commodities and markets.

To put its decision into effect, we have the Commodity Exchange Act.

It is a multi-faceted regulatory system.

The exchanges regulate their members, including the broker petitioners, through their bylaws, rules, and disciplinary proceedings.

Over everything, however, is the Commodity Futures Trading Commission.

It can compel the adoption, modification, or repeal of an exchange's rules and regulations.

It exercises oversight and appellate jurisdiction over the self-regulatory entities.

It is empowered to participate directly in regulatory and enforcement matters, and indeed, it routinely does so.

Unidentified Justice: Mr. Sandweg, excuse me for interrupting, but on the reparations point... you say there is a reparations remedy... am I right in believing that the Commission takes the position there is none?

Mr. Sandweg: The Commission takes the position that there is none.

Unidentified Justice: Well, if they take the position there is none, and they deny all claims of this kind, and there is no review of it, how can it be an effective remedy?

Mr. Sandweg: Your Honor, I think that it is not fair to say that there is no review.

The provisions of the administrative--

Unidentified Justice: Well, if they say there is no remedy, that is a reviewable decision if somebody filed there?

Mr. Sandweg: --Your Honor, we believe it is.

We think that a decision that there is no reparations right is appealable to the courts under both the Administrative Procedure Act and under fundamental notions of due process, if the Commission were to take that view, which it apparently does.

The Commission here has been highly visible in what it has done.

The exchange, acting in its self-regulatory role, held price and penalty hearings to compensate those persons who had defaulted, and penalized the defaulting parties.

The Business Conduct Committee of the exchange held hearings regarding violations of the exchange rules.

The CFTC conducted an extensive investigation and instituted disciplinary proceedings against the exchange and the short sellers, but not against the brokers.

Our position is that the Respondents, had they been so inclined, could have instituted reparations proceedings, and upon proof of the claimed violations, obtained an award for their damages.

In short, the regulatory scheme enacted by Congress and in place provides a comprehensive system for discipline of wrongdoers and compensation of victims.

Now, let us turn to the Respondents who participated in the market and here claim damages.

They claim they are entitled to damages in a federal lawsuit not only on the basis of the antitrust violations which they claim, but also on the basis of an implied private right of action which they contend are implicit in the Commodity Exchange Act.

We submit the implied right of action does not exist on two bases.

The first and the controlling basis is that it simply was not created by Congress.

We believe, however, in case one questions does this make sense, that the fact of the reparations remedy explains but does not control over our position.

The burden here is on the Respondents to demonstrate affirmative Congressional intent to create the remedy.

None of the Respondents have done this, because they can't.

Unidentified Justice: Mr. Sandweg, let me ask you a question somewhat akin to what Justice Powell asked previous counsel.

There is much talk in the record and in the statute itself about "manipulative devices".

What is a manipulative device?

How do you prove it?

Is it negligence?

Is it bad faith?

Mr. Sandweg: The court decisions on the question of the existence of manipulation are numerous and generally they refer to it as anything that the mind of man can imagine.

Therefore, the question of what is manipulative is not at all well defined.

It is not a scorecard where you can go to to check off the indicia and say that you have or do not have manipulation.

Unidentified Justice: Well, how does a judge charge a jury, then, as to whether or not they should find on the evidence that this was or was not a manipulative device?

Mr. Sandweg: I have not seen the jury instructions in the cases that have come out.

Unidentified Justice: Well, but in a typical case.

Mr. Sandweg: I am not sure.

I think it is most difficult to actually prove a manipulation of a commodities market, because of the fact you have so many forces of supply and demand meeting.

There can be simple questions of manipulation.

For example, the corner, where someone controls the entire supply, and controls that supply other than through a legal way.

Unidentified Justice: To a certain extent, everybody is trying to manipulate, aren't they?

Mr. Sandweg: That's true, Your Honor.

Everyone is attempting to participate in the price discovery process by buying or selling for a price they determine to be appropriate.

Unidentified Justice: Mr. Sandweg, the description Judge Friendly gave us of the transaction here, would that fall within your definition of a manipulative device?

On the potatoes?

Mr. Sandweg: Your Honor, I think the question of manipulation of the potatoes market is a very difficult factual question which isn't here.

Certainly the--

Unidentified Justice: I know it is not, but I am just asking whether the description Judge Friendly gave us in page after page after page--

Mr. Sandweg: --From Judge Friendly's description, there were two major forces moving in the marketplace.

Our client fortunately was not one of them.

It would appear that they could be characterized as manipulation, but whether or not that is a proper legal conclusion, I don't speak to today.

I think it is a very difficult fact question, and one of the reasons we think the CFTC exists is to resolve that very difficult fact question, where they have the advantage of the particular knowledge of what can and cannot be manipulative in commodities markets.

In 1936, Congress passed a comprehensive law to regulate a marketplace which has, had, and continues to have a major effect on interstate commerce.

Its concern was protecting the nation's economy.

The language of the Commodity Exchange Act in 1936, when the operative sections at issue were passed, has not one word suggestive of an intent to create a right of action.

The legislative history likewise has not one word.

Because of Congressional concern that federal pre-emption might occur with respect to individual conduct, it preserved under Section 4c the right to bring actions under state law in state courts.

In 1974, the Commodity Exchange Act was amended, but it was not re-enacted.

None of the amendments created a private right of action.

The legislative history of the 1974 amendments tells us nothing about any 1974 amendment which would create a private right of action.

The twig on which the CFTC has asked this Court to hang its hat is a jurisdictional savings clause which, as the Touche case teaches us, cannot create a right of action.

The remaining legislative history, ambiguous at best, tells us nothing except for perhaps a limited knowledge of what courts had done between 1936 and 1974, but courts cannot create private rights of action.

At best, they can examine statutory language and legislative history and find that Congress implicitly created the right.

No court had done that prior to 1974.

This Court has asked whether or not Cort v. Ash compels a different analysis.

I think the Court--

Unidentified Justice: --You suggest, then, that Rigsby was just way out of bounds?

Mr. Sandweg: --I think Mr. Hegarty's presentation of Rigsby is correct, but I think that Rigsby no longer speaks to the current situation.

Unidentified Justice: So your answer is, yes, Rigsby was just wrong?

Mr. Sandweg: I think it was wrong.

The 4b here, the Court also asked whether or not 4b was limited, and I think that is very important to this case.

4b speaks to broker-customer relations.

It does not speak to the kind of relationship between the broker members here and the claimants.

They are not customers of any brokers.

And as Judge Friendly pointed out, the crabbed language of 4b is difficult to interpret, but I think the only proper interpretation is, it reaches a broker-customer claim.

We have mentioned that we think that reparations are important not because they upheld the decision, but rather because they respond to the argument that is here that there should be a remedy, but our system is one which Congress gives the remedy.

Equally important, the factual predicate for that argument is not here.

We think the remedy of reparations is available to these people.

Reparations reaches persons registered and required to register, and affords a comprehensive remedy system for violations.

Section 13a of the Act, which already existed, reaches deeply into those associated with wrongdoing and allows them to be proceeded against as principals.

As our brief discusses, we believe full relief is available to those injured by a violation of the Commodity Exchange Act.

If the Court has no questions, I will reserve the remaining time and use it if necessary.

Thank you.

Chief Justice Burger: Very well.

Mr. Toboroff.

ORAL ARGUMENT OF LEONARD TOBOROFF, ESQ., ON BEHALF OF THE RESPONDENTS

Mr. Toboroff: Mr. Justice, Mr. Chief Justice, and may it please the Court, so far in the presentations so far, facts have been withheld by the defendants, understandably so because they are crucial to the application of this Court's standards to this statute determining legislative intent.

The facts are these.

In a limited and perishable commodity, potatoes manipulators named Simplot and Taggares oversold the entire crop threefold.

They never intended to liquidate it.

Their contracts... to take delivery of their short sales, and as a result they artificially depressed the price, irrespective of the normal supply and demand factors, which are what the commodity futures markets have the right to expect.

In short, they and their brokers fixed the market and ultimately destroyed it, in full view of the exchange, which knowingly permitted it.

The plaintiffs are entitled to deal with a free and fair futures market pursuant to the Congressional purpose and in accordance with the legislative scheme.

Instead, they were thrown into a fixed market manipulated by Simplot, Taggares, and others who are not before this Court in this process, and not subject at all to reparations, incidentally, and who have carefully and tactically absented themselves from this Court here, but their conduct is not absent.

No one challenges that the conduct violated the statute.

No one challenges that the market was polluted in violation of the Congressional purpose.

Those facts delineating that conduct by those people are set forth in exhaustive detail by Judge Friendly below in the record, at Pages 95 through 105 of the Joint Appendix, and I will refrain from repeating any of them, but will rely on that exposition, and note that if Judge Friendly is reversed, those major manipulators will go scot free, leaving their victims behind them, and if the purpose of the Congress, the purpose that Congress expressed when it amended or re-enacted the statute will also be frustrated, and the legislative scheme will be robbed of one of its crucial pieces that make up its symmetry, which is the private right of action.

I think at this point I should first briefly address the question that Mr. Justice Powell asked with respect to the 1936 statute.

In 1974, sir, Congress switched its theory.

They changed from allowing the exchanges to regulate themselves through self-regulation to compulsory regulation at the behest of the newly created CFTC.

One Congressman described the self-regulation as 1974.

We have to look at the legislative intent in 1974.

When that happened, when they switched their theory, the exchanges promptly went to Congress and said, well, give us immunity.

We want immunity from the private right of action.

Congress didn't grant them that immunity.

That is the theory that came into being in 1974, so we have a turnover from 1936 into 1974, compelling us to examine 1974, and we would concede that that is the legislative history that needs to be examined.

Unidentified Justice: Would you say that if there had never been any court cases on private causes of action prior to 1974, and the question arose first after 1974 as to whether the exchanges were subject to suit in a private cause of action, would you say that you win or lose?

Mr. Toboroff: Are you asking, sir, if this case arose, the statute came down in 1974--

Unidentified Justice: Suppose this very case that we have arose, and the only thing that is different is that there never had been any judicial judgments about private causes of action prior to 1974.

Mr. Toboroff: --We would still have the private right of action, because we had something else in addition to the unbroken chain of eleven to fourteen decisions.

We have 50 years of Congressional experience, starting in 1921, as to major market manipulations.

This is not like the Curran situation, the customer-broker.

We have a situation where from 1921 on Congress focused concern on the major market manipulators.

They named some of them in some of the Congressional testimony.

I can't remember their names.

I remember one, Arthur Cutten, I think.

But they named a bunch of them, and they focused their concern on that person, or that group of persons, who through large concentrations of money could throw an entire market out of whack.

Congress was not writing on a blank slate.

It had all kinds of experience.

I submit that that is what the recent cases hold.

The defendants would have us believe that you have to look at the statutory language and stop.

If there is not any explicit statutory language, that is it.

Transamerica teaches differently.

Transamerica says you can go to the structure of the statute and to the circumstances of its enactment, which is the legislative history.

Judge Friendly had the Transamerica, Touche Ross, and Cannon in front of him when he went through this, and he used those cases, that 1979 triad of cases, to support, very painstakingly, support his inevitable conclusion that there was a private right of action in accordance with the standards set forth by this Court.

Now, there have been about six, I think... I will take a guess and say six... decisions since the 1979 triad.

They don't change the standards.

Unidentified Justice: But your theory is, as I understand it, that because of the unbroken line of judicial precedent you refer to, and because of the legislative history of the 1974 amendments, that Congress thereby expressed its intent with respect to a private cause of action.

Isn't that your theory?

Mr. Toboroff: Well--

Unidentified Justice: And that there should be a private cause of action against the exchanges.

Mr. Toboroff: --There should be--

Unidentified Justice: Isn't that what you say Congress said in 1974?

Mr. Toboroff: --That there should be a private right of action?

Unidentified Justice: So that it is completely irrelevant since that time how you would come out under Cort v. Ash or Transamerica or anything else.

The question was settled in 1974.

Congress said the courts have said this was our intention, they were quite right, we refuse to disturb it, that is the end of it.

Mr. Toboroff: A bit more.

Congress justifiably could and justifiably did assume that the private right of action was in place--

Unidentified Justice: And did not disturb it.

Mr. Toboroff: --and did not disturb it, but more than that.

I say a bit more because I am returning, I think, to Mr. Justice Rehnquist's question.

He asked, was there a Supreme Court decision, and there was, and it was there a Supreme Deaktor, and it was explained, the Deaktor case.

Now, everybody has made light of the Deaktor case.

I think Deaktor deserves a bit more attention.

Not whether or not Deaktor was wrong.

Deaktor implicitly recognized the private right of action.

Not whether or not it was wrong, but it was a United States Supreme Court decision decided on December 3rd, 1973, just ten days before Representative Poge opened the Congressional hearings with the statement that--

Unidentified Justice: Deaktor was not a Supreme Court of the United States case.

It was cert denied, wasn't it?

Mr. Toboroff: --No, Deaktor... there was a memorandum opinion in Deaktor on December 3, 1974, I believe.

I am sure.

When that case came down, ten days later, Chairman Poge opened the hearings and emphasized to the entire House, and I am quoting,

"Courts have implied a private remedy for individual litigants under the Commodity Exchange Act."

Now, even if Deaktor was wrong, and I don't think it was... I think it was right... but even if it was wrong, Congress understood that the courts, including the United States Supreme Court, had the question before it, and everyone had recognized, without a hint of a dissent, that there was a private right of action, and that is when Congress set down--

Unidentified Justice: But you must take the next step from that and say that Congress also must he understood in 1974 to have said, and the courts have been quite right as to what our intention was, that there is a private cause of action.

Mr. Toboroff: --Congress had... pardon me--

Unidentified Justice: In 1974, Congress in effect said, I think you submit, that the courts have correctly understood what our intention was in 1936, that there is a private cause of action available.

Mr. Toboroff: --I didn't put it that way.

I will agree with you, but I didn't put it that way.

Unidentified Justice: Well, it might be even better for you if you did.

0 [Generallaughter.]

Mr. Toboroff: In that case, I will take the next question.

Unidentified Justice: Because aren't you saying that Congress not only didn't disturb what the courts have said, but recognized the validity of the courts' approach?

Mr. Toboroff: Right.

As Judge--

Unidentified Justice: You submit the question is over with.

Mr. Toboroff: --All the remedies were in place then, in 1936.

Unidentified Justice: Mr. Toboroff?

Mr. Toboroff: Yes, sir.

Unidentified Justice: Let's get back to the hypothetical that Justice White asked, which was, let's assume that there had been no federal court decisions prior to the Act of 1974.

On that assumption, where would the burden of proof have lain in this litigation?

On you or on your friends over here?

Mr. Toboroff: On my friends over here on my left.

Unidentified Justice: What have our cases said about that?

I have understood up until today that certainly absent the sort of line of judicial decisions you rely on, if one claimed there was an implied cause of action, that he had the burden of establishing Congressional intent.

Didn't Justice Friendly say that in his opinion?

Mr. Toboroff: Yes, sir.

My fire and fall back position on that question is this.

It depends... When Congress sits down, it depends what they are writing on, the slate that they are writing on.

Even without that line, that chain, that unbroken chain of decisions, even without that, they had the experience.

There was a reason that they sat down, 50 years of experience, to protect... and the purpose was to protect the American consumer through the operation of a fair and free market for the benefit of the investors, the traders that come into that market.

There is no market without traders like that.

The market simply doesn't exist without speculators.

Now, to have... I think it is quite a fire and fall back position.

There were 50 years of experience, more than 50 years.

These markets had been polluted many, many times.

The proof of the pudding of what I am stating is as follows.

After July 8, 1980, after Judge Friendly's decision on July 8, 1980, there has not been another major market manipulation.

Up until then, they were legion.

Even between... even after the District Court dismissed the complaints in 1979, bang, along came the silver manipulation.

Unidentified Justice: May I try another hypothetical?

Mr. Toboroff: Surely, sir.

Unidentified Justice: Let's suppose there were no prior experience whatever, that this was a de novo attempt to regulate the commodities market, and no prior judicial decisions.

Where would the burden of proof lie if you filed this complaint?

Mr. Toboroff: I will finally retreat to the recent decisions, but I say that our case is sui generis and miles distant from those decisions, because of those two experiences.

Unidentified Justice: Mr. Toboroff, the Deaktor case was an antitrust case, was it not?

Mr. Toboroff: The Deaktor case was... there were two cases.

In the Seventh Circuit, it was recognized that there was a violation of the Commodity Exchange Act, and I can quote you to the section, or the analysis of it which appears in Judge Friendly's decision in the record below, which seems the easiest place to get it.

May I come back to that, sir?

I have it somewhere, but I--

Unidentified Justice: Well, I am looking at the bottom paragraph on Page 14 in 414 US, where it says that, Richey versus Chicago Mercantile Exchange, which was the primary case,

"held that an antitrust action against the exchange should have been stayed to afford the Commodity Exchange Commission an opportunity to determine if the challenged conduct of the exchange was in compliance with the statute and with exchange rules."

"Because administrative adjudication of alleged violations of the CEA and the rules lay at the heart of the task assigned the commission by Congress, we recognize that the court, although retaining final authority to interpret the CEA and the relationship of the antitrust laws should avail itself of the abilities of the commission to unravel the intricate technical facts of the commodity industry and arrive at some judgment as to whether the exchange had conducted itself in compliance with the law."

Mr. Toboroff: --That is my point, sir.

The very words... I tried to jot them down fast as read, were CEA> ["], which was in the record below, was in the Seventh Circuit, and the repetition of that language by the Supreme Court on December 13... December 3... pardon me... 1973, is crucial to the consideration of that case by the House ten days later.

That is why I say that it is an important consideration, and that this Court implicitly recognized that, but even if this Court didn't implicitly recognize it, Congress must have understood that it was implicitly recognized by this Court.

Therefore, when Congress sat down ten days later, with Deaktor in front of it, they recognized the prior right of action.

Unidentified Justice: But the Deaktor case doesn't talk about a private right of action.

Mr. Toboroff: I understand that.

My point is a little bit short of that.

My point is that Congress understood from a whole line of decisions that there was a private right of action, and then you have Deaktor, which doesn't refute that, where in the Seventh Circuit the allegation is violations of the Commodity Exchange Act against an exchange.

Unidentified Justice: Well, but then you say Deaktor is a Supreme Court case.

Mr. Toboroff: The memorandum decision--

Unidentified Justice: Which says nothing about an implied right of action.

Mr. Toboroff: --I tried to preface that, sir, by saying I wanted to make a bit more of that case than what it is, because of the time frame in which it came down.

If I didn't articulate that properly, I would like to do it now.

My reason for bearing in on that a little heavy was the time frame that it came down and what Congress could have reasonably been given to understand as to whether or not there is a private right of action.

Unidentified Justice: Well, they presumably could read it for themselves, couldn't they?

Mr. Toboroff: Yes, sir, and the Seventh Circuit decision as well.

Unidentified Justice: And which would they have taken to be the law?

Mr. Toboroff: They would have taken to be the law, I respectfully submit, that there was a private right of action--

Unidentified Justice: Well, they would have taken to be the law the Supreme Court decision, not the Seventh Circuit decision.

Mr. Toboroff: --The Supreme Court decision did not overrule the allegations of violations against the... under the Commodity Exchange Act against the exchange that were in the Seventh Circuit.

Unidentified Justice: Well, it does more than that.

It implicitly sustained them, because it remanded and said abstain rather than dismiss, and if there was no private cause of action, they would have dismiss.

Isn't that right?

Mr. Toboroff: Yes, sir.

I would also like to meet head-on, as Judge Friendly did in the question raised by Mr. Justice Powell where the statute doesn't utter a single word in its language.

As I say, you must go through that language.

You must look at everything, and concluding from that language that there is a private right of action.

The exchange in its reply brief wants to stop at the front door of the language in the statute, and they wind it up by sort of a little bit of a scare tactic, saying that if we don't stop here, we are going to have a lot of clogged dockets.

There are going to be a lot of lawsuits.

They are asking for, it seems to me, a little bit of judicial legislation today, something they couldn't get in 1974 when Congress switched the theory from self-regulation to compulsory regulation, and I rather think that isn't entirely true.

I rather think that the way to empty the dockets is just to affirm Judge Friendly's decision.

There are no more major market manipulations, and there won't be a lot of cases because there won't be any manipulations.

I think that is the best way to do it, and I think that is what Congress intended, and I think that in the Congressional scheme, the legislative scheme and the Congressional purpose, the private right of action was one of the principal spokes in the wheel that Congress always understood to be there.

Unidentified Justice: Do you think that 10b(5) Cardon decision in 1946 emptied the dockets?

Mr. Toboroff: I would say, first of all, the commodity markets are a great deal different than the security markets.

The security laws are the closest analogue, and I agree to that but I would say or I would ask Lord knows how many manipulations in the securities markets we would have if manipulators of those markets were not responsible in United States courts.

I can't see any kind of a... if they had a reparations provision under the securities laws, I would presume that the same thing would happen there that is happening here.

It is a limited, small claims type of remedy that doesn't reach the people like Simplot and Taggares.

They go away scot free to do other manipulations in other markets.

They are not liable to any redness from, the victims that they plucked, and if you affirm Judge Friendly today, Simplot and Taggares, for instance, will not manipulate another potato market.

Other manipulators of soybeans, silver, porkbellies, orange juice, they won't manipulate those markets, because they will be subject to the only true'economic incentive redress that can be brought to bear against him, and that is the private litigant.

Unidentified Justice: Why then don't these private litigant suits stop manipulations?

Cardon was decided in 1946, and the suits have been legion since then.

Mr. Toboroff: I think in 10b(5), as I say, the securities markets are a little different from the commodities markets.

I am not arguing in the customer account here.

Most of the legion of cases under 10b(5) are these customer account cases.

They are not broad market manipulations where, for instance, the price of coffee goes up from of cents to $5.40 a pound inside of two months, or where the price Of silver goes from $4 an ounce to $52 an ounce inside of five or six months.

Unidentified Justice: And then back.

Mr. Toboroff: Fight, and almost taking down the securities markets and brokerage firms with it.

That... What is at stake here in Leist against Simplot, in this case, these three consolidated cases, is the manipulation of a vast national market, affecting the national economy, if you will, not the squabble between the customer and his broker.

I submit that most of the legion of cases that you will find in the securities laws are the squabbling type, where somebody has lost $50,000 or $100,000 and goes and gets a lawyer, and there is a private right of action.

Here, that is basically the Sixth Circuit case, that is basically the Fifth Circuit case, but it isn't this case.

This case deals with what is really at stake in this statute.

These are the very evils that Congress tried to prevent in 1974 and had a 50-year history of.

I am practically giving you 1974 facts in 1976.

It is practically in materia, in para materia, and it is not sleight of hand.

It actually happened.

Congress didn't know that these people would go out and manipulate the potato market in 1976, but they knew from 50 years of experience that other markets had been manipulated all along the line.

Unidentified Justice: They saw all that going on and they didn't express one word about creating a private right of action.

Mr. Toboroff: Because in 1974, when they sat down to write the law, they had every reason to expect, justifiably expect, and did justifiably expect that the private right of action was in place.

Exchanges, brokers, futures commission merchants asked them about it, and it stayed in there.

All kinds testimony... in the closing statement, I think, on September 9, 1974, Chairman Talmadge, the head of the Senate Committee, said that... he was talking about the various remedies that were provided by the new Act.

He said, they will not interfere with the courts in any way.

That alone, if you followed the recent decisions of this Court, that alone seems to me to be fatal to the proposition that there is not enough legislative intent to find a private right of action here.

If you get into the legislative intent, the defendants are swamped, and they lose.

It is full of legislative intent, and talking about the standards that have to be applied, I believe--

Unidentified Justice: Mr. Toboroff, can you tell me why you don't pursue your reparations remedy?

Mr. Toboroff: --Reparations remedies, sir, are meaningless as to us, probably as to Mr. Curran as well, but certainly as to us.

Simplot and Taggares are non-registered persons.

Say they are not amenable to the reparations procedure.

Unidentified Justice: And the exchange isn't?

Mr. Toboroff: The exchange isn't, either, but the exchange stood there and watched this happen The facts are in Judge Friendly's record.

They could have stopped it nine days earlier, and so could the CFTC, but they let it go on, and--

Unidentified Justice: Well, Friendly thought there was no reparation available against the exchange then.

Mr. Toboroff: --There is not.

There is not.

Mr. Leist could not go and sue the exchange for the half million dollars or so that he lost.

He could not go to reparations and sue Simplot and Taggares.

That is a laugh, as far as they are concerned.

They are sitting around, waiting to see how this decision comes down.

They haven't manipulated any potato markets since Judge Friendly's decision, but they did manipulate one back in 1971, on the Chicago Mercantile Exchange, in the same fashion.

The fact of the matter is that given all of the... there was no lawsuit brought for that one, but given all of these circumstances, the slate that Congress was writing on, and the reparations question is a heavy question because it has been decided up and down.

It is a remedy that supplants private right of action.

Actually, it was an addition to it, and that is clear from the testimony in the House and the Senate, the hearings in the Senate.

The fact of the matter is that if the only thing that the plaintiffs had were access to reparations, they would have nothing.

Simplot and Taggares, any major market manipulator could manipulate a market ant just go away scot free, and nothing could be done.

There would be no right... if there were no right of action against them in the United States court under the Commodity Exchange Act, there would be nothing left.

Unidentified Justice: That is because they are not registered.

Is that the reason?

Mr. Toboroff: That is because they are not registered, and that is because Congress didn't choose to register them, because there was a private right of action against them.

Congress chose to register people and supplier registration... reparations remedy much in what the Solicitor General's brief for the CFTC calls a small claims procedure, quick, to the point, expeditious.

That hasn't happened, either, but that is not the point.

Unidentified Justice: Mr. Toboroff--

Mr. Toboroff: Yes, sir.

Unidentified Justice: --in your brief, one of the main points... Page 22 is where it commences... you state that Congress did not by today's standards know how to imply a private remedy even if it wished to.

If it wished to provide a remedy, would it not have done so exclusively?

Mr. Toboroff: My point is, they applied a private remedy in 1974 the way the private remedies were applied.

They couldn't know in 1974 that there would be the 1979 triad, and that the Court would now be wrestling at the end of the 1981 term... 1980 term, pardon me, and the beginning of the 1981 term with the question.

Fortunately or unfortunately, this is the first commodity case.

This is a sui generis case.

This does not go to the... has no close analogue to the six or seven recent decisions since the 1979 triad.

They have some analogue in that they are securities cases, although there was no... there was a blank slate on those and they were considering Acts in 1934 or 1940 that were well prior to the expansion era of undertaking the judicial implication which started, as I think Justice Rehnquist pointed out, in 1946 with the Cardon case, and reached full flower with Borak, but if you take Borak as the starting point, 1964, and go from Borak to Cort against Ash in 1975, those eleven years, you have those eleven years, and you have a situation like the modern statute, where you have a 50-year history, and where you have an unbroken chain of decisions... whether they are right or wrong, Congress is aware of those decisions, and you have those two items when Congress sits down in those eleven years.

It is a sui generis case.

It is just, as I said, miles apart from the recent decisions.

This is the only chance that the Court has to apply its standards to this particular Act, naturally, because this is the only case, these two cases, but... these consolidated cases for which I am arguing here have broader questions than simply 4b.

Unidentified Justice: In other words, you are saying Cort v. Ash and its progeny changed the law.

Mr. Toboroff: I... changed the law?

They narrowed the standards, is what they did.

Yes, if Congress sat down... not Cort v. Ash specifically, because after Cort v. Ash, Your Honor noted in Cannon in your dissent that there were, I think 20 was the number, circuit courts of appeals that had implied private rights of action.

It really wasn't until 1979.

Certainly in 1975 after the Cort against Ash decision, some smart Congressional staffers could have perked up their ears and written a little better, but I think if I were standing here and talking about a 1976 statute, I would be trying to stretch it to 1979, is what I am saying, but I don't have to do that.

I got... I am in before Cort against Ash.

In conclusion, I would just like to emphasize that the exchanges are here today really asking for a little bit of judicial exculpation... exculpation by way of judicial legislation from something that Congress wouldn't give them in 1974 when it switched its theory from self-regulation, from fox in the chicken coop self-regulation to compulsory regulation, and I think that based on all of the cases, based on the standards as they exist today, enunciated here, the Court has to conclude that Judge Friendly should be affirmed.

Thank you.

Chief Justice Burger: Mr. Sandweg, you have eight minutes left.

ORAL ARGUMENT OF GERARD K. SANDWEG, JR., ESQ., ON BEHALF OF THE PETITIONERS -- REBUTTAL

Mr. Sandweg: Thank you, Your Honor.

Justice Stevens, you asked about the Deaktor case.

I think it is important to this Court to understand first, as has been pointed out, this Court's decision had nothing to do with the private right of action.

That was the Seventh Circuit's decision.

Unidentified Justice: It is true that the remand by this Court wouldn't have made any sense unless this Court assumed there was a private cause of action.

Mr. Sandweg: It remanded it first to the agency to determine whether or not it was an action, presumably that would have followed from that remand.

Unidentified Justice: But it didn't order dismissal.

Mr. Sandweg: It did not order dismissal.

That is correct.

But the use of Deaktor here is to illuminate what Congress knew when it enacted the 1974 Act, and our point is that the 1974 Act and Congress's knowledge of Deaktor in 1974 is not relevant to this Court's inquiry about this.

The question here is what the Congress did in 1936 when it enacted the operative language alleged to give rise to the right of action.

When Deaktor was cited to the Court... to the Congress in 1974, it was not cited to Congress to show the existence of a private right of action, The purpose of it being cited was to show the application the antitrust laws.

Thus, whatever the Seventh Circuit may have held, or whatever the implications of this Court's decision may have been, they do not give rise to Congressional knowledge in 1974 even if that knowledge were relevant, which we claim that is not.

Secondly, the question of reparations availability.

We believe Section 13a of the Act must be considered with care in analyzing whether or not reparations are available to persons in this case.

My own client has had a reparations claim filed with the Commodity Futures Trading Commission which the commission has forwarded to us, which is the way the commission initiates the proceeding, having determined that the claim, so to speak, states a claim.

That is by a non-customer, just as Mr. Toboroff's clients are non-customers.

The reparations availability as to Messrs Simplot and Taggares have to be read under 13a, which talks about anyone who commands, induces, et cetera, a violation of the Act is liable in an administrative proceeding as a principal.

We submit that reparations are an administrative proceeding under the Act quite clearly, and therefore a person in the character of Messrs. Simplot and Taggares, who were alleged to have violated the Act, would be liable on reparations.

In addition, much has been made as if Mr. Simplot and Mr. Taggares had not been punished by this Act.

Quite the contrary is true.

The exchange imposed massive penalties against them, in addition to CFTC imposed long-term suspensions from trading on these individuals.

Moreover, Mr. Toboroff continues under Judge Mansfield's decision to have available his antitrust claims against them, which remain pending in the District Court.

Thus, they were severely penalized under a statute designed by Congress to accomplish exactly what it accomplished.

If there are no further questions, we thank the Court for its indulgence.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.

Merrill Lynch, Pierce, Fenner & Smith v. Curran - Oral Argument

Thu, 19 Feb 2009 07:43:20 +0000

Case:

Merrill Lynch, Pierce, Fenner & Smith v. Curran

Media File:

80-203_19811102-argument.mp3

Related Transcript:

transcript.xml

Transcript:

ORAL ARGUMENT OF RICHARD P. SASLOW, ESQ., ON BEHALF OF THE PETITIONER

Chief Justice Burger: We will hear argument next in Merrill Lynch against Curran.

Mr. Saslow, you may proceed whenever you are ready.

Mr. Saslow: Mr. Chief Justice, and may it please the Court, the issue presented is whether the Commodity Exchange Act provides persons such as the Currans an implied right to maintain a civil action for damages under Section 4, the antifraud provisions of the Act in federal court.

In a broader sense, the issue is where is the line to be drawn that distinguishes between the proper scope of judicial function in the interpretation and application of statutory language, and what the Constitution defines to be the legislative prerogative, the enactment of substantive rights and federal statutes.

Very briefly, the facts are that the Currans opened a commodity trading account with Merrill Lynch in 1973.

The account was closed about a year later, having sustained substantial losses.

The Currans started suit in the United States District Court for the Eastern District of Michigan, claiming civil damages alleged to have been suffered as a result of the fraud of Merrill Lynch.

In the Court of Appeals, the Court addressed sua sponte and decided the issue of whether the statute creates this implied remedy.

Over the dissent of Judge Philips, the court concluded that there is such a remedy.

The Currans' claim is based on Section 4b of the Commodity Exchange Act, a 1936 statute.

The 1936 Act was broadly proscriptive, provided for criminal sanctions, and granted some regulatory powers to the Secretary of Agriculture.

There was no provision in that Act for any private remedy in federal courts.

There was no language in the statute creating such a right, and there was no indication anywhere in the legislative history that Congress ever considered, contemplated, or intended the existence of such a right.

The 1936 Act contained Section 4c, savings clause, which preserved to persons any rights or remedies they might have under applicable state law.

The Commodity Exchange Act was amended in 1968, very substantially in 1974, and again thereafter in 1978.

The 1974 amendment significantly broadened and strengthened the regulatory control of the government over this sector of the economy.

The 1974 amendments created the Commodity Futures Trading Commission, which was designed to be an expert agency with broad administrative, regulatory, and enforcement and remedial powers.

The Commission was vested with the oversight of contract markets, of the rules and regulations of the contract markets, was given power to enforce with cease and desist orders the terms of the Act.

It engages in the registration and licensing of persons active in this industry.

It has the power to revoke and suspend licenses and registration for violations of the Act.

The Commission has the power to impose civil penalties of up to $100,000, and to pursue criminal prosecutions, with penalties ranging up to $500,000 for, among other things, willful violation of the section at issue here, the antifraud provisions, Section 4b.

The 1974 amendments also repealed the state law savings clause, provided for exclusive jurisdiction over futures trading and related activities in the Commission, and also set up an administrative reparation procedure by which aggrieved persons such as the Currans could pursue a civil damage remedy before the Commission.

The Act did not in 1936 nor in 1974 nor at any other time contain any language granting a person a right to sue for civil damages in the United States District Court alleging a violation of the Act.

The Currans are asking in effect that the Court correct this Congressional oversight.

They ask that the Court--

Unidentified Justice: Do you use that term with precision?

That is, that it was an oversight?

Mr. Saslow: --No, Your Honor, absolutely not.

We take the position that Congress acted purposefully, that it is being characterized by the Respondents as an oversight.

Unidentified Justice: Then you are using it in quotation marks.

Mr. Saslow: Yes, sir.

Unidentified Justice: Their claim of oversight.

Mr. Saslow: Yes, Mr. Chief Justice.

Unidentified Justice: Is it correct that they contend it was an oversight?

They thought Congress was aware of the existing private cause of action and found no need to enact it.

Isn't that their argument?

Mr. Saslow: They argue that there was an existing private right of action.

We dispute that there ever was.

Unidentified Justice: But if they are right, then it wouldn't be an oversight that they didn't put it in.

Mr. Saslow: Yes, it would still be an omission from the statute that is purposeful.

Unidentified Justice: But not an oversight.

If they thought they knew... may they were wrong... that there was an existing private cause of action and they didn't change the law deliberately, because they thought, we've already got a remedy, it would not be fair to call that an oversight, would it?

Mr. Saslow: If that were the situation, no, but the--

Unidentified Justice: And that is what your opponent argues is the situation I know you disagree with it.

Mr. Saslow: --But the legislative history simply doesn't bear that out.

Congress was in fact presented with testimony saying, if you provide these reparation proceedings, you must also include express language creating a civil damages remedy in federal court or else--

Unidentified Justice: I understand.

I just merely was questioning whether it is correct to say they are relying on an oversight.

That isn't as I understand it their argument.

Maybe they are wrong.

Mr. Saslow: --What the Respondents are asking in effect, though, is that the Court ignore the years of debate, hearings, testimony, drafting, enactment, amendment that underlie the formation of this Act since 1936 and which represents a reasoned policy decision on the part of Congress as to what rights and remedies should be contained within the Act.

Chief Justice Burger: We will resume there at 1:00 o'clock.

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

Chief Justice Burger: Mr. Saslow, you may resume whenever you are ready.

ORAL ARGUMENT OF RICHARD P. SASLOW, ESQ., ON BEHALF OF THE PETITIONER -- RESUMED

Mr. Saslow: Mr. Chief Justice, and may it please the Court, the Congress of the United States has since 1936 devoted considerable attention, time, effort, and draftsmanship to the creation of the Commodity Exchange Act.

Yet the Respondents would ask this Court to disregard that Congressional effort in this very key provision and substitute the wisdom of this Court for that of the Congress as to whether this substantive right, this private right of action, should exist under this statute.

That Respondents ask in effect is for the Court to exceed its judicial function and venture into the realm of the legislative function.

This Court recently in Texas Industries versus Radcliffe Materials had occasion, speaking through the Chief Justice, to discuss the fact that the creation of substantive rights is a legislative function.

The Court noted that it is the Congress that is equipped to make these kinds of policy decisions.

For example, in the consideration that preceded the enactment of the Commodity Exchange Act, the Congress heard testimony from witnesses representing many diverse segments within the futures trading industry.

This testimony, the hearings amounted to hundreds and hundreds of pages of legislative history, and represented the accumulation by the Congress of information, of the interests, the opinions, the desires of all of these many groups.

The decision of the Congress as to how those many and often diverse interests could best be balanced and mutually served, and how the futures industry and the national economy could best be served through this Act is set forth in the language, the provisions that the Congress put into the Commodity Exchange Act.

The framers of our Constitution determined that such policy decisions are to be made by elected representatives, those who are politically accountable to their constituents.

The judicial forum is unsuited to the making of such policy decisions.

Courts are limited to the facts presented to them by individual litigants in an adversary posture.

The Court does not have free ranging source of information to make such decisions.

Unidentified Justice: Mr. Saslow, does Section 4b refer to the obligation of the FCMs toward third parties in the market generally, or only to their own customers?

Mr. Saslow: It does not direct their obligation to anyone in particular.

It simply prohibits their committing fraud or deceit.

I believe the focus of Section 4b is expressed in the 1936 enactment, and notwithstanding that the Respondents seek to look for Congressional intent in the 1974 amendments, it must be remembered that Section 4b was enacted in 1936, and has been on the books since that time, notwithstanding the amendment of other provisions of the Act.

And in 1936, the Congress was focusing on the protection of farmers, producers, people who handle the commodities, to protect those people from the abuses of, among others, speculators.

The idea was the protection of the marketplace and of the agricultural segment of the economy from manipulation, excessive speculation, and other abuses in the futures market.

Unidentified Justice: Were the plaintiffs in this case speculators themselves?

Mr. Saslow: Yes, they were.

Speculators as opposed to hedgers, who are people who have an interest in the cash commodity itself and are trying to abate the risk.

Unidentified Justice: By playing both sides, so to speak?

Mr. Saslow: That's right.

The role of statutory construction traditionally involves the resolution of ambiguities in the statute, the efforts of the judicial branch to harmonize apparent conflicts between different provisions within a statute, or the task of harmonizing apparent conflicts between different statutes, and the application of the law to the facts of an individual case.

Where, as in this case, the statute itself is clear, the Court need only consider the language and the structure of the Act to answer the question, and the answer to the question here is that there is no private right of action contained within the statute.

Therefore, none exists.

This Court's recent decisions have emphasized these limitations on the judicial role in the implication of private rights--

Unidentified Justice: Mr. Saslow, may I ask, I gather your basic position is that at least under the 1974 amendments, any redress has to be obtained from the Commission.

There is no state law question here, I gather, is there?

If there is pre-emption, it is pre-emption of any judicial remedy in the federal courts, and redress only before the Commission?

Mr. Saslow: --I do not believe that the federal state pre-emption issue is before the Court in this case, but I do believe--

Unidentified Justice: There are, I gather, I think your brief suggests that there may be some ruling for state law in the cases of contractual commercial rights and contracts for future delivery, but as to what we are talking about in this case, is it your position that the Congress has specified that if you have any redress you have to go to the Commission to get it?

Mr. Saslow: --Yes.

Unidentified Justice: That is basically your position.

Mr. Saslow: That states my understanding--

Unidentified Justice: Yes.

Mr. Saslow: --of the effect of the Act.

Unidentified Justice: Yes.

But didn't you say in your reply brief that the Currans would have a cause of action for fraud under Michigan law?

Or am I mistaken about that?

Mr. Saslow: No, Justice Powell, I don't believe--

Unidentified Justice: You don't think so?

Mr. Saslow: --we expressed that position in our reply brief.

Unidentified Justice: I guess I am looking at the wrong brief.

Well, on Page 2 of your reply brief, you say Respondents could sue for fraud in state court under the common law of Michigan.

Is it the yellow brief?

Am I looking at the right one?

0....

Mr. Saslow: Justice Powell, I was addressing an argument made by the Respondents that their cause of action accrued prior to the date after which reparations would be available to them.

Unidentified Justice: Yes, but--

Mr. Saslow: The pre-emptive effect of the Commodity Futures Trading Commission Act arises in the 1974 amendments.

Prior to that time there was a savings clause in the statute that reserved state remedies to litigants.

That savings clause was deleted in 1974, and the reparation proceedings were made available at the same time.

So, in addressing this, the argument of the Petitioners, we say regardless of when their claim accrued, and that has never been determined in this case, if it was before the effective date of the 1974 amendments, they would have available a state court remedy; if it were afterward, they would have direct reparation remedy before the Commission.

Unidentified Justice: --Doesn't that modify your answer to Mr. Justice Brennan?

Aren't you saying, if I understand you correctly, that these Respondents would have, unless barred by the statute of limitations, a fraud action in the Michigan state courts?

Mr. Saslow: Only if their claim as they now say accrued prior to the availability of reparation.

Unidentified Justice: Well, that is their claim, isn't it?

Mr. Saslow: Well, it was not their claim in the court below.

Unidentified Justice: All right.

Mr. Saslow: We were addressing an argument that they made that if this Court does not grant a private right of action in the federal courts, they would be without any remedy whatever, and in addressing that point we just say that they have one or the other depending on when their claim accrued.

This Court's recent decisions have stressed the limitations on the judicial role in the implication of private rights under statutes that don't expressly provide those rights.

What this Court has said is that it cannot infer a private remedy under such a statute in the absence of clear, persuasive evidence that such was the intent of the Congress, yet the evidence that the Respondents rely on in this case is evidence of the sort that this Court has rejected as being probative of the existence of a private remedy.

The Respondents argue that this is a comprehensive regulatory statute providing various means of enforcement and redress.

They argue further that it is the apparent will of the Congress to provide strong enforcement, and therefore it would advance that same Congressional purpose for the Court to imply an additional form of remedy.

This Court has, however, held otherwise, acknowledging that when there is a comprehensive, broad statute providing for varied remedies, it creates a presumption that the Congress knew what it was doing and enacted those remedies that it intended, and remained silent as to those remedies that it did not intend.

The Commodity Exchange Act at various provisions expressly provides for the jurisdiction of the United States Court to contribute to the enforcement of the statute.

The Courts are given jurisdiction over the cease and desist actions of the Commission.

They are given enforcement of Commission orders.

The enforcement and appellate review of reparation awards is expressly placed in the federal courts.

Obviously, as this Court has noted, when Congress wishes to provide a remedy, it knows how to do so and does so expressly.

Unidentified Justice: Mr. Saslow, is there a review... I can't remember... of the denial of reparations?

Mr. Saslow: From an award of no damages?

Unidentified Justice: If the Commission says, you are not entitled to anything, does the complaining party have right of review of that?

Mr. Saslow: There are two situations in which that can happen, Justice Stevens.

There is an initial determination made upon the filing of the complaint whether the complaint has sufficient merit to go any further.

I understand that that decision is not reviewable.

If the proceeding does continue, and there is a hearing, and the award is that there are no damages, no cause of action, then that determination, in my understanding, is reviewable.

Unidentified Justice: If reparations are granted, how are they administered?

Mr. Saslow: They are heard by an administrative law judge who has broad adjudicative powers, not too dissimilar to the federal courts.

There are provisions for discovery, representation by counsel, and so forth.

Unidentified Justice: Would the function be somewhat like the distributions in a class action?

Mr. Saslow: I am not familiar enough with those mechanics to--

Unidentified Justice: Well, where a fund is recovered for a class, it is impounded by the courts and then administratively it is parcelled out or available to the people, the members of the class who have elected to come in.

Mr. Saslow: --I do not know if the reparation proceedings provide in fact for class action, but if it were an individual proceeding, it would proceed not unlike a normal individual piece of litigation in the federal courts.

In other words, if there is an award, it is enforceable individually against the respondent, and it is enforceable in the federal courts with the normal execution remedies.

In addition, the trading privileges of a respondent who doesn't pay an award ordered by the Commission are automatically suspended.

It is argued by the Respondents that Section 4b was enacted for the especial benefit of customers such as themselves, and that therefore a private right of action should be implied.

This argument is unavailing for two reasons.

The first of those reasons is that it is factually incorrect.

As I discussed a few minutes ago, the protection was directed to the marketplace in general, and to the extent there was any particular favored class, it was basically the farmers.

The argument is also legally insufficient.

Even if people such as the Respondents were a favored class at whom the statute's benefits were aimed, that still is insufficient to create a substantive right to proceed in the federal courts.

The Respondents also seek to invoke the holdings of approximately four United States District Courts that recognize an implied right of action, using the tort pro se analysis of Rigsby and Borak, an analysis that this Court has since categorically rejected in Touche Ross and Transamerica.

It is argued that the Congress was aware of, approved of, and in effect adopted these decisions, and now this Court is debarred from taking that away since it is not said to represent a Congressional enactment.

This argument is factually incorrect and constitutionally unsound.

It is factually incorrect because it is simply not supportable that the Congress as a whole was aware of, spent any time considering, or acted in reliance on the existence of a right found by these four courts in Illinois, Minnesota, Louisiana, and Pennsylvania.

The decisions were constitutionally unsound and Congress was simply not well aware of them.

There are hundreds of pages of legislative history underlying the 1974 amendments, and there are a very few, very scattered, some ambiguous, some clearly perjorative references to these cases, but there is nothing that focuses on them and represents any Congressional intent recognizing this to be the law or establishing an intent that this shall be the law upon the adoption of these amendments.

The District Courts cannot create substantive rights.

Again, it is a Congressional function.

They can recognize, they can infer that which Congress has sufficiently implied to them, but they can't create it out of whole cloth, as these courts did honoring Rigsby and Borak.

To follow this argument of the Respondents--

Unidentified Justice: You contend, of course, that both Rigsby and Borak were incorrectly decided, don't you?

Mr. Saslow: --I think Borak was incorrectly decided under the principles this Court has established since that time.

I think Rigsby relied on an incorrect premise, but I think Rigsby might have nonetheless been correctly decided even under the Court's current principles.

Unidentified Justice: Under your more or less constitutional argument that the Court has no power to do this, it seems to me Rigsby is clearly wrong.

Mr. Saslow: Well, my argument is that the Court cannot say that this statute creates a duty, that duty has been breached, this plaintiff has been injured, therefore he has a right to proceed in federal court for a damage remedy.

I think this Court has in recent terms held that that can't be done.

What can constitutionally be done is for the Court to resolve ambiguities and infer in some cases a right of action even where none is expressly provided.

In Rigsby, for example, one of the provisions of the Safety and Appliance Act at issue in that case said that employees shall not be deemed to have assumed the risk.

A provision that takes away a legal defense would seem to create a reasonable inference that that defense must be able to be asserted in some forum, and I think there might be an inference to be drawn there that a private right of action was intended.

Unidentified Justice: What about Cort against Ash?

Do you think that is acceptable to you?

Mr. Saslow: I think that--

Unidentified Justice: Is that consistent with your theory?

Mr. Saslow: --I think that Cort v. Ash has been leading the lower courts astray, the consideration--

Unidentified Justice: That isn't what I asked you.

Do you think Cort v. Ash is consistent with your approach?

Mr. Saslow: --The result is; the reasoning is probably unnecessary in many cases.

Unidentified Justice: Well, and inconsistent with your approach.

Mr. Saslow: Yes, Justice White, it is.

Unidentified Justice: So if we were going to take your approach, we would have to tear up Cort against Ash and all the cases that have followed that.

Mr. Saslow: No, not at all.

I don't believe that is true.

Unidentified Justice: Well, don't you argue in your brief that Cort and Ash was satisfied?

Mr. Saslow: I think under the test that Cort v. Ash establishes, there is no private right of action.

I think the degree of inquiry that is required by Cort v. Ash is unnecessary in a case where there is not some indication within the statute that there might have been a private right intended.

Unidentified Justice: So if we were going to take your approach, we would have to considerably modify the Cort v. Ash approach.

Mr. Saslow: I believe--

Unidentified Justice: We might get the same results in various cases that you would, and some not, but we would have to do a little rewriting.

Mr. Saslow: --I don't believe that to decide the case in my favor the Court needs to rewrite Cort v. Ash.

I do think that--

Unidentified Justice: Well, why do you criticize Cort v. Ash?

Mr. Saslow: --Because I think that the--

Unidentified Justice: We have not overruled Cort v. Ash, and we have decided four or five cases since then applying it.

Mr. Saslow: --I recognize that.

Unidentified Justice: Why do you question it?

Mr. Saslow: Because, Justice Powell, when the Courts are invited, as Cort v. Ash invites them, to consider whether an additional private right of action would advance the Congressional purpose, the Courts are then invited to try to form a subjective intent or a subjective idea of what the Congressional purpose is and whether this additional remedy might advance it, and I believe they are led into making legislative policy decisions of the kind that should be made by elected representatives.

Unidentified Justice: Couldn't you just say, this would be a very easy case under Cort v. Ash?

Mr. Saslow: I could say that.

Yes, sir.

Unidentified Justice: I would have thought you might have.

Because the factors are not satisfied for implication, you think.

Mr. Saslow: I believe that is correct.

Unidentified Justice: In other words, you depend on the fact that these huge potential penalties against a broker and criminal sanctions are going to keep them in line.

Is that it?

Mr. Saslow: No, Mr. Chief Justice.

What I am in effect relying on is that that is the determination that the Congress made, and that that is properly a Congressional decision to make.

Unidentified Justice: And that that is all they intended.

And that that is all they intended.

That is your argument, isn't it?

Mr. Saslow: And that is all that they intended.

Unidentified Justice: And if there are any reparations, they are incidental.

Mr. Saslow: Well, they are part of the enactment that Congress chose.

The Congress was presented--

Unidentified Justice: No, but basically, Mr. Saslow, aren't you arguing as you answered me earlier, that what they did in 1974 was to say reparation shall be a remedy and you will get it before the Commission, and you don't have any cause of action in the courts, in the federal courts?

Isn't that what you are arguing?

Mr. Saslow: --No, I am arguing that there was never a cause of action in the federal courts, and after 1974 there was also a remedy in reparation and no remedy in state court.

But there was never a right of action in the federal court.

Unidentified Justice: Well, suppose that however much you argue to the contrary, this Court or some court said, well, at the time the 1974 statute was amended, prior to those amendments there was a well recognized cause of action in the federal courts.

At least the federal courts had been adjudicating private causes of action under 4b.

Let's just assume that is true.

Mr. Saslow: All right.

Unidentified Justice: Now, what would you say then?

And let's assume the legislative history were clear that Congress recognized that those causes of action had been implied by the courts, and did nothing, were absolutely quiet about it, except to recognize it.

Mr. Saslow: I would argue that there is still no private right of action.

Unidentified Justice: Because the 1974 reparations remedy displaced the old cause of action.

Isn't that your argument?

Mr. Saslow: No, I am arguing that there was never a right of action in the federal courts.

There was a right in the state courts.

Unidentified Justice: Accepting Justice White's premise, that there was, then what would you say, was his question to you.

Mr. Saslow: I would say that a right of action still has to be affirmatively created by the Congress.

If there--

Unidentified Justice: The reparations action was.

Mr. Saslow: --Yes, that's right.

It was.

And the right of action in the courts was not.

That was a Congressional decision, a choice.

And it is not the function of the judges to--

Unidentified Justice: So you say you think it poses the wrong question, to say like the Sixth Circuit did or the Second Circuit that the real question here is whether Congress intended to eliminate an existing cause of action.

Mr. Saslow: --I think that stands--

Unidentified Justice: The question should be whether they intended to create one.

Mr. Saslow: --I think the question posed by the Sixth Circuit turns Articles I and III on their ear.

Unidentified Justice: And by the Second Circuit, too?

Mr. Saslow: And by the Second Circuit as well.

Thank you.

Chief Justice Burger: Very well.

Mr. Hudson?

ORAL ARGUMENT OF ROBERT A. HUDSON, ESQ., ON BEHALF OF THE RESPONDENTS

Mr. Hudson: Mr. Chief Justice, and may it please the Court, in making the determination of whether a private right of action exists under the Commodity Exchange Act, the opinions of this Court instruct that the touchstone is Congressional intent.

In this case, we submit that the relevant inquiry is whether Congress in enacting the substantive and extensive amendments to the Commodity Exchange Act in 1974 intended to deny a private right of action under Section 4b.

We believe this approach to be the correct one in view of the circumstances surrounding the enactment of the 1974 legislation, circumstances which show that based on the unanimous interpretation of Section 4b by the federal courts and based upon the testimony provided to Congress, and statements made by our legislators, Congress perceived that the Act afforded a private right of action.

Thus stated, we believe that the opinion below did not, as this Court cautioned in Northwest Airlines versus United States, fashion a new rule or provide a new remedy which Congress decided not to adopt, but instead merely interpreted a statute as continuing an existing remedy.

We believe the attempt to couch this case in constitutional terms is in fact to beg the very question that we have before the Court, and exalt the proper exercise of this Court's duty in interpreting a statute far beyond its plain import.

This Court has stated on numerous occasions that in construing a statute we look first to the statutory language, and particularly to the provisions made therein for enforcement and relief.

While as in nearly every case involving an implied right of action, there is no explicit statutory language which would answer this question for us, we believe the explicit terms of the statute are particularly telling of Congressional intent in this case.

Section 4b is a customer-oriented antifraud statute, very much like Section 10b of the Securities and Exchange Act, interpreted by this Court in Superintendent of Insurance, and Sections 206 and 215 of the Investment Advisors Act, considered in Transamerica Mortgage Advisors.

The very language of Section 4b makes it clear that a commodity broker's customers are the especial class intended to be benefitted by that statute.

In Leist against Simplot, Judge Mansfield in his dissenting opinion correctly observed that it is only a customer who may bring a suit under Section 4b.

The express terms of the statute find significant support in the legislative history, which shows that customer protection was one of the, if not the overriding purpose of the legislation.

However, as this Court has cautioned in California versus Sierra Club, the question is not simply whether... who would benefit, but whether Congress intended to confer federal rights upon those beneficiaries.

As to this issue, the Petitioner and the Respondent are not in disagreement, because as Petitioner states in his brief, there is no reason for a court to speculate whether Congress intended that persons aggrieved by violations of the Act be entitled to recover damages.

Plainly, Congress did so intend.

And that intention is specified in the express terminology of the statute.

Sections 5a(11) and Section 14 of the Act create respectively a private, voluntary arbitration mechanism and an administrative reparations procedure to commodity customers injured for a broker's violation of Section 4b.

Thus, we believe the express terms of the statute, without regard to any other factors, conclusively demonstrate that Congress enacted a federal statute conferring federal duties upon commodity brokers toward their customers, and that Congress intended that customers would have recourse, civil recourse for violations of that statute.

Yet based upon the record as submitted to this Court, and we want to make that clear, the record supports, and we contend, that the claim of the Currans arose before the effective date of the reparations procedure.

Under those facts, no remedy is provided to the Currans.

Accordingly, the remaining inquiry of whether Congress intended that those rights to which I have referred would be supported through private litigation must be determined by reference to the language of the... not to the language of the statute, but through Congressional intent and the factors reflecting that intent, as this Court has outlined in Cort against Ash.

Unidentified Justice: Is there any dispute about that with your opposition, as to whether there is a remedy for the Currans under this section?

Mr. Hudson: Justice Blackmun, I believe there is no dispute.

The comment has been made that possibly their claim arose during a time when they could use reparations.

We contest that vigorously.

I believe that it was correctly observed earlier that the Petitioners are suggesting that the Currans be sent to state court.

They simply, in our view, cannot use reparations and they cannot use arbitration.

We believe, therefore, that it would be useful to take a look very quickly to what precisely Congress did in 1974 with the Commodity Exchange Act.

In 1974, 19 new sections were enacted; 27 sections were amended; and excluding the severability clause, only five sections were left undisturbed.

Section 4b was one of the sections that was amended, yet the operative language upon which the Respondents rely was left completely intact.

The changes to the 1974 Act... in the 1974 legislation constituted a vast change in the scheme of legislation, and expansion of federal regulation, and in the means of providing redress for the violations.

So, we believe, based on that very extensive modification, that the intent to be discerned is the intent of the 1974 Congress.

This is a point which every court which has considered this issue thus far has made.

In considering what the 1974 Congress intended with regard to claims like the Currans', we must recognize that when Congress sat down to amend the statute, it was the unanimous interpretation of the lower federal courts that a private right of action was allowed under Section 4b.

Petitioner is unable to point to one single decision that even suggests that that would not be an appropriate result.

Unidentified Justice: Well, Mr. Hudson, in the case of Georgia against United States, decided about seven or eight years ago, where the Voting Rights Act was renewed, the Court's opinion states at Page 411, US at Page 526,

"After extensive deliberations in 1970 on bills to extend the Voting Rights Act, during which the Allen case, which had been a matter of some controversy in this Court, was repeatedly discussed."

"The Act was extended for five years without any substantive modification."

"We can only conclude, then, that Allen correctly interpreted the Congressional design when it held that the Act gives broad interpretation of the right to vote."

et cetera.

Now, was there that kind of discussion in the 1974 Congress?

Mr. Hudson: No, there was not, Justice Rehnquist.

In fact, the discussions in the 1974 Congress did not get into the specifics in terms of the cases that were decided, however, we believe that even without that, we believe that the conclusion which the Court reached in Cannon versus University of Chicago, which was that... the statement was made that our legislators are presumed to know the law, in addition to that general presumption, there was a significant amount of testimony which was presented and which we have outlined in our brief which shows that Congress was told that there was a right of action in the courts.

For example, a statement by Mr. Alvin Donohue, of the Minneapolis Grain Exchange, to the effect that the facts in large claims can best be established through the procedure--

Unidentified Justice: These were lower courts, not the U. S. Supreme Court, like the Allen case.

Mr. Hudson: --This is correct, Justice Rehnquist.

However, we believe that the emphasis which the Petitioner is trying to place on that very fact is... overlooks what we believe to be a very significant concept of statutory construction to which this Court referred to in Cannon, which is that it is not really the state of the law which is governing, it is Congress's perception of the state of the law.

Whether or not that perception is correct or not is of no moment.

If Congress perceived that that private right of action existed, that in fact is the most significant indication of legislative intent.

Unidentified Justice: Well, by 1974, when this Congress acted, AMTRAK had been decided, had it not?

Mr. Hudson: It had.

Unidentified Justice: Or within a month or so, and there we had said that it was no longer open season on private rights of action.

Mr. Hudson: This is correct, Justice Rehnquist.

I think that the AMTRAK decision and the very, I believe, cogent questions that you are pointing out must be considered, but I think they must be considered in the context of the entire circumstances.

We believe that we must weigh the factor that you have just mentioned with the fact that Congress was told on repeated occasions that customers could go to Court in most instances by those very individuals who were going to be governed by this Act.

As a matter of fact, one of the representatives of the Petitioner made that very statement to Congress himself in testimony.

It is... Therefore, the way that we believe that factor is relevant is that this Court has outlined a number of tools, accepted tools of statutory construction which must be looked at.

I think the point that we are making, there was this line of authority, Congress was told that there was recourse to the courts--

Unidentified Justice: Well, was there any contrary authority?

Mr. Hudson: --There was not.

Not under Section 4b, Justice White.

It was unanimous, and in fact the belief, we believe, was so universal that it is even underscored by the proceedings below in this case.

Unidentified Justice: Well, Mr. Hudson, is it your position then that Congress anticipated these parallel remedies with respect to those people who could use reparations?

With respect to them, did they have a choice?

Or could they go both ways at once?

Mr. Hudson: I perceive, Justice White, that Congress intended that they would have a choice.

Unidentified Justice: A choice, but if they chose one way, that was the end of it?

Mr. Hudson: Correct.

That is correct.

Unidentified Justice: If you filed an action in court, you couldn't go for reparation?

Mr. Hudson: That's correct.

As a matter of fact--

Unidentified Justice: So there was no primary jurisdiction or no exclusive jurisdiction.

Mr. Hudson: --That's correct.

That is correct.

That is our contention, Justice White.

As a matter of fact, the Commodity Futures Trading Commission agrees with that, because at the very--

Unidentified Justice: I know they do.

I know they do, and where were the commodities decisions reviewable?

In the courts of appeal?

Mr. Hudson: --Yes, in the courts of appeal.

That is correct.

You mean from the lower federal courts or--

Unidentified Justice: No, no.

Mr. Hudson: --in reparations?

Unidentified Justice: From reparations.

Mr. Hudson: Yes, they go directly from reparations to the... well, they go directly from reparations to the Commodity Exchange Commission itself.

Unidentified Justice: And then to the courts.

Mr. Hudson: Correct.

That's correct.

Then to the courts of appeal.

Unidentified Justice: Mr. Hudson, on that point, do you agree that they would have been reviewable... a denial of a claim for reparations would have been reviewable?

Mr. Hudson: No, I do not, Justice Stevens.

Unidentified Justice: You don't.

Mr. Hudson: As a matter of fact, that is one of the points that we make in support of our contention that it could not have been intended to be an exclusive remedy.

There are certain facets to the way that the reparations remedy works that we believe show that it is inconsistent with an intention to make it an exclusive remedy.

Unidentified Justice: But your position is that you have a choice, but once you have made it, you are stuck with it.

Mr. Hudson: That's correct.

Unidentified Justice: So if you file for reparations and they refuse to entertain it--

Mr. Hudson: No, I don't think I would go that far, Justice White, because after all, if--

Unidentified Justice: --I gather you wouldn't.

Mr. Hudson: --Well, if there has been no decision, if there has been no appeal--

Unidentified Justice: Well, there has been a decision not to entertain--

Mr. Hudson: --Correct, but I don't believe that would be any kind of decision on the merits, and I don't believe it would bar--

Unidentified Justice: --It certainly would have been a choice of yours, though.

Mr. Hudson: --Excuse me, sir?

Unidentified Justice: It would have been a choice of yours to seek reparations rather than court review.

Mr. Hudson: It would.

It would, because reparations, we believe, was intended to provide an expeditious and inexpensive alternative to court proceedings.

Unidentified Justice: So you think that Congress anticipated independent judgments by courts on commodities exchanges and with no obligation... if you filed in the court rather than go for reparations, the court you filed in would have no duty whatsoever to consider how the Commodities Exchange Commission had construed its own statute.

Mr. Hudson: This is correct.

In fact, this was the way that the courts were interpreting the law prior to the 1974 amendments.

This is exactly what the courts were doing.

Admittedly, the Commodity Futures Trading Commission had not been created at that time.

Unidentified Justice: Well, yes.

That's what I--

Mr. Hudson: We believe, however, that if we accept the premise, and we believe it is adequately supported in the record, that Congress perceived that alternative to be available, then Congress should have spoken to that fact.

Congress would have said something about it.

Congress did not.

And in fact, as I have indicated, we believe the intent of Congress to perpetuate the remedy is shown by a study of the mechanism itself of enforcement under the Act.

Unidentified Justice: --Suppose there had never been a decision on a private cause of action under 4b prior to 1974.

Let's assume there had never been any judgments.

Would you still be making the argument that Congress... that courts could imply cause of action under 4b?

Mr. Hudson: Yes, I would, Justice White.

The reason would be that--

Unidentified Justice: In spite of their provision of the reparations?

Mr. Hudson: --I definitely would.

The reason is that we are looking at a number of factors.

That is one factor.

I believe that because of the existence of that line of authority, because Congress was informed of it, we have to consider that.

If that was not the case, then I think we would have to pass that, we would have to look at the other circumstances, for example, the way the reparations remedy itself works.

Arbitration, which is one of the remedies provided, is only allowable for claims below $15,000, and must in any event be voluntary, certainly not the case if you have no alternative.

And the Currans have no alternative in this case, because while the Commodity Futures Trading Commission Act, including Section 4b, became effective on October 23rd, 1974, the reparations remedy did not become effective for three months later, in January of 1975, and claims under reparations could not be filed for one year thereafter, January, 1976.

So, while this type of a phase-in may certainly be explainable in terms of allowing the CFTC to adopt its regulations and prepare itself for its duties, it is completely, we believe, had Congress intended to make that an exclusive remedy, it would have logically made that available to everyone who might come before the Commission.

At the same time, it strains credulity to believe that Congress intended to immunize conduct violative of Section 4b during that period prior to the time that reparations would take effect.

This, we believe, is governed by the very standard tool of statutory construction that an unreasonable construction of a statute should yield to the reasonable one.

So, unless this Court upholds the existence of a private right of action, the Currans will be without any remedy, and we believe that the duty which Congress imposed upon the Petitioner will become entirely precatory, certainly not a wise decision, we believe.

Now, consideration of the reparations procedure itself shows, even if it was available, shows that it would not be adequate because of the point made in response to Justice Stevens' question, that there is no review of a denial by the CFTC, and in fact in 1978 Congress analogized reparations as similar to the operation of a small claims court, certainly not the kind of description that would contemplate an exclusive remedy.

Unidentified Justice: Well, your point is basically that the CFTC and the federal courts simply are proceeding on two parallel, never meeting plains, because neither of them has to pay any attention to the other.

Is that right?

Mr. Hudson: Well, I would not say that, Justice Rehnquist, because certainly I believe that decisions by the Commodity Futures Trading Commission could be viewed as precedent and applied just as decisions in the other courts.

However, I would point out that with regard to securities legislation, while the SEC does not have a customer remedy procedure of this nature, there are various different courts interpreting the law, and certainly with regard to enforcement matters the SEC is interpreting the law as well.

That has not posed a problem.

I don't believe it would pose a problem in this case.

Unidentified Justice: Well, but the SEC has been rebuffed a number of times in this Court, has it not?

Mr. Hudson: Indeed it has, and based certainly on some of the decisions, including those that were cited here, I believe, properly, but the fact of the matter is that Congress has in fact permitted the SEC to perform a certain function in that regard.

It has also permitted the courts to perform a certain function, and I believe that there has not been an inconsistency in that.

Finally, we would like to point out very briefly that the underlying purpose of the 1974 legislation, which was customer protection, would clearly be frustrated by denying the Currans the right to pursue their claims, but in addition to that there are other ramifications.

For example, the volume of cases with the Commission has become so great that the backlog there is now two to three years.

This hardly comports with Congress's intent to make the reparations remedy an expeditious one.

And--

Unidentified Justice: Would you say the same line of reasoning would enable someone to bypass the EEOC and go directly into court?

Mr. Hudson: --By itself, absolutely not, Justice Rehnquist, but once again, we believe this case presents a situation where we have a confluence of factors which we believe is entirely consistent with the prior decisions of this Court that when considered all together show that Congress intended that remedy to continue.

Any one of them by themselves, I will readily concede, would not clearly show that intent, but we believe that when you have them all together, you must go forward and find that there is a right of action.

In Johnson versus United States, which is a case not cited in our brief, Justice Holmes, then Judge Holmes of the First Circuit Court of Appeals, stated that it is not an adequate discharge of a court's duty to say, we see what you are driving at, but you have not said it, and therefore we will go on as before.

Unidentified Justice: I thought he came from the Supreme Judicial Court of Massachusetts.

Mr. Hudson: That case, Your Honor, was in the First Circuit Court of Appeals.

Unidentified Justice: Well, Justice Holmes never sat there.

Mr. Hudson: Well, I am mistaken then.

I apologize.

I think, however, the point is certainly adequate for this case as well.

Unidentified Justice: Wherever he sat, he said what you said he said.

Is that it?

0 [Generallaughter.]

Chief Justice Burger: Very well, Mr. Hudson.

Mr. Sullivan.

Unidentified Justice: Mr. Sullivan, before you start, it may help me if you answer a question or two that I have in mind.

I think everyone agrees that we are endeavoring to ascertain the intention of Congress, and the primary question was Congressional intent in 1974 when this Act was extensively amended.

It seems to me also that the intention of Congress in 1936 is relevant.

Let's assume, for example, that before the 1974 Act, that we had decided Cort v. Ash, and you had to apply Cort v. Ash to the 1936 record, a record in which there is not a word suggesting an implied cause of action, and the statute then didn't even have a jurisdictional savings clause comparable to the savings clause in the Acts of 1933 and 1934 dealing with securities law.

Applying Cort v. Ash to the 1936 Act, how would the Solicitor General have argued?

ORAL ARGUMENT OF BARRY SULLIVAN, ESQ., AMICUS CURIAE

Mr. Sullivan: I can't say that that is a question that I have particularly given my consideration to before now.

Unidentified Justice: Well, let me ask you this.

Let's assume you agree with the implication of my question that after Cort v. Ash and before the 1974 Act, it would be very difficult indeed to infer a cause of action under the 1936 Act.

Mr. Sullivan: I think it would certainly be more difficult than under Rigsby.

Unidentified Justice: Let's assume we agree on that.

How do you justify putting the burden of proof on proponents of the view that there is on implied cause of action, understanding Cort to have said, in effect, that the lower courts that interpreted the 1936 Act as providing a cause of action were wrong?

In other words, if they were wrong, and in effect you have conceded it would be a very close question, where does the burden lie here today?

Mr. Sullivan: Well, I think it is difficult to say that those courts were necessarily wrong, because they are applying a different test, but as someone said in response to a question earlier, they might have gotten to the same place by a different test.

Unidentified Justice: By what test?

Assuming Cort v. Ash came down prior to the 1974 Act, what test in light of Cort would have sustained a private cause of action being inferred on the basis of the language, the legislative history of the 1936 Act?

Mr. Sullivan: Well, I think that first of all, under Cort, I would have to start by saying that Section 4b was enacted for the especial benefit of futures traders.

Unidentified Justice: But 4b has not been changed.

Mr. Sullivan: That is correct, and I would say that in 1936, that was the case.

That is how I would start the process.

Unidentified Justice: That would meet one of the four factors in Cort, but only one.

Mr. Sullivan: That's correct.

And the second factor is the one that might give us some trouble, as far as Congress's--

Unidentified Justice: It will give you a whole lot of trouble, in view of the emphasis in your brief on intention.

Mr. Sullivan: --Well, it would, and I concede that, but the problem is that in 1936, when Congress enacted the language that it did in 4b, it wasn't aware of the Cort test, obviously, and it was operating under Rigsby.

Presumably, the Congress then thought that if it were appropriate to have an implied right of action under Section 4b, the courts would imply that.

I don't think that there is any... I think it is very difficult to go back and to see what Congress did in 1936 and to analyze it in terms of today's law, and that is basically the emphasis of our brief, and I think justifiably so.

Unidentified Justice: You mean, I gather, Mr. Sullivan, that Rigsby stood for the proposition that the mere fact that the statute was enacted for the benefit of a particular class without more, required the implication of a cause of action in his favor?

Mr. Sullivan: I don't think that it required the implication of class action--

Unidentified Justice: Or supported it, at least?

Mr. Sullivan: --Pardon me?

Unidentified Justice: Supported one, at least?

Mr. Sullivan: I think that's right.

I think that as has been stated in either Sierra Club or Middlesex County by Justice Stevens, these were really analogous to the freewheeling days before Erie.

These were the freewheeling days before Cort.

It was well established in the 1890s and in 1936 when Congress enacted 4b that the courts were under a statutory tort theory going to go ahead and finish the job that presumably Congress could have done if it wanted to.

Unidentified Justice: Well, Mr. Sullivan, you say it didn't require it but it would have supported it.

One court could have come out against it and another court could have come out in favor, and both would have been right under your theory.

Mr. Sullivan: Well, I think that is probably accurate.

I think depending on the circumstances of a particular case, although I have to say that this is a matter of legal history, to say how somebody would apply Rigsby.

I am really not an expert in that.

However, I think that there was a good deal of discretion left to the courts under Rigsby to determine whether the implication of a particular remedy, one among many, presumably, would be felicitous in terms of the administration of the statute and the goals that the statute was directed at furthering.

This is a very different world that we are talking about in terms of what the law was when Congress enacted this section in 1936 and what the law is today, let alone what the law was in 1974 when Congress amended the statute.

Unidentified Justice: You do agree, then, that... or your observation is that Cort against Ash did cut back substantially on Rigsby?

Mr. Sullivan: I don't think there is any question about that, Mr. Justice White.

What I think should also be said about the cases that were decided on which we relied prior to 1974 is that not only were they unanimous, not only were they before Congress, Congress was clearly aware that this was what the state of the law was--

Unidentified Justice: How many are there, Mr. Sullivan?

Mr. Sullivan: --I think it depends on who is doing the counting, as to how many.

There, I think, are about ten or eleven that either hold it or say it indicta with respect to one of the provisions of the Act.

Some are 4b cases and some are manipulation cases.

Unidentified Justice: How many are Supreme Court cases?

Mr. Sullivan: Well, there is one Supreme Court case, the Deaktor case, in which the Court held that in the first instance a manipulation claim should be presented to the agency, and while the Court didn't squarely hold in that case, and we certainly concede that it didn't, that there was a private remedy under the manipulation section.

Certainly the implication of the Court's decision that you go in the first instance to the agency or to the old commission certainly implies that in the second instance you can go to court, and indeed, the exchanges did not contest that in that case.

They simply argued the case, and it was argued here as a prime jurisdiction question, which again shows how well settled in our view the law was at that time.

And along that line, in fact, in 1974, when the exchanges, in an attempt to cut back on their liability, went to Congress and in effect conceded that as the law stood then they could be liable under the manipulation provisions, and that they needed relief, and Congress... there is no evidence that Congress gave them any relief.

In years later, in testimony before the Commission, as we point out, the commodity professionals, the industry also treated this as a question that had been decided against them, both by the courts and by Congress in 1974 by testifying before the Commission that a private right of action was still available, and this was cramping their style, in effect, and it is only now, at this stage of the game, when this Court's decisions since Cannon have given the commodities industry a handle, a legal handle that they now say that there was never any cause of action.

Chief Justice Burger: Your time has expired, Mr. Sullivan.

Unidentified Justice: Do you have a question?

After you.

Mr. Sullivan, I wanted to follow up, if I might, on Justice Powell's question about, assume we forget about everything since... or assume Cort v. Ash were the law in 1936, and you said the analysis would be more difficult under 4b then.

Would the analysis of the private cause of action issue under 4b be any different in your view than the analysis under the Securities Act for a 10b cause of action?

Mr. Sullivan: No, I don't think so.

Unidentified Justice: So the reasoning which would destroy the 4b cause of action would also presumably destroy the 10b cause of action?

Mr. Sullivan: I think that is right.

Unidentified Justice: But there was a jurisdictional provision in the Securities Act, both 1933 and 1934, and none in the Act of 1936, with respect to commodities.

Mr. Sullivan: That is correct, but I think that... I think the placement of the jurisdictional provision in the particular statute isn't particularly important.

The question is whether there is some basis for federal jurisdiction, and presumably if you agree that there was a cause of action you would find that there was general... question jurisdiction.

Unidentified Justice: Mr. Sullivan, may I ask you a question or two that I would ask the Solicitor General if he were here?

It may not be fair to ask you, but it is a bit curious, at least for me, that the executive branch of government, the Solicitor General's office in particular, should be here today when there is no question of the constitutionality of a statute, arguing in favor of an implied cause of action, in view of the fact that there are scores of cases that have fallen into the federal judicial system trying to decide just what we are trying to decide here today, whether Congress intended to create a cause of action when it didn't utter a single word in the statute that supports that, and it seems to me to be a curious thing for the government of the United States, the executive branch to be arguing that the courts rather than the legislative branch should decide this issue.

Now, how many words would it have taken Congress to have said in a sentence, 15, 20, 25 words, and it said nothing.

There is not a word in the Senate committee report, and a couple of ambiguous comments in the House report.

So we have very little guidance, it seems to me.

You just tell the Solicitor General what I said.

Are you here representing a commodities exchange?

Mr. Sullivan: Yes.

I am representing the Commission.

Unidentified Justice: Do you think that is part of the executive branch?

Mr. Sullivan: I perhaps should have the Solicitor General here to answer that question, too.

But it is an independent--

Unidentified Justice: It is the position of the independent agency that private enforcement would aid the enforcement of this federal statute, is it not?

Mr. Sullivan: --That's right, and I think that... I was preparing a response to Justice Powell's question, not realizing that I wouldn't have an opportunity to answer it, and I would just say that if we did not believe that the legislative history and the historical context in which this issue arises led us to the view that Congress intended a private right of action to be sustained in 1974, we would not be here.

But we believe that there is a fine line between this Court's using judicial restraint quite properly as a shield to protect itself from having to legislate unconstitutionally, perhaps, as opposed to using it as a sword to not give effect to what Congress's intent clearly was, and we believe that Congress's intent is manifest, despite the fact that the people who were drafting this legislation might have gotten a B rather than an A on a law school exam because they didn't use the case names--

Unidentified Justice: It would have been preferable for Congress to make itself explicit, wouldn't it?

Mr. Sullivan: --I think it would have been preferable, but I think that in the historical context the question really is, why should Congress have thought that it was necessary, and I think everyone knows that when Congress goes back and puts in a few words in a statute, that is also fertile ground for further litigation as to whether the words that have been put in the statute mean exactly what the case law said previously.

Therefore, that may be just as problematic as being silent.

Unidentified Justice: You are not suggesting that it would be difficult on the part of Congress to make its intention absolute and unequivocal, are you?

Mr. Sullivan: My basic response, Mr. Chief Justice, is that in 1974 there was no need for Congress to do that, and that is why--

Unidentified Justice: That doesn't quite answer my question.

I said, is there any doubt that in a very few words, whether 25, as my Brother Powell suggested, or 30, that Congress could make it crystal clear what they intended?

Mr. Sullivan: --I think that that is certainly--

Unidentified Justice: You wouldn't have any trouble drafting that language, would you?

Mr. Sullivan: --Well, I can't say that I have had any experience as a statutory draftsman in the past, but I think that that is probably true, but again the question is, why would Congress have thought in 1974 that it was necessary.

Unidentified Justice: Whether it is necessary.

That is a separate question.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.

Attribution:

The OYEZ Project

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Middlesex Cty. Sewerage Auth. v. Sea Clammers - Oral Argument

Wed, 18 Feb 2009 06:13:17 +0000

Case:

Middlesex Cty. Sewerage Auth. v. Sea Clammers

Media File:

79-1711_19810224-argument.mp3

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79-1711_19810224-argument_transcript.xml

Transcript:

ORAL ARGUMENT OF MILTON B. CONFORD, ESQ., ON BEHALF OF THE PETITIONERS IN NOS. 79-1711, 79-1754 & 79-1760

Chief Justice Burger: We will hear arguments next in Middlesex County Sewerage Authority v. the National Sea Clammers.

Mr. Conford, I think you may proceed whenever you are ready.

Mr. Conford: Mr. Chief Justice and may it please the Court:

This action present important questions as to the consequences of the adoption of recent comprehensive water pollution legislation.

One of these statutes, commonly known as the Clean Water Act, adopted in 1972 is an extensive revision of previous federal water pollution legislation.

The second statute involved, commonly known as the Ocean Dumping Act, adopted in 1972, and also amended in 1977.

This is an action brought by an association of fishermen claiming to have been injured by pollution of the ocean by some six or seven New Jersey sewerage agencies and several New York agencies, all public agencies.

The action of the plaintiff is couched in several counts, the major one, based upon violation of these statutes.

The District Court of New Jersey granted summary judgment to the defendants based upon jurisdictional and substantive grounds.

The Court of Appeals for the 3rd Circuit reversed, and remanded for trial.

Three issues evolved from the differences of opinion between the district court and the court of appeals, which this Court has certified for consideration today.

These are, first, whether there was an implied private remedy flowing from these statutes.

Secondly, whether private parties' plaintiffs have standing to invoke the federal common law nuisance remedy declared by this Court in Illinois v. Milwaukee.

And third, whether if there is such status for a private action it has been preempted by the Clean Water Act and the Ocean Dumping Act in relation to the complaint in this case.

In view of the time constraints that I am under in this matter, I propose with the Court's leave to address the second and third issues, on which I am opposed both by the Solicitor General and the respondents.

The Solicitor General supports us only on the first issue, that concerning whether there was an implied cause of action.

Unidentified Justice: He agrees with you that there is not?

Mr. Conford: He agrees with us that there is not.

Unidentified Justice: In which event the case is over?

Mr. Conford: The case?

No.

If there is no implied cause of action there may be a federal common law nuisance action.

Unidentified Justice: I see.

Yes.

But he disagrees with you on that?

Mr. Conford: That is right.

I turn to the second issue, which will be found to share a common rationale with the third issue as I develop it.

That is, whether this Court should today declare that there is an across the board remedy available to anybody based on common law nuisance.

An inquiry into that question cannot be approached without a consideration of the context of the comprehensive statutes as they now exist.

In short the issue is, should this Court now declare that there is a broad based, across the board, available to anybody, federal cause of action for nuisance in the context of the simultaneous existence of these comprehensive regulatory water pollution statutes?

I submit that consideration of the traditional, well known bases for the Court enunciating federal common law should dictate that such a cause of action should not exist.

Chief Justice Burger: We'll resume there at 1 o'clock on that point.

0 [Recess.]

Mr. Conford, you may continue.

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

I should supplement what I said before the recess by indicating that all of the sewerage agencies in this case possessed United States EPA permits, both for the sewage effluent and the sewage sludge dumping which are complained of in this action.

Now, as I said before the recess, our conception of the applicability of federal common law should in the context of the presently existing situation, not that which existed when this Court last decided this question in Illinois v. Milwaukee.

What we are now confronted with is the question of whether federal common law should exist on an across the board basis in the context of the comprehensive regulatory mechanism which is constituted both by the Clean Water Act and the Ocean Dumping Act.

Our study of the occasions for declaring federal common law as declared by this Court lead us to the conclusion that there is no appropriate occasion now to declare federal common law of the extent demanded by the plaintiffs in this case.

One illustration of traditional application of federal common law is where a state is a party to an action, either a state against another state or a state against citizens of another state.

In that situation, based upon the Constitution, there are being no statute applicable this Court by necessity has had to declare federal common law.

Unidentified Justice: Well, is this an argument, Judge Conford?

In light of the statutes, there's just no room for that.

Mr. Conford: What I'm trying to do, Justice Brennan, is to indicate that of the generally accepted criteria for applying federal common law, none is appropriate to the present situation.

Unidentified Justice: Without regard to others?

In any event, where there's a statute that regulates the subject matter.

Mr. Conford: Where there's a statute?

Unidentified Justice: A federal statute.

Mr. Conford: Where there's a federal statute?

Unidentified Justice: That displaces any room for federal common law.

Mr. Conford: Except to the extent that it is thought necessary to supply statutory interstices.

We maintain that in this case not only is there not the situation of a state party, but there is no occasion for applying interstices.

What we have here is clearly not a situation of interstitial law.

We have an alternate rival system attempted to be set forth: to wit, the federal common law of nuisance, under which a judge, as Justice Douglas said in the Milwaukee case, operates according to no fixed rules but he is the chancellor, exercising his informed judgement as to what should be.

Unidentified Justice: Well, then that was said in the context... or put it another way, was that said in the context of a private party suit?

Mr. Conford: No, it was said in the context of a state party suit.

And that's why I say it is not applicable here.

Unidentified Justice: Which began as an original jurisdiction, case.

Mr. Conford: Exactly.

And the Court, in an effort to serve its policy of not taking original jurisdiction, labored to find an alternate basis for jurisdiction because of its felt need that a state affected by pollution coming from another state ought to be afforded a remedy.

Now, another common basis for applying federal common law or creating federal common law is when implicated a distinct federal policy, sometimes statutory and sometimes not, but the necessity of supplying uniformity so that the same rule applies in all circumstances, whether federal or state.

We submit that that criterion for the creation of federal common law equally does not exist here.

Unidentified Justice: Would that be illustrated by the Lincoln Mills kind of case?

Mr. Conford: Yes.

That was the determination that there should be an action to enforce an agreement to arbitrate.

Unidentified Justice: And that it should be--

Mr. Conford: Applied uniformly, whether--

Unidentified Justice: --Uniformly; nationally applicable.

Mr. Conford: --Nationally, whether the problem arose either in state or federal system.

Unidentified Justice: Right.

Mr. Conford: Now, clearly, that does not apply here, the objective of uniformity.

When you have two systems, one, federal nuisance law and the other, a regulated statutory system, it's the opposite of uniformity.

Depending upon the plaintiff's choice to go tort law or go statutory law, you can have two entirely different results.

And even in the tort situation itself, there is a built in factor against uniformity, because two federal district court judges hearing approximately the same kind of a nuisance case could arrive at different subjective judgments as to whether the conduct of the defendant was reasonable.

So we submit, there again, there is no uniformity purpose in setting up these remedies side by side.

I can't think of any other appropriate federal law basis that would be applicable to these situations.

I think having negated those which are generally understood and generally applicable, it must follow that it is not appropriate to create the federal common law remedy which our adversaries advocate.

Now, that leads me to the issue of preemption.

We have an unusual type of preemption here.

It is not federal statute against state statute.

It is federal statute against federal common law.

For this purpose I assume for the sake of the argument that there would be a federal across the board common law remedy.

The applicable rule in this situation is illustrated by Arizona v. California, in which this Court held that notwithstanding the fact that the Court had created a common law of equitable apportionment of waters in an interstate stream, nevertheless, when the Congress adopted specific legislation reallocating the distribution of the waters of the Colorado River, that settled the question and it supplanted federal common law of equitable apportionment of water.

Unidentified Justice: The word, then, is either supplanted, displaced, whatever it is--

Mr. Conford: Whatever it is--

Unidentified Justice: --But it's not preemption, because preemption is reserved usually, as you said, to state and federal controversies.

Mr. Conford: --But it's a type of preemption, and this Court has certified--

Unidentified Justice: Well, maybe it would be easier to understand if we didn't use the word, preemption.

Mr. Conford: --Well, I think this Court certified the question in those terms, because Justice Douglas suggested in the Milwaukee case that a time might come when comprehensive federal water pollution legislation might preempt the common law.

I agree with you that conceptually it is not preemption, it's displacement, because Congress has the last word.

If Congress decides that the law should be thus and so and it is contrary to pre existing federal common law, that's it, and--

Unidentified Justice: It's just like a superseding statute.

Mr. Conford: --Exactly.

And we maintain that that is the situation here.

Now, central to this inquiry is a question of, does the reorganization of the federal water pollution act, is it of a scope which should cause a different approach than that which existed when the rudimentary water pollution statute existed prior to 1972?

This Court has been instructed on that question by the very able opinion of Judge Tone in the 7th Circuit, in the Illinois-Milwaukee case which you heard in December, which contains a very comprehensive discussion of the differences between the rudimentary water pollution statute as it existed prior to 1972 and as it exists now.

But I think the best and most pithy summary of what Congress intended to do and what thought of the old statute is a quotation from the Public Works Committee report on the 1972 amendments.

And here's what they said:

"Water pollution control in the past has been all too often sporadic, inconsistent, and improvised on an ad hoc basis. "

They said,

"Our major purpose in adopting this legislation is to establish a comprehensive, longrange policy for the elimination of water pollution, making it clear, to industry and municipalities alike what the water pollution performance will be expected of them during the coming decade. "

That states it better than I possibly could.

Unidentified Justice: Before you finish with your argument, will you explain your position with regard to the savings clauses?

Mr. Conford: Yes, I'll be glad to do that now.

I was going to do it later.

Unidentified Justice: The question is, does the savings clause in both of these statutes operate to compel the adoption of the previously existing federal common law of nuisance?

Mr. Conford: I say it does not.

In the first place, the reference is to statutes and common law.

In my judgment the legislature did not actually mean federal common law when it said common law.

When Congress talks about common law, Ordinarily I think they mean state common law, general common law.

Secondly--

Unidentified Justice: Well, isn't that true throughout the law?

Common on law without any adjectives means... does not embrace federal common law.

Mr. Conford: --You mean, whether it does?

Unidentified Justice: Does not.

Mr. Conford: It does not?

That's my opinion.

Secondly, the argument that it means federal law is hardly realistic in the light of the fact that the concept concerning federal common law in the water pollution area was only developed by this Court in 1972.

This legislation was going through the legislature and had adopted this language before the Court spoke in 1972 in Illinois v. Milwaukee.

And, thirdly, if it were to be accepted for the sake of argument that it did mean federal common law, that then puts the ball back in this Court's jurisdiction, because it is for this Court to say what is appropriate federal common law in that context.

And for the reasons which I have already developed indicating why federal common law in this area would be inappropriate, that takes care of the savings clause, I believe, completely.

Now, what they did mean by the savings clause, in my judgment, was state statutes and state common law.

For example, the Water Pollution Act specifically invites states to participate by adopting more stringent regulations, by setting up area wide water quality standards, and New Jersey, in fact, has adopted legislation along both of these lines.

New Jersey adopted in 1977 both a water pollution control act consistent with the federal act, and an area--

Unidentified Justice: I gather the test, whether the state rule, whether it's statutory or judicial may operate, depends on whether it's more stringent than the federal regulations.

Mr. Conford: --Exactly.

But you could have state common law.

For example, there could be a state nuisance action, there could be a state trespass action--

Unidentified Justice: If it held up to a higher standard than the federal statute?

Mr. Conford: --The New Jersey courts could adopt the standards contained in the statute and in the regulations as appropriate standards for conduct in common law actions.

Unidentified Justice: Or still more stringent?

Mr. Conford: They would have to be more stringent as far as pollution permits are concerned, but they could, in this case, fill in interstices in the federal regulations.

If there were a specific situation based upon water quality of a particular body of water that EPA had not regulated, the State of New Jersey could do so.

And those standards would apply in a New Jersey state court common law action.

Unidentified Justice: But are you saying that the state law could only apply in an interstitial sense?

What about a case in which the state seeks to impose common law rule that is directly governed... say, the federal permit says, ten parts and the state common law rule says--

Mr. Conford: If it were inconsistent--

Unidentified Justice: --More strict?

More strict?

If you comply with both, by complying with state--

Mr. Conford: --It is permitted to be more strict.

The statute expressly permits it to be more strict.

Unidentified Justice: --Even though it's the state common law?

Mr. Conford: State common law would come along if there were an action for trespass, an action for negligence, an action for nuisance based on water pollution.

Unidentified Justice: It would not be a defense to the state common law action if there was compliance with a federal permit?

Mr. Conford: I think so.

I think so.

The state statute could not supersede, could not be inconsistent with the federal statute or federal regulations except to the extent that a permit could be more stringent.

The state could require a more stringent regulation, because the Clean Water Act expressly permits that.

Now, our adversaries would argue that there should not be preemption in the loose sense that I've been using the for the reason that all that the Clean Water Act and the Ocean Dumping Act purport to do is to set standards but not to affirmatively, but not to constitute an affirmative policy which would be impervious to a common law action.

Unidentified Justice: Are you suggesting, from what you say, is it possible that each of the coastal states could have a standard more stringent than the federal with respect to offshore?

Mr. Conford: Only as to their territorial waters.

Unidentified Justice: Inside?

Not the offshore?

Mr. Conford: Inside; not the ocean.

Unidentified Justice: That's three mile limit, isn't it, along the coast?

Mr. Conford: I believe so, three miles from the shoreline.

Evidence of the fact that Congress intended to give agencies involved in this situation, whether industrial or public, time and reasonable standards, not perfection, is evidenced by the fact that the Clean Water Act contains a very numerous set of time regulations.

Certain things have to be done 180 days after the statute is adopted, certain things have to be done 300 days later.

By 1977 the public sewerage agencies must achieve secondary treatment.

By 1983 they must achieve what is described as the best practicable waste treatment technology over the life of the works.

In the case of certain industrial pollutants that are particularly harmful... I'm now paraphrasing... Congress has said that there should be obtained the best available technology achievable to result in reasonable progress to elimination of pollution.

I therefore suggest that there is an affirmative congressional not only to permit these agencies to meet these standard, but to be given time.

Congress realized that a pollution situation which has developed for decades couldn't be solved overnight, that it was necessary to apply time stages in which these agencies could achieve the goal of approaching a pollution free situation.

Chief Justice Burger: You're now into your colleague's time.

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

Chief Justice Burger: Mr. Horowitz?

ORAL ARGUMENT OF ALAN I. HOROWITZ, ESQ., ON BEHALF OF THE FEDERAL PARTIES: PETITIONERS IN NO. 80-12; RESPONDENTS IN NOS. 79-1711, 79-1754 & 79-1760

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

I would first like to address the issue of the existence of an implied private right of action under the Clean Water and the Ocean Dumping Acts.

On this issue, the federal petitioners urge that the judgment of the Court of Appeals be reversed.

The Court of Appeals held that a private right of action should be implied under both of these statutes, apart from the citizen's suit provisions, thus enabling the respondents, because they allege economic injury from pollution, to this lawsuit both for injunctive and monetary relief and against both the dischargers of pollution and the Government agencies responsible for administering these statutes.

The standards for determining whether violations of a regulatory statute might form the basis for an implied private right of action are by now well established by this Court.

The fundamental inquiry is into the congressional intent.

And, as this Court noted in the Transamerica cases, when Congress explicitly provides one remedy for violations of a statute, it is strong evidence that it did not intend that another private remedy be implied.

In this case there can be little doubt regarding Congress's intent.

Both statutes contain detailed provisions authorizing suits by private parties as an aid to enforcement of the statutes.

These provisions are modeled on a prototype enacted in the Clean Air Act Amendments of 1970 after extensive congressional debate.

I will focus here on the specific citizen suit provision of the Clean Water Act.

I believe a similar analysis is applicable to the analogous provision under the Ocean Dumping Act.

Section 505 of the Clean Water Act authorizes a citizen suit only in certain specified circumstances.

A citizen may sue any discharger who is violating an effluent limitation established under the Act or a related order of the Administrator of EPA.

The district courts have jurisdiction in such suits to enforce the limitation and to assess the civil penalties against the violator.

A citizen may also sue the Administrator himself to compel him to perform a mandatory duty under the statute.

Moreover, the Act establishes certain specific procedural limitations on this action.

These relate to notice that must be given to EPA prior to suit, to abstention from suit when the Government is pursuing its own enforcement remedies, and to venue.

There is simply no evidence nor any reason to believe that Congress intended to create by implication yet another private cause of action for claims that cannot be brought under the citizen suit provision, as plaintiffs' claims in this case concededly were not brought under the citizen suit provision.

The savings clause to which respondents point as authority for this implied right of action means simply what it says.

Preexisting statutory rights and common law remedies are preserved.

Thus, in these statutes, Congress's intent is clear.

Congress carefully considered the extent to which it wished to create a private right of action, and it intended to create only the right that it specified.

Now, in our brief we have also discussed the other Cort v. Ash factors and I will mention here only that, for reasons explained there, it also counsels against the implication of a private right of action.

I would like to note here, however, that a refusal to imply the private right of action sought by the respondents is quite consistent with the purposes of these statutes.

The primary reason for the enactment of the Clean Water Act as well as the Ocean Dumping Act was to place certain federal limitations on effluent discharges into our nation's waters, and to provide for enforcement of these limitations.

Congress carved out a role in this scheme for citizen participation but only as an aid to enforcement, for which the primary responsibility rests with the Federal Government.

Congress did not deal specifically in these statutes with remedies to compensate individuals for pollution damage that they suffer except to note that the Act did not take away any existing remedies.

Thus no private right of action to compensate the plaintiffs need be implied.

Other remedies which were preserved by the savings clause are their recourse for the adverse effect of pollution that they suffer.

Unidentified Justice: Mr. Horowitz, before you leave the savings clause, you construe it as applying only to preexisting remedies.

Was there a previous... prior to the enactment of the statute was there a remedy for violating an effluent standard?

Isn't that a concept that was created by the statute.

Mr. Horowitz: Well, I think the simplest explanation of that language in the statute is that the citizen suit provisions specifically refer to suits to enforce effluent limitations.

That is the only type of suit that one might have thought would have been preempted by that language.

Therefore it seems to me reasonable that Congress used the words "effluent limitation" again in the savings clause, just to make it clear it's referring back to the original language in the citizen suit provisions.

Now, certainly--

Unidentified Justice: Is it your position that the savings clause did no more than preserve previously existing rights of action, whatever they may have been, if any?

Mr. Horowitz: --That's right.

Unidentified Justice: Or that it had, it preserved some sort of private rights of actions, depending upon this very statute?

Mr. Horowitz: Well, we don't think it... it did not create any new causes of action.

Unidentified Justice: The savings clause didn't, certainly?

Mr. Horowitz: The savings clause didn't; right.

But it intended to--

Unidentified Justice: Preserve preexisting causes, if any?

Mr. Horowitz: --preserve every single action that had existed before.

In other words, to make clear that the citizen suit provision was establishing a new private action limited to those--

Unidentified Justice: Well, then, wasn't... isn't Mr. Justice Stevens correct in suggesting that until this statute came along there was no such right of action?

Even conceivably.

Mr. Horowitz: --The citizen suit provision refers to any other relief, it doesn't refer only to effluent limitations.

It does refer to the phrase "effluent limitation"--

Unidentified Justice: It does.

Mr. Horowitz: --but it said... I don't think there were these effluent limitations prior to the enactment of the Clean Water Act.

Unidentified Justice: There weren't; there were not.

The concept didn't exist, did it?

Mr. Horowitz: No, the concept didn't exist; that's correct.

So that's right.

Unidentified Justice: Well, you're referring to a nuisance suit, common law nuisance claim that's preserved?

What is preserved?

Would you give us some concrete illustrations?

Mr. Horowitz: Well, certainly, the common law nuisance remedy was preserved; also any remedy relating to water pollution under any other statute.

States that--

Unidentified Justice: That's where you and Mr. Conford part company, at that point?

Mr. Horowitz: --As far as the federal common law, that's correct.

Unidentified Justice: Was there a common law nuisance right of action in a federal court with no diversity--

Mr. Horowitz: Yes, the Illinois v. Milwaukee case was decided prior to the passage of the statute--

Unidentified Justice: --Yes, I know, but the state was a plaintiff there.

I'm talking about--

Mr. Horowitz: --The state was the plaintiff.

Unidentified Justice: --A private nuisance action.

Was there any such thing?

Do you know of any?

Can you cite us any?

Mr. Horowitz: No.

Because the Illinois v. Milwaukee case was only decided a couple of months before it so far as I know.

Unidentified Justice: Which was the state, the state was the plaintiff there.

Mr. Horowitz: As far as I know, no private party had sought to invoke that decision prior to the enactment of this Act.

Unidentified Justice: Well, then, what was there to save?

What federal rule--

Mr. Horowitz: Well, Congress was just making it clear that they were saving whatever there was to save.

Unidentified Justice: --Whatever existed.

Well, isn't there some truth to what Judge Conford said that the court more or less cast about for a reason to give the State of Illinois another forum in which to try its case than this one, by saying that federal common law was available?

Mr. Horowitz: Well, the court gave many explanations for why it was implying common law.

It didn't say that this was to be applied, to be restricted only to cases that could otherwise be brought under the original jurisdiction, and the reason for finding the federal common law of nuisance was because of the overriding federal interest in interstate pollution; I mean, controlling interstate pollution.

I don't know what the court's reasoning was, but they didn't say that they were doing it solely to divest themselves of original jurisdiction in that case.

The State of New York has argued in its brief that the federal common law of nuisance should be restricted to cases that could otherwise be brought under this Court's original jurisdiction, but I don't think there's any basis for that and I don't think that the reasons that the court gave in Illinois v. Milwaukee support that contention.

I guess I'm starting to get into the second issue here, and if I can just, if I could respond one more time to Mr. Justice Stevens' question: I don't think that that was the best way to draft the savings clause, but I don't think that the fact that they used the word "effluent"... there is a rational explanation for their use of the words "effluent limitation".

Unidentified Justice: Well, the rational explanation being that if there is another remedy created under this statute to enforce an effluent limitation, we don't want to tamper with that remedy.

And you're saying, yes, but the only other remedy under this statute is the citizen suit provision: there's no implied remedy.

Mr. Horowitz: It just seems inconceivable that in enacting this detailed citizen remedy that Congress intended to imply some other remedy without saving so, and by doing it in this very mystical fashion, using the word "effluent limitation" in the saving clause.

Unidentified Justice: But if you don't read it that way, that language is clearly superfluous.

It would mean the same thing if you just took out "effluent standard limitations".

Mr. Horowitz: The clause is drafted as broadly as possible.

Congress just wanted to make it clear that they weren't taking away any other remedies.

Now, but... there may be some superfluities.

Unidentified Justice: Although that doesn't answer the question about what remedies existed, if any.

Mr. Horowitz: Right.

Now... well, let me get to that now, I guess.

On the issue of the federal common law of nuisance, federal petitioners urge affirmance of the Court of Appeals decision.

Now, in Illinois v. Milwaukee, this Court recognized the applicability of the federal common law of nuisance to problems of interstate pollution because of the overriding federal interest.

Putting aside for one moment the question of whether that's since been preempted by Congress, the question here is whether that remedy is available to private parties, or whether it's to be restricted to a state, the context in which it was previously before the Court.

Extensive water pollution does not respect state boundaries as it travels through the water.

Now, the Court gave several examples of previous decisions where it had noted that interstate pollution, both air and water, was an area that touched upon a federal interest and required implication of a federal remedy.

In the words of Judge Friendly,

"The interstate nature of the controversy here makes it inappropriate that the law of either state should govern. "

Now, given the existence of this federal common law, there is no reason why it should not be made available to private parties.

This Court specifically noted in the Milwaukee case that the existence of a common law in that case was not the consequence of the fact that the plaintiff was a state.

The interest in uniformity and difficulties in applying state law equally support the application of federal common law whether the plaintiff is the United States or a private party.

Unidentified Justice: And will you tell me again what the basis of federal jurisdiction is?

Mr. Horowitz: The basis of federal jurisdiction is under Section 1331(a), because there's a federal common law.

The reason for the implication of the federal common law is the need for a uniform standard to apply to an incident of interstate pollution, as pollution crosses individual state boundaries.

Unidentified Justice: So a federal court has jurisdiction of a common law nuisance cause of action because of 1331?

Mr. Horowitz: Right.

It presents a federal question, the federal question being under the federal common law of nuisance.

Unidentified Justice: And this is only because this is an interstate nuisance?

Mr. Horowitz: Yes.

Well--

Unidentified Justice: Otherwise you'd overrule Erie v. Tompkins, wouldn't you?

Mr. Horowitz: --Well, I'm not seeking to overrule Erie v. Tompkins.

There may be federal interests, for example, the United States as a plaintiff, that may be with or... as an intrastate--

Unidentified Justice: But that wouldn't be 1331 jurisdiction?

Mr. Horowitz: --Well, no.

Unidentified Justice: That would be the other jurisdictional statutes--

Mr. Horowitz: Certainly, where a private party brings a suit and there's no interstate effects, we agree that the federal common law of nuisance does not apply.

Unidentified Justice: --And a federal court would not have jurisdiction, would it?

Mr. Horowitz: No, because there's no federal question.

The federal common law of nuisance does not apply.

So a suit could not be brought in the federal court, it would be restricted to a state remedy.

Now, I'd like to make a couple points on the preemption argument which Judge Conford has focussed on.

First of all, it is abundantly clear from these statutes that there was no intent to preempt the common law of nuisance, neither the Clean Water Act nor the Ocean Dumping Act.

This is clear both from the legislative history and from the savings clause, and in the Clean Water Act the legislative history specifically referred to actions that have been brought under the federal common law of nuisance.

Now, the other bases that are ordinarily looked at for this Court for preemption, at least in the state context, also do not apply here.

There is no conflict between the federal common law of nuisance remedy and these statutes.

Similarly, the fact that--

Unidentified Justice: Why do you say that, when the federal statute provides for effluent limitations and specific permits and so forth, and a federal nuisance remedy could simply involve a single federal judge saying, well, I don't think the EPA or whoever it is that administers the effluent permits acted with sufficient stringency here.

I'm going to reduce the effluent limit.

Mr. Horowitz: --Well, I think that's... considering the preemption clause I think it's important to draw a distinction between whether a cause of action for nuisance exists at all and what standards are to be applied on the merits in determining whether there's a nuisance.

Now, this Court said in Milwaukee that the standards established under the federal acts will be highly relevant to determining whether a nuisance exists.

Now, if there's a permit... and I should point out that in this case the complaint alleges that the discharges were in violation of permits, so there really is no defense at all because of the permit.

If there's a permit, then that permit is relevant in determining whether there is a nuisance to the extent of what EPA considered in issuing the permit.

Now, what--

Unidentified Justice: Do you think that the federal judge could go beyond the permit and say, well, this permit allows too much effluent and under the common law of nuisance I'm going to say it's only half as much?

Mr. Horowitz: --Unless he found some deficiency in what EPA did, I wouldn't--

Unidentified Justice: Well, isn't there a statutory review provision for EPA that a person dissatisfied by the permit issued can appeal [= EPA's] actions?

Mr. Horowitz: --Yes.

But there are gaps in the statute.

The Clean Water Act does not control every kind of discharge.

There are certain conditions listed in our brief in the Milwaukee case, but there are certain aspects of discharges that were not covered by--

Unidentified Justice: Just one question, if I may, before you sit down.

On this matter of uniformity that you seem to press, taking Mr. Justice Rehnquist's illustration: one district judge has imposed a more stringent standard; the one in the next district might go the other way.

Is that not so?

Another district judge in the same circuit?

And until the circuit settled it, you'd have no uniformity.

Mr. Horowitz: --Well, perhaps there's a little confusion here.

The choices, as I understand it, the municipal petitioners are not arguing that there is no nuisance remedy, the question is whether there is a federal remedy or whether the plaintiffs must resort to a state remedy.

So if the goal of uniformity is advanced by having a federal remedy, in a case like this where you have pollution and pollution effects in two different states as well as in the ocean, if there's a federal remedy, this can all be resolved by one judge in one court in one action.

If there are state remedies there will have to be a suit in New York, I suppose, a suit in New Jersey, possibly a suit in federal court.

And the result may be three different determinations by three different standards, all to the same conduct.

So, in that sense, I think the uniformity rationale is much better served by federal action.

Unidentified Justice: You wouldn't have any uniformity until finally all of these cases would work their way through the circuits by conflicts up to this Court.

You may have two, three, five years before you'd have any uniformity in this field.

Is that what you're saying?

Mr. Horowitz: Well, you would have uniformity in a particular... as far as a particular pollution incident.

Now, it's possible that you would have a different standard applied in some suit in the State of Washington and in some suit in the State of Florida, but the Clean Water Act itself takes account of that sort of disparity.

It entitles states to have their own more stringent limitations Thank you.

Chief Justice Burger: Thank you.

Mr. Corbin.

ORAL ARGUMENT OF ROBERT P. CORBIN, ESQ., ON BEHALF OF THE RESPONDENTS NATIONAL SEA CLAMMERS ASSOCIATION ET AL.

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

A brief review of the factual background of this case that is submitted is helpful to a full consideration of the significant environmental issues present.

My clients are the National Sea Clammers Association and Mr. Gosta Lovgren, individuals who are commercial fishermen and ply their trade in the waters of the Atlantic Ocean immediately adjacent to the State of New Jersey.

During the summer of 1976 there occurred what may be described as a rapid and massive growth of algae in the geographic area ranging from the southwest portion of Long Island to a point approximately due east of the southern tip of the State of New Jersey.

Specifically, what we complain about is that when this massive algal bloom died, it settled on the ocean floor creating a condition of oxygen deficiency or anoxia in and about the waters on the ocean floor.

As a result, there was a tremendous amount of death and destruction to the marine and other life of the ocean, and particularly with respect to the ocean bottom dwellers who were not equipped to escape the blighted area.

The impact of this algal bloom was especially deleterious since July is the normal spawning season, so it had an impact not only on the existing stocks of fish and shellfish but future stocks of marine life in and about the blighted area.

As a result of this the commercial fishing/clamming related industries were virtually destroyed.

In their complaint we have alleged that this algal bloom resulted from two differing types of conduct.

It was first alleged that the City of New York and various other New York and New Jersey municipalities discharge sewage sludge and other waste materials, many of which are highly toxic, into the Hudson River and New York Harbor where it is then carried out into the Atlantic Ocean.

The second and somewhat different aspect of the causal part of this problem arises from the fact that various municipalities ostensibly under the aegis of the Army Corps of Engineers directly dump similar materials, including very highly toxic substances, directly into the Atlantic Ocean where it was actually transported out by boat and by barge.

Of the three issues that this Court designated to entertain argument on, we first present argument with respect to our position that the federal common law of nuisance has not been preempted since this Court's first recognition of that remedy in the leading decision of Illinois v. City of Milwaukee.

As we have indicated in our brief, there are at least three arguments which we maintain compel the conclusion that the federal common law of nuisance not only continues but is available for my clients in this case.

First, an analysis of the two statutes, of the two environmental statutes with which we are involved.

The Federal Water Pollution Control Act and its amendments, and the Marine Protection Research and Sanctuaries Act indicate that where Congress has chosen to preempt an area either entirely or partially, it has done so expressly.

To cite but two examples.

First, under the Federal Water Pollution Control Act, as I believe Judge Conford has already noted, the Federal Water Pollution Control Act has preempted the authority of a state, of any municipality within the state, or of any similar agency from adopting or enforcing... yes, sir?

from adopting or enforcing any effluent standard or limitation less stringent than that adopted pursuant to the authority of the federal statutes.

Unidentified Justice: But can't that be read as simply preempting, federal law preempting state law and not necessarily precluding federal law preempting preexisting federal common law?

Mr. Corbin: I don't think so, Your Honor.

I believe they would have been much more explicit.

I would further suggest that that provision of the Federal Water Pollution Control Act must also be read in conjunction with the savings clause of that statute, which I believe is even clearer statutory language to this Court that they did not intend to preempt the rights and remedies that already existed at the time that the savings clause was enacted.

I would also submit that there is nothing in the savings clause which indicates, other than perhaps the misnomer which has been attached to it, to suggest that that only reserved rights and remedies which existed as of the time it was enacted, as opposed to the rights and remedies which would grow out of a developing state or federal common law of nuisance or in other environmental areas--

Unidentified Justice: Well, but, in the Illinois v. City of Milwaukee, the court was quite specific about stating that perhaps eventually federal common law would be superseded by a federal statute too.

Mr. Corbin: --I would certainly concede, Your Honor, that that argument was made, but with respect, we would submit that if that time is ever going to come, it certainly hasn't come now.

I think at the time the federal environmental statutes were enacted, at least a part of the congressional purpose and design was the recognition that the previously existing statutes were inadequate in a number of respects, not the least of which was the fact that whereas the previous emphasis for environmental protection was thrust upon the states, it was determined that for whatever reason the states were simply not carrying out those dictates.

I think that a careful reading of the provisions of the two statutes, the Clean Water Act and amendments, and the Ocean Dumping Act, indicates that the approach currently taken by Congress is to afford a full panoply of federal protection, but that that protection to be provided is not antagonistic but rather will be coextensive with the availability of private enforcement, particularly in the context of this suit where you have individuals who are not just claiming that the water that was polluted smelled bad, that they couldn't fish or boat or enjoy other recreational activities normally attendant with the Atlantic Ocean.

These men's businesses were destroyed.

Unidentified Justice: Well, why didn't Congress simply endorse the common law of nuisance rather than provide for a whole series of effluent limitations and that sort of thing, and the EPA issues specific permits, and the Army Corps of Engineers to permit dumping, and allow review of each of those actions in federal courts?

Mr. Corbin: I would submit, respectfully, Your Honor, that indeed Congress did endorse precisely that, namely, the continued availability of the private damage remedy where damages can be shown.

We have cited in our brief from the 1972 Senate report which considered the Federal Water Pollution Control Act and clearly and unambiguously indicated that the private damage remedy remains where damages could be shown, as indeed we maintain our clients can show.

And they also indicated that compliance with the requirements of the Act would not be a defense to a common law action for damages.

So, I think, as I attempted to indicate earlier, Congress declared, took a completely different approach from the earlier approach.

Yes, there would be a full panoply, a comprehensive regulatory and statutory framework.

Far from viewing the continued existence of a private remedy as being antagonistic to that, as I believe my opponent has suggested, Congress chose to permit that as a welcome conflict, if indeed there was a conflict.

Unidentified Justice: Well, at the time that was formulated in Congress, had there been any cases affirming the existence of a private action for damages for nuisance in a federal court invoking independent federal jurisdiction of it?

Mr. Corbin: To my knowledge, Your Honor, there had been no such cases at that time.

But we would submit that the savings clause cannot be read to mean that it only preserves rights which existed as of the date of its enactment.

There is simply nothing to suggest that this Court today, in 1981, in evaluating our case, must determine what rights and remedies if any my clients had in 1972 when the statute was enacted, when there is nothing in the statutory language or in the legislative history that indicate that there was a time lock on a court's analysis as to--

Unidentified Justice: Except for the misnomer, "savings clause", and you say it's a misnomer?

Mr. Corbin: --Exactly.

Unidentified Justice: A savings clause ordinarily is just that, a time lock, isn't it?

Mr. Corbin: I would agree that if it was a true savings clause it would be that.

Unfortunately, that misnomer, as I have phrased it, has been attached and, I believe, incorrectly.

Unidentified Justice: Until this case, have there been independent actions by private parties for damages for nuisances invoking federal jurisdiction?

Mr. Corbin: Yes, there have, Your Honor.

We cited one in our brief, if I may, the Byram River decision.

Yes, Your Honor, the Byram River v. Village of Port Chester, a Southern District of New York decision from 1975.

I might also add that--

Unidentified Justice: Did that invoke federal jurisdiction under 1331?

Mr. Corbin: --Yes, Your Honor.

They held that standing to sue under--

Unidentified Justice: It wasn't a diversity case?

Mr. Corbin: --No, Your Honor.

The specific jurisdiction for the district court was under the federal common law of nuisance.

Unidentified Justice: So, it was thought, there held to involve a federal question?

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

I believe I was proceeding into the second point of our argument, namely, that the clauses... I hesitate to use the word 1972, we submit clearly and unambiguously indicates that, yes, in a sense, these were savings clauses, because they most certainly preserved all rights and remedies existing as of the date the statute was enacted.

However, they do not have, as Mr. Justice Rehnquist has suggested, a time lock to preclude the continued availability of new rights and remedies which might be developed in the future by judge made law under the federal common law of nuisance.

Unidentified Justice: Isn't that an assumption, that Congress was buying a pig in a poke?

Mr. Corbin: I would not believe that to be the case, sir, particularly if one remembers the history of the development of this statute.

The previous statute was, I believe, woefully inadequate both with respect to the scope of area covered as well as the inadequate remedies which were provided.

Indeed, that was one of the very reasons cited by this Court in its decision in Illinois v. City of Milwaukee where there was not even a mandatory conciliation or arbitration type provision with respect to disputes over interstate pollution.

Unidentified Justice: Well, in your Byram River case, supposing there had been an effluent permit granted, and the district court said, we think EPA was just all off base here, and therefore we're going to cut the amount of effluent in half.

Now, do you think that Congress welcomed that sort of conflict when it adopted the Water Pollution Control Act?

Mr. Corbin: Yes, I do, sir, and I would submit that that so called conflict, we certainly recognize it as a real one, but would submit that the conflict of that nature already exists and indeed my opponent urges that it continue to exist.

We submit that there is no greater conflict or potential conflict with respect to what we are asking than the situation exists under Illinois v. City of Milwaukee where in your example, if I may borrow it, sir, the judge says, well, I can't award damages, but I'm going to order you to completely stop dumping, and therefore be limited to injunctive relief.

I believe that that capability, that potential for conflict, is indeed welcome.

To cite but another example, that under the Federal Water Pollution Control Act the states are free to adopt more stringent limitations, effluent limitations, than are prescribed, if at all, under the federal statute.

Unidentified Justice: Well, what is the person who has the effluent permit supposed to do when the district judge tells him, no, you can only do half of what the EPA has told you you can do?

Mr. Corbin: Well, before that question is reached, sir, I believe that there is a further safeguard for that person, and that is particularly with respect to the standards to be applied to determine whether something is in violation of the federal common law of nuisance or, indeed, constitutes a public nuisance.

Though we don't believe it's necessary for this Court to reach the issue, we would certainly be satisfied if this Court were to adopt the standard suggested by the 3rd Circuit which, as you know, was the restatement of torts, definition of a public nuisance.

Not only must the existence of the public nuisance be determined, but the comments, the official comments to that restatement provision suggest that where, as our opponents have suggested, there is a comprehensive legislative or regulatory framework which has been imposed to prescribe or regulate a given conduct, the courts are especially loath to describe the conduct regulated as being a violation of a common law.

So I do not see that there would be any particular difficulty with a federal judge being confronted with that situation.

We will frankly concede that we have, even if this Court were to affirm the findings of the 3rd Circuit, my clients have a difficult road ahead of them in terms of the evidentiary burdens to be overcome.

We would only ask that we be given the opportunity to meet those burdens at trial.

One other comment which I wish to address with respect to the continued need for the federal common law of nuisance.

As my opponent has indicated previously, the state authority to regulate to the extent to which it exists at all on the Atlantic Ocean goes no further out than the three mile limit.

We have alleged in our complaint a situation where there is a certain degree of pollution within that three mile limit, but there is also a certain degree of pollution from this algal bloom in the next area going geographically from the shore, and that is in the 12-mile-limit area.

We submit that the only law which can apply in that area within the 12-mile limit in which the states do not have any authority to regulate has to be the federal common law of nuisance, and indeed the geographic area, or at least a portion thereof, which was affected is precisely one of the remaining interstices in which the federal common law must apply.

Unidentified Justice: Mr. Corbin, may I just ask... I understand your common law theory, but your statutory theory, your implied cause of action theory, do you allege that the defendants violated the effluent limitation?

Mr. Corbin: Yes, we do, Your Honor.

We... our thrust is twofold.

Contrary to the assertions in some of the briefs, it has never been established as a matter of record, and indeed we intend to plead, as we have alleged, that permits under both statutes, the dumping permits under the Ocean Dumping Act and the permits to discharge the sewage and sludge, that those dumping and discharging activities were in violation of permits which were issued as well as the rules and regulations under which the permits are issued.

Unidentified Justice: Are you still able to make those claims by giving the 60-day notice?

Mr. Corbin: Without giving the 60 days, or--

Unidentified Justice: No, with, giving, say you did it, you gave notice today?

Could you still make those claims?

Mr. Corbin: --I believe we could.

However, we may--

Unidentified Justice: Why couldn't we have avoided the whole implied cause of action issue by having you give notice a couple of years ago?

Mr. Corbin: --Well, the difficulty with that, Your Honor, as we argued unsuccessfully to the district court, somewhat more successfully to the 3rd Circuit... as Your Honor may recall, the [= 3rd] Circuit indicated that could have been an alternate basis to support our federal statutory claims.

We filed our complaint in January of '77.

The conduct about which we complain, and its effect, was over by the fall of 1977.

It was rather futile to request an end to the activity that had already destroyed the fishing industry off the coast of New Jersey.

Unidentified Justice: Oh, I see, and your 60-day... that claim would not be a damage claim, would it?

Mr. Corbin: That's correct, sir.

And, I may also add that neither of the two statutes permitted private damage claims.

Contrary to the assertions of Judge Conford that what we were seeking is a broad and far ranging sort of relief, the relief which we request and which we submit we are entitled to under the federal common law of nuisance is going to involve a relatively small class of individuals.

We request this Court not to adopt the narrow and overly restrictive reading of the rationale of this Court's 1972 decision of Illinois v. City of Milwaukee.

As that Court indicated, it was not merely the character of the parties, the fact that a plaintiff was suing a sovereign entity not within its own jurisdiction, that led the Court to apply the federal common law of nuisance.

The Court held there, and we maintain that holding is applicable here, that where there are, such as here, an involvement of an interstate waterway, particularly a situation where there is truly an interstice, or actually, a vacuum, with respect to the non application of any other law other than the federal common law of nuisance, that certainly the rationale of the City of Milwaukee decision remains.

I believe my time has ended, unless there are any questions.

Thank you.

Chief Justice Burger: Judge Conford, do you have anything further?

Mr. Conford: Nothing further, sir; thank you.

Chief Justice Burger: Very well.

Thank you, gentlemen.

The case is submitted.

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Universities Research Assn. v. Coutu - Oral Argument

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ORAL ARGUMENT OF ROBERT E. MANN, ESQ., ON BEHALF OF THE PETITIONER

Chief Justice Burger: We'll hear arguments in Universities Research Association v. Coutu.

Mr. Mann, I think you may proceed when you are ready.

Mr. Mann: Good morning, Mr. Chief Justice, and may it please the Court:

The issue before the Court in this case is whether under the Davis-Bacon Act a federal court would have jurisdiction to revise a public contract upon suit by a private party against a private contractor without regard to the actions or inactions of the agency party to the contract.

The case arises at the Fermi National Accelerator Lab near Batavia, Illinois, which is a high energy physics research establishment housing the world's largest proton accelerator.

The petitioner is an association of universities which has entered into a contract with the Federal Government, originally through the Atomic Energy Commission, and more recently with the Department of Energy, to manage the Fermi National Accelerator Laboratory.

All funds for the construction and management of the Laboratory are supplied by the Federal Government through provisions in the contract.

The petitioner's role is that of manager, to supervise construction, to supervise the operation, and to supervise the maintenance of the facility.

To carry out its responsibilities, the petitioner association is authorized by the Government to hire individuals to work in various categories, such as physicist, engineer, technician, clerical person, et cetera, and all funds for the compensation of those persons are provided by the Federal Government in accordance with the contract.

There are rate schedules attached to the contract which have been agreed to by the Government as appropriate for payment of the individuals employed by the petitioner.

The claimant in this case maintains that notwithstanding his employment as an electronics technician, that is, one assigned to monitor computers, operate accelerators, and assist in research functions, he should have been paid at area electrician construction rates pursuant to the Davis-Bacon Act.

The contract specifically provides that the parties did not contemplate performance of construction work by persons employed by the Association, and therefore there are no Davis-Bacon Act stipulations in the contract.

The Federal District Court issued two rulings.

The first ruling held that in the absence of an express Davis-Bacon Act provision in the contract there could be no right of recovery.

The case was left open for purposes of allowing the plaintiff to show if he could that the Government had made separate determinations regarding his work as being construction in nature.

After the taking of a number of depositions, other discovery, Freedom of Information Act requests, the plaintiff was forced to conclude that he could show no prior agency determination that his work was in fact covered by the Davis-Bacon Act.

Consequently, the Federal District Court granted a motion for summary judgment upon that result.

The Court of Appeals reversed.

The Court of Appeals, in effect, held that regardless of the express inclusion of Davis-Bacon Act provisions in this contract, they were included as a matter of law and that the Federal District Court would have authority in effect to substitute its judgment for that of the agency regarding the construction nature of the plaintiff's work, to set an appropriate wage scale, and to set up an appropriate classification.

In doing so it extrapolated from its 1977 McDaniel case in which it held that there was an implied right of action to enforce express contract terms setting forth Davis-Bacon Act requirements.

We would ask the Court to focus on the fact that this is not a proceeding arising under the Administrative Procedure Act challenging agency action.

It is not a proceeding arising under a contract action based upon express contract commitments.

Our petitioner here has never entered into a contract agreeing to pay Davis-Bacon Act rates.

It is not an action to enforce a self-enforcing statute, such as an equal opportunity clause, which is directed to the beneficiary party without regard to Government actions.

This is an action which attempts to maintain a private cause of action to secure a judicial determination as to coverage of the Davis-Bacon Act, application of particular wages and classifications.

The effect is to substitute the federal courts for the agencies' contracting officers regarding these matters of coverage, classification, and rates.

Not only that, the action is brought against a not-for-profit entity which does not stand to gain or lose, depending on what rates are paid to the employees.

And it is brought after the contract has already been performed.

It is not being brought in anticipation of the contract, as some recent cases have been brought, but after the contract was performed the Federal District Court was asked to revise the contract to include specific Davis-Bacon Act provisions and to hold the defendant not-for-profit contractor liable without regard to the agency action that it had contracted with.

As the Court undoubtedly knows, the Davis-Bacon Act emerged along with other pieces of legislation in the same legislative era of the '30s, including the Fair Labor Standards Act, the Walsh-Healey Act, and of course the Davis-Bacon Act and other provisions requiring the payment of wages at certain levels in order to rectify conditions that had resulted from the Depression.

There are significant differences, however, between the Davis Bacon-Act and the Walsh-Healey Act, on the one hand, and the Fair Labor Standards Act on the other.

The same Congress that enacted these statutes provided that the Davis-Bacon Act and Walsh-Healey Act policies would be enforced through the vehicle of contract, and not only through the vehicle of contract but through the vehicle of administrative pre-determination of what the obligations would be.

Conversely, in the Fair Labor Standards Act the universal minimum wage and hours of work standard was set and the parties affected by that were expressly given the right to file suit to enforce their rights independently of the Government to secure their wages.

Congress was concerned about the social goal that it had, that is, to make sure that local wage and labor markets were not disrupted, but also was concerned about maintaining efficiency in government contracting.

And so it struck a balance.

It struck a balance in the Davis-Bacon Act, and the fulcrum of that balance is the concept of predetermination, so that before the contract is gone into and executed, all parties know what their obligations are and no one can be heard to complain if the obligations prove too onerous.

What we have here is an attempt by the Court of Appeals and the respondents to upset that fulcrum, to establish a principle whereby the federal courts after the contract has been executed, notwithstanding the predetermination concept, are in a position to go back and determine that something should have been paid at a different rate than it was.

The concept of predetermination, which is embedded in the Davis-Bacon Act, was a topic of the legislative amendments to that Act in 1935.

Prior to 1935 there was no provision for predetermination.

In 1935, after a four-year history of some confusion in applying the law, Congress expressly amended it to provide for predetermination, so that the contract would carry the obligations and not some implied obligations based upon a post-analysis of the work.

Unidentified Justice: Mr. Mann, could I just be sure I understand your position.

Assume here there had been a predetermination that some part of the construction work on the laboratory would be covered by Davis-Bacon.

And the laboratory did not pay those... and it was performed by their own people.

And supposing an employee didn't know about that till the contract was performed and then he had gotten less than the Davis-Bacon Act provided, would he have in your view of the law, have a private cause of action against your client for the difference between what he was paid and what he actually should have been paid?

Mr. Mann: We have taken the position on that question, Mr. Justice Stevens, that there is under the Act no private right of action at all, even to recover under express provisions.

There may be a right of action in a state court, under a state common law theory of third-party beneficiary, but not in federal court, because there's no real federal question there; it's a contract question involved there.

So we've taken the position that even if there were an express contract that there would not be a private right to go to court.

Unidentified Justice: Did you take that position in the 7th Circuit?

Mr. Mann: The position of the 7th Circuit... that question was not asked in the 7th Circuit, and that issue was not actually before us.

Unidentified Justice: But you didn't raise that in the 7th Circuit?

Mr. Mann: That's correct.

Unidentified Justice: Or in the trial court?

Mr. Mann: In the trial court the question of the private right of action per se was raised in the context of the jurisdiction of the court to revise the contract.

That is, we didn't really address the issue whether in general there is a private right to enforce a specific clause, but whether there is a private right to obtain the court determination of the fundamental issues of coverage, of classification of rate, that was the issue presented to the trial court, and the trial court held that it did not have jurisdiction under the Davis-Bacon Act to in effect substitute its judgment for the contracting officer's judgment, at least without having had some effort by the contracting officer to be involved, some appeal to him, some--

Unidentified Justice: Well, I understand the distinction between predetermination and postdetermination, but it seems to me that's quite a different question than the question whether there is a private cause of action.

And it seemed to me in your brief the issue was rather clear, that you basically were arguing about whether they decided in advance of performance of the contract there was any Davis-Bacon Act work and you said, no, and that's the end of the case.

That doesn't require us to think at all about private cause of action, as I see it.

Mr. Mann: --Well, I believe the private cause of action comes in, Your Honor, in connection with the question of whether or not there is a private cause of action in the context of this case, to in effect secure a coverage determination by the federal court as opposed to the contracting agency.

Unidentified Justice: But would you say the contracting agency could, after the contract was performed, come in and say, we'd like to make a new, a postcontract coverage determination?

Mr. Mann: I believe that the evolved law under the Davis-Bacon Act would hold that if the agency wishes to come in and amend the contract, the agency may find itself liable for increased cost, as an amendment for the convenience of the Government, for example.

I believe there have been Comptroller General decisions and perhaps some Court of Claims decisions which say that the Government does not have as a matter of right the right to come in and amend its determination, and yet still hold the contractor unequivocally liable as though the amendment had occurred at the outset.

But I believe that the concept of predetermination is flexible enough to permit the agency itself, upon its own motion or upon the appeal of some party to--

Unidentified Justice: Well, if they assume the responsibility for paying the difference, I suppose anybody could do that.

Mr. Mann: --That's correct.

And--

Unidentified Justice: But assuming they're saying, no.

We paid you the contract amount and we just now realized we should have made a Davis-Bacon Act determination.

We failed to do it.

They can't do that either, can they, in your view of the law?

Mr. Mann: --Our view of the law is that they cannot.

Unidentified Justice: In other words, it seems to me that if I understand your position correctly, it's the same whether the Government were the plaintiff or the employee was the plaintiff?

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

Unidentified Justice: So the private cause of action issue, it seems to me, is a red herring in this case.

Mr. Mann: Well, except that the private cause of action raises a question as to who is going to control the terms of the contract.

I think it's one thing if one of the contracting parties, that is, the Government, moves to amend the contract for its advantage in one way or another.

But these are after all public contracts and there's public policy as well as economics involved, and for a third party to come in and say, irrespective of what the agency thinks about how the law should be applied, I believe this was Davis-Bacon work and I want an amendment; we believe that that raises--

Unidentified Justice: Well, if he's just saying, I want an amendment.

But if his theory is, it clearly says it's Davis-Bacon Act work, I provided it and the contract provided for it, you're saying, well, he could sue in the state court.

Mr. Mann: --I would assume that.

Unidentified Justice: So the public policy in the private cause of action issue is just a question of where he sues.

Mr. Mann: If there's an express term in the contract, that's correct.

I don't believe there is a--

Unidentified Justice: And that was in the McDaniel case by hypothesis, wasn't it?

Mr. Mann: --By hypothesis; that's correct.

The 7th Circuit in both McDaniel I and McDaniel II indicated in the course of their opinion that they assumed that there were express provisions.

Unidentified Justice: In this case there never would have been a lawsuit had not a private individual claiming a private cause of action under the Davis-Bacon Act brought it, would there?

Mr. Mann: So far as we know, that's right, Mr. Justice Rehnquist.

The only lawsuit that has been brought is by the private individual.

Unidentified Justice: So, if there is no... so, in other words, the question addressed in part II of your brief is the threshold question, is it not?

Mr. Mann: The private cause of action right?

Unidentified Justice: Right.

If the answer to that is, no, there's no private cause of action at least in the federal courts.

Then that's the end of this case, without getting into matter addressed in Part I of your brief.

Mr. Mann: Yes, Your Honor.

Our position is that whether or not there's a private right of action to enforce express terms, clearly there is no federal jurisdiction to create the terms that are being enforced.

Unidentified Justice: If there's no private right of action in federal district court, that's the end of that case.

Mr. Mann: That's the end of the court case.

Yes, sir.

Thank you, Mr. Chief Justice.

At this time I'm ceding my time to Ms. Shapiro to express the views of the United States.

Chief Justice Burger: Mrs. Shapiro.

ORAL ARGUMENT OF MRS. HARRIET S. SHAPIRO, ESQ., ON BEHALF OF THE UNITED STATES AS AMICUS CURIAE

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

This is a suit against a federal contractor based solely on the Davis-Bacon Act.

It's not a suit to review agency action under the Administrative Procedure Act.

An Administrative Procedure Act suit would raise different issues between different parties and require the consideration of different fundamental legislative policies.

I want to emphasize that neither my brief nor my remarks today deal with the issues or the policies that would have to be considered in an Administrative Procedure Act suit.

We've taken no position on those issues and I'm not authorized to speak for the government concerning them.

The question here is only whether the contractor employee has a right to relief against the contractor in an implied private cause of action under the Davis-Bacon Act itself.

We have discussed in our brief the reason why we believe that under the Cort v. Ash test there is no such implied cause of action.

And we have emphasized there the indications of legislative intent as the recent decisions of this Court require.

This morning, however, I would like to focus on the third Cort v. Ash factor, and discuss briefly why we believe that the implication of a private cause of action is not necessary to the accomplishment of the legislative purpose.

That purpose was to assure the payment of prevailing wages by government construction contractors without disrupting the federal procurement process.

The express remedies provided are the result of the congressional balancing of these potentially competing federal interests.

The remedies are designed to protect the laborer's wages without interfering unduly with efficient procurement.

That congressional balancing was originally made in the 1930s when government procurement contracts were far simpler than the one before the Court in this case.

Today the Act still covers the traditional brick-and-mortar contracts.

It also covers contracts for construction that is necessary for the highly technical federal programs at the Department of Energy as well as at NASA and the Defense Department.

These two types of contracts are in many ways quite different in terms both of the need of the laborers for the additional protections that a private cause of action would afford, and of the potential of such a cause of action for disrupting procurement.

These differences simply highlight the importance of maintaining the balance Congress struck in an earlier day.

Mr. Mann has described briefly how the Fermilab is run under the prime contract at issue here.

That operation is typical of many large, long-term federal contracts for work at the frontiers of science and technology.

I want to add to his description only the statement... at the Fermilab the Davis-Bacon decisions are made by a committee composed of agency experts and if the decisions that the private work projects are submitted to the committee, the committee makes a recommendation as to whether the project involves Davis-Bacon work or not.

If the committee recommends to the manager and the contracting officer that Davis-Bacon work is involved, that work is subcontracted out to a contractor who works under the Davis-Bacon Act, with the Davis-Bacon clauses in his contract, using building trades union employees.

The operation of this system is monitored.

The agency has extensive reviews to make sure that the contracts for construction work include the Davis-Bacon clauses.

It also conducts enforcement investigations at the site to make sure that the work is performed as required by the contract and consistently with the contract.

Unidentified Justice: Mrs. Shapiro, in a case such as you're describing where there is a clear determination that the Davis-Bacon Act is to be performed and to be paid for at the regular rates, assume there was a slip-up and for some reason an employee did not get paid the amount required by the statute and by the predetermination and all the rest of it, and for some reason the Government missed it in its review and paid out the contract.

Would the employee in your view have a cause of action against his employer for the difference between what he was paid and what he should have been paid?

Mr. Shapiro: In your hypothetical the provisions are in the contract?

Unidentified Justice: Yes.

Mr. Shapiro: Yes.

Unidentified Justice: He would only be... in the federal court he'd have such a cause of action?

Mr. Shapiro: Probably not in the federal court.

It would be--

Unidentified Justice: Why not in a federal?

Mr. Shapiro: --he would have an action on his contract.

Unidentified Justice: Right.

Mr. Shapiro: It wouldn't be on the Davis-Bacon Act.

It would be... well, the contract would--

Unidentified Justice: He didn't have a contract with the employer, but he had a contract for a lesser amount with the employer.

Mr. Shapiro: --He's a third-party beneficiary of the contract that was written.

Unidentified Justice: And in your view he'd have the remedy but would be confined to the state court?

Mr. Shapiro: That's correct?

He also has--

Unidentified Justice: So you ask us basically to overrule--

--Unless there's diversity jurisdiction or something like that.

Mr. Shapiro: --Yes.

Unidentified Justice: Yes, and there's no federal remedy for violation--

Mr. Shapiro: Well, but... in that he certainly has an express remedy under the Davis-Bacon Act too.

Unidentified Justice: --Well, if he has a remedy... does he have a remedy?

Mr. Shapiro: Like the Miller Act bond.

I mean, it's the--

Unidentified Justice: No, no.

I'm assuming a case where there was a slipup and they paid out, and the bond was discharged.

Mr. Shapiro: --Yes, yes, that's right.

Unidentified Justice: And sometime later he then could sue his employer but you'd say, just as a matter of third-party beneficiary of a contract, but he has no federally protected rights.

Mr. Shapiro: That's right.

And--

Unidentified Justice: That's the Government's position?

Mr. Shapiro: --as Mr. Justice Stewart pointed out, that's basically one... that's what we thought was involved in the McDaniel case.

Unidentified Justice: You don't think he was still within the Cort v. Ash test of a person who was specifically intended to be the specific beneficiary of the statute in that case?

Mr. Shapiro: Well, but--

Unidentified Justice: If the likelihood of a slip-up is so remote that he wouldn't--

Mr. Shapiro: --In your case there has been no violation of the Davis-Bacon Act, because--

Unidentified Justice: --Well, he wasn't paid as the--

Mr. Shapiro: --Well, what the Davis-Bacon Act requires is that the provisions be put in the contract.

Unidentified Justice: --The Act does not require that the contract be performed in accordance with the law?

Mr. Shapiro: It gives certain remedies that are available but the contract... I mean--

Unidentified Justice: Well, then he shouldn't even have a remedy under state law, if I understand you correctly, because the law, as you said, has been complied with.

The Government just slipped up.

Mr. Shapiro: --No, I mean, where he has under... whatever remedy he has under state law is not on the Davis-Bacon Act, it's on the contract provisions which require payment of the wages that he didn't get.

Mr. Mann has emphasized the difficulties that implication of a private cause of action would cause for Government procurement from the contractor's point of view.

There are also problems from the point of view of the agency that is using these highly specialized, expert contractors to achieve important federal goals.

The interface between construction, alteration, and repair work covered by Davis-Bacon and installation, experimental, or maintenance work that is not covered will often be very hard to identify under prime contracts like the one here.

Moreover, the various work projects must be closely coordinated and labor disputes avoided.

For all these reasons, it is important that decisions concerning Davis-Bacon coverage be made by people who are very familiar with the technical program involved, and that those decisions be made promptly, with finality, and consistently, for all work within the scope of the contract.

The possibility of a court acting as an independent decisionmaker in a private cause of action threatens the effective operation of this system.

The more independent decisionmakers there are in terms of number of district courts, courts of appeals, the harder--

Unidentified Justice: Mrs. Shapiro, can I just refresh my recollection?

The Government took a contrary position when it filed its memorandum in connection with the sur-petition in McDaniel, did they not, on the private cause of action issue?

Mr. Shapiro: --No.

Unidentified Justice: I'm sorry.

Mr. Shapiro: I don't believe--

Unidentified Justice: You took the position in that case that the 7th Circuit was wrong?

Mr. Shapiro: --Yes, we did.

Our position in McDaniel was basically, first, the 7th Circuit's opinion was somewhat cloudy, and to us it read as though what they were saying was that they believed that there was an express Davis-Bacon clause in the contract.

And for the reasons that we just discussed under that theory, we believe that the 7th Circuit didn't have jurisdiction because there wasn't 1331 or 1337 jurisdiction, but that there would be a contract action in the state court.

Unidentified Justice: Right.

Mr. Shapiro: And so that, on that theory... and we didn't think that... as a matter of fact, the decision--

Unidentified Justice: Your view then was there was never any federal implied cause of action under any circumstances?

Mr. Shapiro: --But, the petitioner in McDaniel had not raised that particular question.

We did discuss in McDaniel the reasons why we thought that if the Court had been reaching the question that the 7th Circuit clearly reached here it was incorrect because of the application of the Cort v. Ash factors.

But we recommended no certiorari because we just didn't think that case was a clear enough case; this one is.

My final point is that at least in the particular situation that we have here, there are significant nonjudicial methods for the laborer to assure, to be sure that the agency is not acting in an arbitrary manner.

These controls are non-judicial but the fact is that the construction trades are highly unionized, since all Davis-Bacon work is required to be performed by subcontract, those unions have a real interest in policing the agencies' implementation of the Act, so that their employers get as much of the total work at the projects as possible.

And they have ample means of assuring that the agency will consider their view seriously.

These basically are, negotiation locally in Washington with the procuring agency, and through consultation with the Department of Labor.

In short, particularly in the context of contracts like this one, the Davis-Bacon Act is effectively enforced through negotiations between union and agency.

Implication of a private cause of action in this context is not necessary to achieve the Act's purposes.

Unless there are further questions, I reserve the remainder of the time for petitioner.

Chief Justice Burger: Mr. Nye.

ORAL ARGUMENT OF ROBERT JAY NYE, ESQ., ON BEHALF OF THE RESPONDENT

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

Just on that last point about sufficient nonjudicial controls to be sure that the Davis-Bacon Act will be implemented and applied by reason of negotiations between unions and agencies, I wish to advise the Court if the Court does not already know that I represent an individual and a class of individuals.

I do not represent a union.

I am here representing wage earners who have been requested by their employer, the petitioner in this case, to do certain work which manifestly is under a Davis-Bacon Act contract.

It says,

"for construction, alteration, repair. "

and everything else that the Davis-Bacon Act requires.

These people did perform that work, we are not at the stage yet in this case where it can be said to this Court that they did not... this case arose on a summary judgment, just on a legal issue.

They performed that work and they were not paid the prevailing wages required by the Davis-Bacon Act and established by the Secretary of Labor's predeterminations of wages.

Now, on that predetermination point--

Unidentified Justice: Why'd you sue in federal court rather that state court?

Mr. Nye: --Because, Your Honor, we have a federal right of action.

Number one, because, number one, the statute gives it to us.

Section 3(b) of the statute says... and this Court in its Binghamton decision refers to that as being an employee right of action against his contractor.

That statute reads:

"The right of action and/or of intervention against the contractor and his sureties conferred by law upon pertinent persons furnishing labor or materials. "

Unidentified Justice: That refers to the Miller Act, doesn't it?

Mr. Nye: Well, if it does, Your Honor, and if it is to be so construed, it was not so construed in the Binghamton case, but of course that case did not involve the question.

If it is to be construed as being only an action on a surety payment bond... it doesn't talk about the Miller Act bond, but on a surety payment bond, then we have the anomaly in this case of the contractor failing to furnish the surety payment bond that Congress requires with respect to construction contracts, and therefore the employes again are placed in a position of not being able to sue.

Unidentified Justice: That may be, but it would not seem to me to necessarily follow that because the employer hasn't provided a bond which Congress has required him to file, that gives an employee a private right of action in a federal court.

Mr. Nye: If the Court please, the question, as the 7th Circuit has said in the McDaniel cases, is not the existence of a private right of action.

Congress intended a private right of action.

Unidentified Justice: We granted certiorari here to review the judgment of the 7th Circuit.

Mr. Nye: Yes, Your Honor.

I appreciate that, and I understand that.

And I am submitting to the Court that Congress has created in favor of employees a private right of action.

They intended one where they cannot--

Unidentified Justice: Did they say in so many words that an employee shall have a private right of action against an employer for failure to comply with the Davis-Bacon Act?

Mr. Nye: --In my interpretation of that language--

Unidentified Justice: Well, I mean... certainly; you're a lawyer, I was a lawyer and like to think of myself as still being one.

One could point to a section that says, either an employee shall have a cause of an action in United States District Court in the jurisdiction where he performs the labor.

You have to admit it doesn't say that.

Mr. Nye: --I say... I must take two positions, Your Honor.

I say it does--

Unidentified Justice: Where?

Mr. Nye: --grant the employee that right of action.

And the mere fact that it may be on a payment surety bond, the surety bond, after all, is simply security to assure payment of an obligation.

When the Congress talks about the right of action given to an employee in Section 3(b) of this Act, they have given a right of action to that employee.

They have assured to him a private remedy in the event that none of the other remedies are available.

And in this case, none of the other remedies are available.

The Government did not--

Unidentified Justice: Give me the exact language of Section 3(b) as you rely on it.

Mr. Nye: --I am quoting it.

I have that language itself... the employee shall have

"the right of action and/or of intervention against the contractors and their sureties conferred by law upon persons furnishing labor or materials. "

Now, that is the statute and that with reference--

Unidentified Justice: Yes, but that refers to... that refers back to the right of action conferred by law upon persons furnishing labor or material.

It's derivative.

Mr. Nye: --Well, that may be the decision of this Court.

It has been the decision of the 7th Circuit, that may also be the decision of this court.

But to the extent that it does refer back to some payment bond that is required and that payment bond does not exist, I am saying, because Congress intended a right of action, this Court must recognize that there is by implication, at least, some remedy when this statutory remedy is rendered ineffective and unavailable to the employees, certainly through no fault of the employees whatsoever.

Unidentified Justice: But would you say the same thing if a contractor went into bankruptcy, the Miller Act funds were exhausted, and even given the wage priority, your clients simply couldn't recover?

Mr. Nye: If they can't recover, they can't recover, Your Honor, if there are no funds.

If the employer is bankrupt and there are no funds available from an estate, from a bankrupt estate with which to to pay the employees, they cannot recover.

But that's whether or not the remedy is worthwhile, whether or not there will actually be recovery on a remedy.

That's not the existence of the remedy itself.

Unidentified Justice: What do you have to say about the 1964 amendments on this issue of whether a cause of action should be implied?

Mr. Nye: The 1964 amendments to my recollection, Your Honor, had nothing to do with the existence or nonexistence of the right of action.

Unidentified Justice: Wasn't there an effort at that time to amend the statute to provide expressly for--

Mr. Nye: Representative Goodell in his attempt to place an amendment in the Act, which did not pass, sought to open up the entire area of judicial review concerning all aspects of the Act, at least according to his proposed bill, his proposed amendments.

However, other statements by legislators, for example, Representative Fogarty and others, and Representative Goodell himself, recognized that the basic purpose of that proposed amendment by that Representative, was to render the Secretary of Labor's predeterminations of prevailing wages, what the prevailing wages in a community are, subject to judicial review.

And because the Congress has always determined that that question should not be open to judicial review as well as for other nongermane reasons, Congress did not adopt that view.

Congress did not, therefore, open up the question of predeterminations of wage rates, what they are in a community, to judicial review.

But the question of predetermination of anything else has never been an issue in the Act.

That has never been placed in the hands of any government agency, one way or another.

Counsel attempts to use the word predetermination in a very broad way, and the Davis-Bacon Act is a very simple statute.

It says that the Secretary of Labor shall make predeterminations of wage rates, and he does, and they are published in the Federal Register for each county and metropolitan area around the country, and that's all that he is supposed to predetermine.

Now, what the petitioner seeks to say, that there should be and must be, in order for the Davis-Bacon Act to work, there must be a predetermination by a government agency that a contract is a construction contract.

Well, the Solicitor of Labor in his testimony in 1962, among others, has said that when Congress enacted the Davis-Bacon Act in 1931 and amended it substantially in 1935, Congress did not use the words

"construction, alteration, or repair, including painting and decorating. "

to mean something special, or something that is placed in the hands of some technicians at some government agency, or something difficult of interpretation.

The Solicitor of Labor at that time and all of the authorities who have referred to it have talked about the fact that Congress meant the ordinary meaning of those words, and courts can make those determinations.

We have cited the recent Cortelyou of one of our circuits in which the Court held specifically, very recently, that the work that was before it clearly was pursuant to a contract calling for

"construction, alteration, or repair, including painting or decorating. "

Now, I have asserted in my brief that the right of action question was never briefed, argued, or whatever, before the lower courts.

This summary judgment matter arose when the petitioner filed a motion for summary judgment, and discovery at that time, by the way, was stayed to permit the court to rule on that legal question.

That summary judgment motion was supported by an affidavit of petitioner's counsel saying,

"No Davis-Bacon Act stipulations have been included within or are incorporated within the government contract here in question. "

I am paraphrasing a bit there.

But that's the issue, that's the issue that was raised before the trial court, that is the... this contract does not contain Davis-Bacon Act stipulations, that was the issue raised before the trial court and that was the issue argued and dealt with in the 7th Circuit.

There was no right of action issue at that time.

And the 7th Circuit said, and I respectfully submit, correctly... and indeed it must be so held... that a statute that is a mandatory statute, a statute that says that certain things shall occur is incorporated by operation of law if it is not within a contract in itself, or if it is there by reference if it is referred to by the parties.

And I submit to this Court also, that the Davis-Bacon Act is expressly within our contract, notwithstanding the summary judgment granted by the trial court, because among other things this is... the fact that Davis-Bacon was referred to in correspondence between the AEC at that time and our petitioner.

The requirement on the petitioner is that such construction work which is called for by this contract would be subcontracted to subcontractors with the petitioner having the obligation to make sure that Davis-Bacon stipulations were included in all those subcontracts.

And there was the further agreement between them by memorandum which we were able to discover... by the way, through Freedom of Information Act procedures, not through the discovery that we were able to get by that time... there was the further memorandum of understanding that if the petitioner does any of this work with its own employees... that's our case... its own employees, then the contract will be modified.

The general contract, this prime contract, will be modified to require that the petitioner pay its own employees the prevailing wages required by the Davis-Bacon Act.

How can anybody say that the Davis-Bacon Act is not express in that contract?

And even if it isn't, even if we were to say that the Davis-Bacon Act is not referred to in that contract and that they are not bound by express contract, they are certainly bound by the principle that mandatory statutes which affect government contracts are in those contracts by operation of law.

Unidentified Justice: --But that isn't the same question as saying where they have a right to sue on those contracts.

Mr. Nye: That's a separate question.

Yes, Your Honor.

And that was never raised below, and I raise that here.

Unidentified Justice: Do you disagree with your opponent's reply brief at pages 14 and 15, as to his account of how he claims to have raised it in the 7th Circuit treatment of McDaniel I, McDaniel II?

Do you say... you have not had a chance to reply to that.

Is he simply being factually inaccurate?

Mr. Nye: Well, if I may examine that?

Unidentified Justice: Well, no, don't--

Mr. Nye: He did not raise it, it was not dealt with in that.

You can look at his briefs, in his briefs in that court.

His brief in that court does not talk about the right of action; indeed, does not go into that question at all.

He was placing all of his reliance on the question of contract interpretation.

And that was all that was argued before the court of Appeals, except for the exhaustion of administrative remedies points.

But on this contract question, as to whether or not my clients, these wage earners, should have exhausted whatever administrative remedies there might be before going to the federal courts.

And at that time the 7th Circuit mentioned the petitioner has not suggested any such administrative remedy, and the Court of Appeals could not find one.

Unidentified Justice: --That was available then?

Mr. Nye: Or is available today, Your Honor.

Unidentified Justice: I know.

But there was one, wasn't there, prior to the contract issuance?

Mr. Nye: No, your Honor.

The Government in their briefs, in this case, in their amicus brief, has mentioned that there is no administrative remedy available to a wage earner under these circumstances.

Unidentified Justice: After... I know, after the contract issued.

Mr. Nye: That's right.

Unidentified Justice: Well, how about before?

Mr. Nye: He was not a wage earner for this petitioner before, Your Honor.

He didn't know that he was going to be working for these people.

There was no way.

There was no way, absolutely, for this wage earner or his class members, not having been employed, not knowing whether they would ever be employed, not knowing that the Government was going to contract with Universities Research Associates, that there was any issue to be raised.

They didn't... they have no interest in it.

Their interest developed when they became employed and when it was determined by them... and of course this is postcontracting... that they were not being paid the proper minimum wages.

And as to that, the Government agrees, there is no administrative remedy.

Indeed, in the 1962 hearings before Congress concerning the administration of the Davis-Bacon Act... it is very interesting to read these; I've cited them in my brief.

The representatives of the Comptroller General's office has said, there are, there is no agreement among the agencies as to who has what kinds of enforcement powers.

And the Comptroller General also says, the Secretary of Labor believes he does, we believe we do.

And then the Secretary of Labor's representative said the same thing, there is no agreement; we believe we do, and they believe they do.

Unidentified Justice: Well, Mr. Nye, considering the fact that federal courts are courts of limited jurisdiction, on what jurisdictional section of the Title 28 do you rely for being in court here?

Mr. Nye: Section 1337, Your Honor, a civil action, a civil case arising under any statute, any federal statute affecting interstate commerce.

And that is one of the powers exercised by Congress in enacting the Davis-Bacon Act.

That is the jurisdictional prerequisite, the right of action is referred to by Congress.

To the extent that this Court elects to determine the question of the existence of a right of action, I should point out that I'm not asking this Court nor have I ever asked that this Court or any court in this case consider that there is an alternative private remedy to an employee which he can voluntarily use and disregard any other private remedy that Congress may have given him, such as that one under Section 3(b), talking about the right of action against the contractor and his sureties, which Congress has given to him.

I have not said that a wage earner has the right to disregard express remedies.

I have said, if an alternative is required, if that statute, if that section is interpreted as meaning only action under some payment bond, then there must be... since Congress intended... a right of these individuals to recover their unpaid wages, for these individuals to have a right of action directly against the contractor, but only if the original statutory remedies are unavailable, and ineffective in the ways that they are in this case.

Now, I should be very frank with this Court to point out that there is nothing in the record thus far to demonstrate that the remedies are unavailable or ineffective in this case.

That was shown in the McDaniel case because that was in issue, and we presented affidavits below in the trial court demonstrating that the employer... that was University of Chicago operating Argonne National Lab... had not furnished the necessary surety payment bond and that the Comptroller General had not withheld certain payments in order to pay employees, as well as a couple of other miscellaneous items like blacklisting, which of course would not be done in this kind of an instance, and one other minor administrative item.

There we made our record.

Here we never had a record, had an opportunity to make the record concerning the unavailability or ineffectiveness of this right of action, if it is so interpreted, if it is so limited to action only on a surety bond.

Here we have to... if the Court is going to rule on this question of the existence of a right of action, this Court must in order to be fair presume that the situation is as it was in McDaniel, and which we have no reason to doubt in this case that the situation was the same, that our Petitioner has not submitted Miller Act bonds or any other kind of surety payment bond that the employee can proceed upon, and that the Comptroller General has not withheld sums to assure payment to these laborers.

Certainly this Court, unless it makes that presumption cannot rule appropriately on my opponent's suggestion that there is no right of action existing under circumstances such as these.

I am not... and I make this clear again... I am not asserting that there's an alternate implied right of action for use by employees under any and all circumstances as an alternative to going through the surety payment bond procedure if the statute is interpreted in that way.

I am saying that if those remedies are rendered ineffective and unavailable and particularly if they're rendered ineffective and unavailable because of action or inaction by the contractor and maybe cooperation by the Government, that the employee does have this right of action.

Congress intended it, and the courts should make sure that--

Unidentified Justice: So, any time the agency issues a contract and has made a determination that there is no coverage, that it isn't covered, I suppose you would... the contract would issue and there wouldn't be a surety bond, and in any of those circumstances if you allege that the agency mistakenly decided that there was no coverage, you would have... you should be able to have the court redetermine coverage.

Mr. Nye: --Well, I know that Your Honor wants direct answers so I'm going to give you one: yes, Your Honor.

Unidentified Justice: Yes.

Well, that's this case, isn't it?

Mr. Nye: That's true.

And may... no, it is not, Your Honor.

Unidentified Justice: Oh.

Mr. Nye: There is no coverage determination saying that the Davis-Bacon Act does not apply in this case.

Unidentified Justice: I know, but they didn't... but they didn't provide for it.

Mr. Nye: If the Court please, they referred to it, they spoke about it, they did everything except put a long list of stipulations in the contract.

Now, if the Court please, the Government and my opponent have not referred to any Government agency determination that this is not a Davis-Bacon Act contract.

Unidentified Justice: Well, that "long list of stipulations", as you call it, is required by the Davis-Bacon Act, is it not?

Mr. Nye: The Davis-Bacon Act requires that there be certain stipulations; that's--

Unidentified Justice: And therefore its absence indicates that the parties determined that the Davis-Bacon Act is inapplicable.

Mr. Nye: --Well... or the parties... well, I know the reason why they did not include that: because they intended that all Davis-Bacon work under this Davis-Bacon contract was to be subcontracted, and that the subcontracts would include those stipulations.

But here we are asserting... and we are at the stage where this must be accepted by the Court.

We are asserting on behalf of these laborers that they did certain amounts of the Davis-Bacon Act work.

Unidentified Justice: I see.

Mr. Nye, in this connection, earlier, I understood you to say that the contract has a provision that says if this eventuality comes to pass then they shall be paid at Davis-Bacon rates.

Mr. Nye: That's what I contend, even--

Unidentified Justice: Do you rely on paragraph 33, is that the paragraph you rely on for that, or is it a different paragraph?

Mr. Nye: --No, it's a letter, a memorandum of understanding in our joint appendix.

I think it's one of the later pages.

Two letters; excuse me: one at the time of the original signing of the contract in 1968, and again in a memorandum of understanding that I was able to discover when Modification 14 was made by the parties.

Modification 14 was the big modification of this contract, so at both times the Government and the petitioner agreed between themselves that in the event that the contractor does any of this work with its own work force... and these employees whom I represent are in its own work force... that the contract will be modified.

And I say it is modified thereby to include the Davis-Bacon Act stipulations concerning these employees.

Unidentified Justice: But don't you run into the same problem Justice Stewart just identified, though, the very fact that it was not subsequently modified tends to indicate that the two parties agreed that no Davis-Bacon Act work had been performed?

Mr. Nye: Well, if the Court please, even this Davis-Bacon committee... it's an informal committee; it's not as formal as counsel would let us believe, and I was present at the depositions where it was described.

This informal Davis-Bacon Act committee of three people in the local ABC office was presented with requests for Davis-Bacon Act determinations... they're referred to in my brief also... approximately 135 during the period of years, for various kinds of work.

And 126 of those requests were returned by this Davis-Bacon Act committee saying, this is Davis-Bacon Act work.

Now, I submit that certain of the Davis-Bacon Act work done under this contract, and maybe a lot of it that was done pursuant to those determinations... determinations, now, if we need determinations... by the government agency here involved, certain of that work was done by my people.

And if so, they are entitled to be paid.

Congress intended it, and nobody, not their decision... not to call this a Davis-Bacon Act contract... not their decision, not--

Unidentified Justice: But Mr. Nye, just sticking with that for just a second, is it not true that if that happened the way you describe, the Government had a duty not to pay the contract price until they were satisfied that the employees had been paid the appropriate wages, isn't that true?

Mr. Nye: --Well, there's question as to how that's effectuated, if the Court please.

I don't know how that's done.

The Davis-Bacon Act itself does not say how that shall be done.

All we know is that the Comptroller General is supposed to withhold certain sums of money.

We don't know who asks the Comptroller General to do it or how the Comptroller General decides that.

Unidentified Justice: Well, is it not true as a sort of a general proposition that the Government has a duty not to pay out in full on the contract until it's satisfied that there's been no violation of the Davis-Bacon Act?

Mr. Nye: I think that there is such a duty.

I think there is.

I'm not proceeding on that duty.

I'm not suing the Government in this case.

I'm proceeding against my client's employer because the obligation of the Davis-Bacon Act is upon the employer to pay, and it's been referred to again and again by Congress and by the courts as being... and by this Court... as being a statute that requires the payment to laborers and mechanics concerning government contracts involving construction, alteration and repair, including painting and decorating, of wages which the Secretary of Labor has determined are the prevailing wages in a particular area for that type of work.

By the way, the Government in its brief has also said that if we look at the payment schedules... some of which the Petitioner has included in the Joint Appendix.

If we look at payment schedules, the Government has said it is clear that certain of the amounts received by my clients... actually received... were less than what the prevailing wages would have required that they be paid.

So we have... there is no question that these people have not been paid what they are owed.

There is no question that Congress commanded that the prevailing wage principle be effectuated.

And by the way, I think it's important to note the Comptroller General has just done a survey and there are 77 statutes concerning federally assisted contract situations, 77 statutes in which the Davis-Bacon Act is referred to and in these 77 statutes it is required that Davis-Bacon obligations be performed, that payment of wages be made in accordance with the prevailing wage principle of the Davis-Bacon Act and the Davis-Bacon Act is cited in each of those statutes.

I don't know what effect if any this Court's decision will have on the 41 state "little Davis-Bacon acts" which exist throughout the country.

I'm not representing that it will have or not have any effect, but it shows the pervading effect and acceptance of the prevailing wage principle, not only by Congress in the Davis-Bacon Act, not only by Congress in the 77 other statutes that refer to federally assisted programs and construction, but also throughout the rest of these United States.

Thank you.

Unidentified Justice: I take it that the heart of the Government's submission is that the agency determination of coverage is just unreviewable?

Mr. Nye: If the Court please, I suggest that the agency has no function in deciding or not deciding with any binding effect that a contract is covered or not.

Unidentified Justice: I know that, but don't you understand the Government to assert what I say?

Mr. Nye: Yes, Your Honor.

Unidentified Justice: And that if the agency makes a determination before contracting and that is subject to appeal, I suppose, to the Department of Labor, but the Department of Labor's decision may or may not bind the agency.

But in any event the Government's submission is that those determinations are not subject to judicial review.

Mr. Nye: I assume that that's what they are saying, and to that extent--

Unidentified Justice: I thought, rather, that the specific question exposed by my brother White was one that the Government took no position on?

But wouldn't it be very odd to say it's subject to a judicial review but that this case must be dismissed, because where there is no agency determination at all--

Mr. Nye: --It is--

Unidentified Justice: --Or where there wasn't... at least, where there's no administrative remedy now?

Mr. Nye: --There is no... absolutely, there is no administrative remedy.

If there were one we wouldn't be going through the Courts.

We would be proceeding with a much easier administrative remedy, but we have none, if the Court please.

It is our view and request that this Court affirm the decision of the Court of Appeals.

Chief Justice Burger: Do you have anything further?

Mr. Mann: Just one, comment, Jr. Chief Justice.

I'd like to reemphasize that it is our position that in order to hold the contractor liable, there must be an affirmative predetermination of coverage, and the coverage must be not only the wage rates but the existence of the coverage of the Act as well, because the agency making that determination is the other contracting party.

And that concept is embodied in the comment that Mr. Nye referred to with respect to the contract, which is shown on pages 62 and 63 of the Appendix, where it indicates that if the Atomic Energy Commission determines that work is covered by Davis-Bacon, then the contract will be amended.

ORAL ARGUMENT OF ROBERT E. MANN, ESQ., ON BEHALF OF THE PETITIONER -- REBUTTAL

Unidentified Justice: May I just ask one other question in response to something Mr. Nye had said?

If those letters that are referred to in the Appendix... and very honestly, I don't have them in mind... if they do unambiguously state that, if employees of the contractor do perform any Davis-Bacon work, then they shall be paid at Davis-Bacon rates, if they so provide, then do you have a duty to pay at the rate he claims?

Mr. Mann: If they provided that, yes, sir.

What the provisions of the letter agreement say is that if the Atomic Energy Commission determines both the need for our employees to do the work and that the work is covered, then the contract will be amended.

Unidentified Justice: In effect, that's saying, if they do that, then instead of subcontracting the work, they could do it with their own employees if we agree that this is covered work?

Mr. Mann: Right.

In advance.

If we agree... it's in advance.

Thank you very much, Mr. Chief Justice.

Chief Justice Burger: Thank you, gentlemen.

The case is submitted.

Attribution:

The OYEZ Project

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