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1955_71

https://www.oyez.org/cases/1955/71

MR. JUSTICE REED delivered the opinion of the Court. Affronti was tried in the United States District Court for the Western District of Missouri on a ten-count indictment charging him with illegal sales of narcotics. A jury found him guilty on counts two through ten, and a five-year sentence was imposed on each count, to be served consecutively. At the time of sentencing, execution of the sentences on counts six through ten was suspended and probation granted, the probation to commence at the expiration of the sentences on counts two through five. While serving his sentence on count two, petitioner filed a motion in the District Court seeking suspension of sentence and probation on counts three, four and five. The motion was denied upon the controlling authority of Phillips v. United States, 212 F.2d 327 (1954), which held that the district courts have no power to suspend sentence after a prisoner has begun to serve a cumulative sentence composed of two or more consecutive sentences. The Court of Appeals affirmed, and we granted certiorari because of the existence of a conflict between the decision below and the decision of the Ninth Circuit in Kirk v. United States, 185 F.2d 185. Prior to 1925, the district courts had no power at all to suspend sentences and release a convict on probation. Ex parte United States,. This situation was remedied by Congress when it passed the Probation Act in 1925. That Act gave power to the federal courts, "after conviction or after a plea of guilty or nolo contendere," to suspend sentence and place the defendant on probation. The purpose of the Act, as revealed by its legislative history, was discussed by this Court in United States v. Murray,. That case also presented a question concerning the time within which a district court can suspend a sentence and grant probation. In Murray, this Court observed that, in view of the existence of provisions for parole and executive clemency, it would seem unlikely that Congress would have intended to make the probation provisions applicable during the same period of time. Id. at. It was concluded that it would be more reasonable to construe the Probation Act so as to reconcile the three methods of mitigation of criminal sentences, thereby "making them as little of a repetition as we can." Id. at. This and other considerations led the Court to hold that a district judge had no power under the Act to place a convict on probation after he had begun the execution of his sentence. The decision in the Murray case does not, however, completely dispose of the question now before the Court. Since the Murray decision, there has been a language change in the statutory provisions for probation. In Murray, the Court was considering the question of power of the district courts to place a convict on probation after he had commenced to serve a single general sentence. Here, we are concerned with the power to grant suspension of sentences which are, technically, wholly unexecuted because they constitute the unserved terms of a series of consecutive sentences. In 1948, in connection with the revision and codification of Title 18 of the United States Code, the language of the Probation Act with which we are concerned was changed. The statute now provides for suspension of sentence and probation "[u]pon entering a judgment of conviction." The substitution of the quoted words for "after conviction or after a plea of guilty or nolo contendere," the phrase which appeared in the Probation Act prior to the 1948 codification of Title 18, does not appear to have resulted in any substantive change in the law. The Reviser's Notes which accompanied the 1948 codification merely stated the following with respect to this amendment: "Words 'after conviction or after a plea of guilty or nolo contendere for any crime or offense not punishable by death or life imprisonment' were omitted from first sentence as unnecessary. " The Reviser's Notes were used by Congress as a full explanation of all changes made in the text of the existing law. It is unlikely, therefore, that Congress intended the phrase as it appears in the present section to have a different meaning than the phrase had prior to the revision. The more significant difference between the Murray case and the present one is the fact that here we are dealing with a cumulative sentence composed of a number of distinct sentences which are to run consecutively. Petitioner notes that, while he has begun the execution of the first of the series of sentences, he has not commenced the execution of the sentences which he is now seeking to have suspended. He reasons from this fact that the District Court still has probationary power over the latter sentences. Of course, the words of the statute do not themselves require adoption of petitioner's argument. In fact, the language of the present probation provision, and of the original provision as interpreted by Murray, suggests a contrary result. In the final analysis, this case must be governed by the meaning of the statute. Are we to read the statute to mean that the courts should be able to suspend the uncommenced terms of a cumulative sentence after the prisoner has been imprisoned and entered upon the execution of a prior term? We think not. The Murray opinion points out that it is unlikely that Congress would have found it wise to make probation apply in such a way as to unnecessarily overlap the parole and executive clemency provisions of the law. Federal judicial power to permit probation springs solely from legislative action. Ex parte United States, supra. The authority to put a convict on probation for an uncommenced term, after service of an earlier term has begun, has not been clearly given. Therefore, in construing the provisions for probation, we adhere to the Murray interpretation to avoid interference with the parole and clemency powers vested in the Executive Branch. We conclude that the probationary power ceases with respect to all of the sentences composing a single cumulative sentence immediately upon imprisonment for any part of the cumulative sentence. We note the argument that, since Congress has authorized the sentencing court to limit probation to less than all of the terms of a cumulative sentence, it should follow that the probation powers for each term exist until that term is begun. But the power to limit a grant of probation to less than an entire cumulative sentence does not compel a conclusion that the power to grant probation as to each of the separate sentences exists until the convict begins to serve each. We think, moreover, this argument is met by our conclusion that the provisions for probation should be interpreted to avoid, so far as possible, duplicating other existing provisions for the mitigation of criminal sentences. See note 12 supra. Congress has done nothing since this Court's decision in United States v. Murray, supra, to indicate that probation power should be applied after the beginning of any term of a sentence. Affirmed.

Under 18 U.S.C. § 3651, after a sentence of consecutive terms on multiple counts of an indictment has been imposed and service of sentence for the first such term has commenced, a federal district court may not suspend sentence and grant probation as to the remaining term or terms. United States v. Murray,. . (a) The legislative history of this section does not require a different result. ,. (b) The probationary power ceases with respect to all of the sentences composing a single cumulative sentence immediately upon imprisonment for any part of the cumulative sentence. . (c) The provisions for probation should be interpreted to avoid, so far as possible, duplicating other existing provisions for the mitigating of criminal sentences. P.. 221 F.2d 150 affirmed.

1955_410

https://www.oyez.org/cases/1955/410

MR. JUSTICE MINTON delivered the opinion of the Court. Twentieth Century Airlines, Inc., was issued a letter of registration as a large irregular air carrier by the Civil Aeronautics Board in 1947. For some reason, beginning in 1951, it conducted its business under the name of North American Airlines. On March 3, 1952, it amended its articles of incorporation so as legally to change its name to North American Airlines, Inc. By letter dated March 11, 1952, it requested the CAB to reissue its letter of registration in the new corporate name. The Board took no action on that request, but rather, in August, 1952, adopted an Economic Regulation requiring every irregular carrier, after November 15, 1952, to do business in the name in which its letter of registration was issued. 14 CFR § 291.28. The Board explained that, under the Regulation, it would allow continued use of a different name to which good will had become attached, except where use of such name constitutes a violation of § 411 of the Civil Aeronautics Act, 52 Stat. 1003, as amended, 66 Stat. 628, 49 U.S.C. § 491, which prohibits unfair or deceptive commercial practices and unfair methods of competition. 17 Fed.Reg. 7809. On October 6, 1952, respondent applied for permission to continue use of its name, "North American Airlines." Petitioner, American Airlines, on October 17, 1952, filed a memorandum with the Board requesting denial of North American's application for the reasons, among others, that use of the name "North American" infringed upon its long established trade name, "American," and constituted an unfair method of competition in violation of § 411 of the Act. The Board, as authorized by § 411, on its own motion, instituted an investigation and hearing into whether there was a violation of § 411 by North American. It consolidated with that proceeding an investigation and hearing into the matter of North American's application for change of name in its letter of registration. American was granted leave to intervene in the consolidated proceeding. After extensive hearings, the Board found that respondent's use of the name "North American" in the air transportation industry, in which it competed with American, had caused "substantial public confusion," which was "likely to continue" and which constituted "an unfair or deceptive practice and an unfair method of competition within the meaning of Section 411." Docket Nos. 5774 and 5928 (Nov. 4, 1953), 14-15 mimeo. It found that the public interest required elimination of the use of the name, and accordingly it denied the application of North American and ordered it to "cease and desist from engaging in air transportation under the name 'North American Airlines, Inc.,' 'North American Airlines,' 'North American,' or any combination of the word 'American.'" Id. at 15-16. On petition for review by North American, the Court of Appeals for the District of Columbia set aside the Board's order. 97 U.S.App.D.C. 85, 228 F.2d 432. American, having been admitted as a party below by intervention, sought, and we granted, certiorari. 350 U.S. 894. As we understand its opinion, the Court of Appeals set aside the order because the public interest in this proceeding was inadequate to justify exercise of the Board's jurisdiction under § 411. Although the court was critical of the finding of "substantial public confusion," it did not, on its disposition of the case, expressly disturb that or any other of the Board's findings. For the purposes of review here, we will accept the findings, and there is no cause for this Court to review the evidence. Universal Camera Corp. v. Labor Board,, has no application in the present posture of the case before us. The questions then presented are whether confusion between the parties' trade names justified a proceeding by the Board to protect the public, and whether the kind of confusion found by the Board could support a conclusion of a violation of the statute by respondent. This is a case of first impression under § 411. That section provides that "The Board may, upon its own initiative or upon complaint . . . if it considers that such action by it would be in the interest of the public, investigate and determine whether any air carrier . . . has been or is engaged in unfair or deceptive practices or unfair methods of competition in air transportation or the sale thereof." If the Board finds that the carrier is so engaged, "it shall order such air carrier . . . to cease and desist from such practices or methods of competition." Section 411 was modeled closely after § 5 of the Federal Trade Commission Act, * which similarly prohibits "unfair methods of competition in commerce, and unfair or deceptive acts or practices" and provides for issuance of a complaint "if it shall appear to the Commission that a proceeding by it . . . would be to the interest of the public." 38 Stat. 719, as amended, 15 U.S.C. § 45. We may profitably look to judicial interpretation of § 5 as an aid in the resolution of the questions raised here under § 411. It should be noted at the outset that a finding as to the "interest of the public" under both § 411 and § 5 is not a prerequisite to the issuance of a cease and desist order as such. Rather, consideration of the public interest is made a condition upon the assumption of jurisdiction by the agency to investigate trade practices and methods of competition and determine whether or not they are unfair. Thus, this Court has held that, under § 5, the Federal Trade Commission may not employ its powers to vindicate private rights, and that whether or not the facts, on complaint or as developed, show the public interest to be sufficiently "specific and substantial" to authorize a proceeding by the Commission is a question subject to judicial review. Federal Trade Commission v. Klesner,. See also Federal Trade Commission v. R. F. Keppel & Bro., Inc.,; Federal Trade Commission v. Royal Milling Co.,. In the Klesner case, two District of Columbia retailers, with a long history of acrimonious personal and business relations, were both operating stores called the "Shade Shop." This Court held that the public interest merely in resolving their private unfair competition dispute would not justify the Commission in issuing a complaint. The courts of law are open to competitors for the settlement of their private legal rights, one against the other. The Board, under a mandate from Congress, is charged with the protection of the public interest as affected by practices of carriers in the field of air transportation. In exercising our function of review of the Board's jurisdiction to protect the public interest by a proceeding which may be generated from facts also giving rise to a private dispute, we must take account of the significant differences between § 5 and § 411. Section 5 is concerned with purely private business enterprises which cover the full spectrum of economic activity. On the other hand, the air carriers here conduct their business under a regulated system of limited competition. The business so conducted is of especial and essential concern to the public, as is true of all common carriers and public utilities. Finally, Congress has committed the regulation of this industry to an administrative agency of special competence that deals only with the problems of the industry. The practices of the competitors here clashed in a field where Congress was specifically concerned to protect the public interest. Demonstrated confusion of the public as to the origin of major air transportation services may be of obvious national public concern. The criteria which the Board employed to determine whether the confusion here created a problem of concern to the public are contained in the following quotation from its report: ". . . the record is convincing that the public interest requires this action in order to prevent further public confusion between respondent and intervenor due to similarity of names. The maintenance of high standards in dealing with the public is expected of common carriers, and the public has a right to be free of the inconveniences which flow from confusion between carriers engaging in the transportation of persons by air. The speed of air travel may well be diminished when passengers check in for flights with the wrong carrier, or attempt to retrieve baggage from the wrong carrier, or attempt to purchase transportation from the wrong carrier, or direct their inquiries to the wrong carrier. Friends, relatives, or business associates planning to meet passengers or seeking information on delayed arrivals are subject to annoyance or worse when confused as to the carrier involved. The proper handling of complaints from members of the public is impeded by confusion as to the carrier to whom the complaint should be presented. The transportation itself may differ from what the confused purchaser had anticipated (e.g., in terms of equipment), even though the time and place of arrival may be about the same. It is obvious that public confusion between air carriers operating between the same cities is adverse to the public interest. . . ." Docket Nos. 5774 and 5928 (Nov. 4, 1953), 12-13 (mimeo). Under § 411, it is the Board that speaks in the public interest. We do not sit to determine independently what is the public interest in matters of this kind, committed as they are to the judgment of the Board. We decide only whether, in determining what is the public interest, the Board has stayed within its jurisdiction and applied criteria appropriate to that determination. The Board has done that in the instant case. Considerations of the high standards required of common carriers in dealing with the public, convenience of the traveling public, speed, and efficiency in air transport, and protection of reliance on a carrier's equipment are all criteria which the Board in its judgment may properly employ to determine whether the public interest justifies use of its powers under § 411. It is argued that respondent's use of the name "North American" cannot amount to an unfair or deceptive practice or an unfair method of competition authorizing the Board's order within § 411. "Unfair or deceptive practices or unfair methods of competition," as used in § 411, are broader concepts than the common law idea of unfair competition. See Federal Trade Commission v. R. F. Keppel & Bro., Inc., supra; Federal Trade Commission v. Raladam Co.,,. The section is concerned not with punishment of wrongdoing or protection of injured competitors, but rather with protection of the public interest. See Federal Trade Commission v. Klesner, supra, at. The courts have held, in construing § 5 of the Trade Commission Act, that the use of a trade name that is similar to that of a competitor, which has the capacity to confuse, or deceive the public, may be prohibited by the Commission. Federal Trade Commission v. Algoma Lumber Co.,; Juvenile Shoe Co. v. Federal Trade Commission, 289 F. 57. And see Pep Boys -- Manny, Moe & Jack, Inc. v. Federal Trade Commission, 122 F.2d 158, where the confusing name was not that of any competitor. The Board found that respondent knowingly adopted a trade name that might well cause confusion. But it made no findings that the use of the name was intentionally deceptive or fraudulent, or that the competitor, American Airlines, was injured thereby. Such findings are not required of the Trade Commission under § 5, and there is no reason to require them of the Civil Aeronautics Board under § 411. Federal Trade Commission v. Algoma Lumber Co., supra, at; Eugene Dietzgen Co. v. Federal Trade Commission, 142 F.2d 321, 327; D.D.D. Corp. v. Federal Trade Commission, 125 F.2d 679, 682; Gimbel Bros., Inc. v. Federal Trade Commission, 116 F.2d 578, 579; Federal Trade Commission v. Balme, 23 F.2d 615, 621. See also S.Rep. No. 221, 75th Cong., 1st Sess. 2. The Board had jurisdiction to inquire into the methods of competition presented here, and its evidentiary findings concerned confusion of the type which can support a finding of violation of § 411. The judgment of the Court of Appeals must therefore be reversed. However, since we do not understand the court to have decided whether the Board's findings were supported by substantial evidence on the record as a whole, the case is remanded to the Court of Appeals for further proceedings in the light of this opinion. Reversed and remanded.

In a proceeding under § 411 of the Civil Aeronautics Act, the Civil Aeronautics Board found that respondent's use of the name "North American" in the air transportation industry, in which it competed with American Airlines, had caused "substantial public confusion" by causing persons to check in at the wrong carrier, attempt to purchase transportation from the wrong carrier, meet flights of the wrong carrier, and otherwise, that such public confusion was "likely to continue" and was an unfair method of competition within the meaning of § 411. It further found that the public interest required elimination of the use of the name, and it ordered respondent to cease and desist from engaging in air transportation under the name of "North American Airlines" or any combination of the word "American." Held: 1. The Board applied criteria appropriate to a determination of whether a proceeding by it in this case would be in the "interest of the public," as required by § 411, and it had jurisdiction to inquire into the methods of competition presented here and to determine whether they constituted a violation of the Act. . 2. The Board's evidentiary findings concerned confusion of the type which can support a finding of violation of § 411. . 3. However, since this Court does not understand the Court of Appeals to have decided whether the Board's findings were supported by substantial evidence on the record as a whole, the case is remanded to that Court for further proceedings in the light of this opinion. P.. 9 U.S.App.D.C. 85, 228 F.2d 432, reversed and remanded.

1955_351

https://www.oyez.org/cases/1955/351

MR. JUSTICE DOUGLAS delivered the opinion of the Court. The sole question in the case is whether the cause of action alleged comes within the admiralty jurisdiction of the District Court. The District Court held that this was an action on a maritime contract, within the admiralty jurisdiction, 129 F. Supp. 410. The Court of Appeals reversed, holding that the suit was in the nature of the old common law indebitatus assumpsit for money had and received, based upon the wrongful withholding of money. 223 F.2d 406. The case is here on a petition for certiorari which we granted, 350 U.S. 872, because of the seeming conflict of that ruling with Krauss Bros. Lumber Co. v. Dimon S.S. Corp.,,. The libel alleges that respondent, doing business in his own and in various trade names, owned and controlled a passenger vessel, known as the City of Athens, and held out that vessel as a common carrier of passengers for hire, and that petitioners paid moneys for passage upon the vessel, scheduled for July 15, 1947, to Europe. A contract for the transportation of passengers is a maritime contract within admiralty jurisdiction. The Moses Taylor, 4 Wall. 411. The allegations so far mentioned are plainly sufficient to establish such a contract. The libel goes on to allege a breach of that contract through an abandonment of the voyage. If this were all, it would be plain that petitioners stated a claim for breach of a maritime contract. But the libel further alleges that the sums paid by petitioners as passage money were "wrongfully and deliberately" applied by respondent to his own use and benefit "in reckless disregard of his obligations to refund the same" and that respondent "has secreted himself away and manipulated his assets . . . for the purpose of defrauding" petitioners. Then follow allegations of certain fraudulent acts and transactions. The allegations of wrongfulness and fraud do not alter the essential character of the libel. For the ancient admiralty teaching is that "[t]he rules of pleading in the admiralty are exceedingly simple, and free from technical requirements." Dupont de Nemours & Co. v. Vance, 19 How. 162,. And see 2 Benedict, American Admiralty (6th ed. 1940), §§ 223, 237. Though these particular allegations of the libel sound in fraud or in the wrongful withholding of moneys, it is plain in the context that the obligation to pay the moneys arose because of a breach of the contract to transport passengers. Lawyers speak of the obligation in terms of indebitatus assumpsit, a concept whose tortuous development gave expression to "the ethical character of the law." See Ames, The History of Assumpsit, 2 Harv.L.Rev. 1, 53, 58 (1888). As Mr. Justice Holmes once put it, "An obligation to pay money generally is enforced by an action of assumpsit, and to that extent is referred to a contract, even though it be one existing only by fiction of law." Thomas v. Matthiessen,,. The fiction sometimes distorted the law. A line of authorities emerged to the effect that admiralty had no jurisdiction to grant relief in such cases, "because the implied promise to repay the moneys which cannot in good conscience be retained -- necessary to support the action for money had and received -- is not a maritime contract. " United Transportation & Lighterage Co. v. New York & B.T. Line, 185 F. 386, 391. Yet that duty to pay is often referable, as here, to the breach of a maritime contract. As Mr. Justice Stone said in Krauss Bros. Lumber Co. v. Dimon S.S. Corp., supra, at: ". . . Even under the common law form of action for money had and received, there could be no recovery without proof of the breach of the contract involved in demanding the payment, and the basis of recovery there, as in admiralty, is the violation of some term of the contract of affreightment, whether by failure to carry or by exaction of freight which the contract did not authorize." The truth is that, in a case such as the present one, there is neither an actual promise to repay the passage moneys nor a second contract. The problem is to prevent unjust enrichment from a maritime contract. See Morrison, The Remedial Powers of the Admiralty, 43 Yale L.J. 1, 27 (1933). A court that prevents a maritime contract from being exploited in that way does not reach beyond the domain of maritime affairs. We conclude that, so long as the claim asserted arises out of a maritime contract, the admiralty court has jurisdiction over it. The philosophy of indebitatus assumpsit is, indeed, not wholly foreign to admiralty. Analogous conceptions of rights based on quasi-contract are found in admiralty. One who saves property at sea has the right to an award of salvage, regardless of any agreement between him and the owner. See Mason v. Ship Blaireau, 2 Cranch 240,; The Sabine,,; 1 Benedict, supra, § 117 et seq. Likewise, where cargo is jettisoned, the owner becomes entitled to a contribution in general average from the owners of other cargo which was saved without the aid of any agreement. See Barnard v. Adams, 10 How. 270,; Star of Hope, 9 Wall. 203,; 1 Benedict, supra, § 98. Other examples could be given. See Chandler, Quasi Contractual Relief in Admiralty, 27 Mich.L.Rev. 23 (1928). Rights which admiralty recognizes as serving the ends of justice are often indistinguishable from ordinary quasi-contractual rights created to prevent unjust enrichment. How far the concept of quasi-contracts may be applied in admiralty it is unnecessary to decide. It is sufficient this day to hold that admiralty has jurisdiction, even where the libel reads like indebitatus assumpsit at common law, provided that the unjust enrichment arose as a result of the breach of a maritime contract. Such is the case here. The judgment is reversed, and the case is remanded to the Court of Appeals for proceedings in conformity with this opinion. Reversed and remanded.

A libel in admiralty alleged that petitioners paid moneys to respondent for transportation to Europe on respondent's vessel, and that respondent breached the contract by abandonment of the voyage. The libel further alleged that respondent wrongfully appropriated the passage money to his own use and committed other fraudulent acts. Held: the cause of action alleged was within the admiralty jurisdiction of the Federal District Court. Pp. 532-536. (a) The essential character of the libel as a claim for breach of a maritime contract was not altered by the allegations of wrongfulness and fraud. . (b) So long as the claim asserted arises out of a maritime contract, the admiralty court has jurisdiction over it. P.. (c) Admiralty has jurisdiction even where a libel reads like indebitatus assumpsit at common law, provided that the unjust enrichment arose out of the breach of a maritime contract. . 223 F.2d 406 reversed and remanded.

1955_49

https://www.oyez.org/cases/1955/49

MR. JUSTICE DOUGLAS delivered the opinion of the Court. This suit, removed from a Vermont court to the District Court on grounds of diversity of citizenship, was brought for damages for the discharge of petitioner under an employment contract. At the time the contract was made, petitioner was a resident of New York. Respondent is a New York corporation. The contract was made in New York. Petitioner later became a resident of Vermont, where he was to perform his duties under the contract, and asserts his rights there. The contract contains a provision that, in case of any dispute, the parties will submit the matter to arbitration under New York law by the American Arbitration Association, whose determination "shall be final and absolute." After the case had been removed to the District Court, respondent moved for a stay of the proceedings so that the controversy could go to arbitration in New York. The motion alleged that the law of New York governs the question whether the arbitration provision of the contract is binding. The District Court ruled that, under Erie R. Co. v. Tompkins,, the arbitration provision of the contract was governed by Vermont law, and that the law of Vermont makes revocable an agreement to arbitrate at any time before an award is actually made. The District Court therefore denied the stay, 122 F. Supp. 733. The Court of Appeals reversed, 218 F.2d 948. The case is here on a petition for certiorari which we granted, 349 U.S. 943, because of the doubtful application by the Court of Appeals of Erie R. Co. v. Tompkins, supra. A question under the United States Arbitration Act, 43 Stat. 883, as amended, 61 Stat. 669, 9 U.S.C. §§ 1-3, lies at the threshold of the case. Section 2 of that Act makes "valid, irrevocable, and enforceable" provisions for arbitration in certain classes of contracts, and § 3 provides for a stay of actions in the federal courts of issues referable to arbitration under those contracts. Section 2 makes "valid, irrevocable, and enforceable" only two types of contracts: those relating to a maritime transaction and those involving commerce. No maritime transaction is involved here. Nor does this contract evidence "a transaction involving commerce" within the meaning of § 2 of the Act. There is no showing that petitioner while performing his duties under the employment contract was working "in" commerce, was producing goods for commerce, or was engaging in activity that affected commerce within the meaning of our decisions. The Court of Appeals went on to hold that, in any event, § 3 of the Act stands on its own footing. It concluded that, while § 2 makes enforceable arbitration agreements in maritime transactions and in transactions involving commerce, § 3 covers all arbitration agreements even though they do not involve maritime transactions or transactions in commerce. We disagree with that reading of the Act. Sections 1, 2, and 3 are integral parts of a whole. To be sure, § 3 does not repeat the words "maritime transaction" or "transaction involving commerce," used in §§ 1 and 2. But §§ 1 and 2 define the field in which Congress was legislating. Since § 3 is a part of the regulatory scheme, we can only assume that the "agreement in writing" for arbitration referred to in § 3 is the kind of agreement which §§ 1 and 2 have brought under federal regulation. There is no intimation or suggestion in the Committee Reports that §§ 1 and 2 cover a narrower field than § 3. On the contrary, S.Rep. No. 536, 68th Cong., 1st Sess., p. 2, states that § 1 defines the contracts to which "the bill will be applicable." And H.R. Rep. No. 96, 68th Cong., 1st Sess., p. 1, states that one foundation of the new regulating measure is "the Federal control over interstate commerce and over admiralty." If respondent's contention is correct, a constitutional question might be presented. Erie R. Co. v. Tompkins indicated that Congress does not have the constitutional authority to make the law that is applicable to controversies in diversity of citizenship cases. Shanferoke Coal & Supply Corp. v. Westchester Service Corp.,, applied the Federal Act in a diversity case. But that decision antedated Erie R. Co. v. Tompkins, and the Court did not consider the larger question presented here -- that is, whether arbitration touched on substantive rights, which Erie R. Co. v. Tompkins held were governed by local law, or was a mere form of procedure within the power of the federal courts or Congress to prescribe. Our view, as will be developed, is that § 3, so read, would invade the local law field. We therefore read § 3 narrowly to avoid that issue. Federal Trade Commission v. American Tobacco Co.,,. We conclude that the stay provided in § 3 reaches only those contracts covered by §§ 1 and 2. The question remains whether, apart from the Federal Act, a provision of a contract providing for arbitration is enforceable in a diversity case. The Court of Appeals, in disagreeing with the District Court as to the effect of an arbitration agreement under Erie R. Co. v. Tompkins, followed its earlier decision of Murray Oil Products Co. v. Mitsui & Co., 146 F.2d 381, 383, which held that "Arbitration is merely a form of trial, to be adopted in the action itself, in place of the trial at common law: it is like a reference to a master, or an 'advisory trial' under Federal Rules of Civil Procedure. . . ." We disagree with that conclusion. We deal here with a right to recover that owes its existence to one of the States, not to the United States. The federal court enforces the state-created right by rules of procedure which it has acquired from the Federal Government and which therefore are not identical with those of the state courts. Yet, in spite of that difference in procedure, the federal court enforcing a state-created right in a diversity case is, as we said in Guaranty Trust Co. v. York,,, in substance "only another court of the State." The federal court therefore may not "substantially affect the enforcement of the right as given by the State." Id.,. If the federal court allows arbitration where the state court would disallow it, the outcome of litigation might depend on the courthouse where suit is brought. For the remedy by arbitration, whatever its merits or shortcomings, substantially affects the cause of action created by the State. The nature of the tribunal where suits are tried is an important part of the parcel of rights behind a cause of action. The change from a court of law to an arbitration panel may make a radical difference in ultimate result. Arbitration carries no right to trial by jury that is guaranteed both by the Seventh Amendment and by Ch. 1, Art. 12th, of the Vermont Constitution. Arbitrators do not have the benefit of judicial instruction on the law; they need not give their reasons for their results; the record of their proceedings is not as complete as it is in a court trial; and judicial review of an award is more limited than judicial review of a trial -- all as discussed in Wilko v. Swan,,. We said in the York case that "The nub of the policy that underlies Erie R. Co. v. Tompkins is that for the same transaction the accident of a suit by a nonresident litigant in a federal court instead of in a State court a block away should not lead to a substantially different result." 326 U.S. at. There would in our judgment be a resultant discrimination if the parties suing on a Vermont cause of action in the federal court were remitted to arbitration, while those suing in the Vermont court could not be. The District Court found that, if the parties were in a Vermont court, the agreement to submit to arbitration would not be binding, and could be revoked at any time before an award was made. He gave as his authority Mead's Adm'x v. Owen, 83 Vt. 132, 135, 74 A. 1058, and Sartwell v. Sowles, 72 Vt. 270, 277, 48 A. 11, decided by the Supreme Court of Vermont. In the Owen case, the court, in speaking of an agreement to arbitrate, held that " . . . either party may revoke the submission at any time before the publication of an award." 83 Vt. at 135, 74 A. at 1059. That case was decided in 1910. But it was agreed on oral argument that there is no later authority from the Vermont courts, that no fracture in the rules announced in those cases has appeared in subsequent rulings or dicta, and that no legislative movement is under way in Vermont to change the result of those cases. Since the federal judge making those findings is from the Vermont bar, we give special weight to his statement of what the Vermont law is. See MacGregor v. State Mutual Life Assur. Co.,; Hillsborough v. Cromwell,,; Steele v. General Mills,,. We agree with him that, if arbitration could not be compelled in the Vermont courts, it should not be compelled in the Federal District Court. Were the question in doubt or deserving further canvass, we would, of course, remand the case to the Court of Appeals to pass on this question of Vermont law. But, as we have indicated, there appears to be no confusion in the Vermont decisions, no developing line of authorities that casts a shadow over the established ones, no dicta, doubts, or ambiguities in the opinions of Vermont judges on the question, no legislative development that promises to undermine the judicial rule. We see no reason, therefore, to remand the case to the Court of Appeals to pass on this question of local law. Respondent argues that, since the contract was made in New York and the parties contracted for arbitration under New York law, New York arbitration law should be applied to the enforcement of the contract. A question of conflict of laws is tendered, a question that is also governed by Vermont law. See Klaxon Co. v. Stentor Electric Mfg. Co.,. It is not clear to some of us that the District Court ruled on that question. We mention it explicitly so that it will be open for consideration on remand of the cause to the District Court. The judgment of the Court of Appeals is reversed, and the cause is remanded to the District Court for proceedings in conformity with this opinion. Reversed and remanded.

Petitioner's action against respondent in a Vermont state court, for damages for the discharge of petitioner under an employment contract, was removed to the Federal District Court on grounds of diversity of citizenship. The contract had been made in New York, where both parties resided at the time, and provided that the parties would submit any dispute to arbitration under New York law, but petitioner had later become a resident of Vermont, where he was to perform his duties. Respondent's motion for a stay of the proceedings so that the controversy could go to arbitration in New York was denied by the District Court, which ruled that the arbitration provision of the contract was governed by Vermont law and that, under Vermont law, the agreement to arbitrate was revocable any time before an award was actually made. The Court of Appeals reversed. Held: the judgment of the Court of Appeals is reversed, and the cause is remanded to the District Court. . 1. The provision of § 3 of the United States Arbitration Act for stay of the trial of an action until arbitration has been had does not apply to all arbitration agreements, but only to those covered by §§ 1 and 2 of the Act (those relating to maritime transactions and those involving interstate or foreign commerce), and there is no showing that the contract here involved is in either of those classes. . 2. The differences between arbitration and judicial determination of a controversy substantially affect the cause of action arising under state law, and make the doctrine of Erie R. Co. v. Tompkins,, applicable. . 3. If, in this case, arbitration could not be compelled in the Vermont state courts, it should not be compelled in the Federal District Court. . 4. In the circumstances of this case, there is no reason to remand the case to the Court of Appeals to pass on the question of local law. P.. 5. On remand of the cause to the District Court, there will be open for consideration the question whether New York arbitration law should be applied to the enforcement of the contract -- a question of conflict of laws governed by Vermont law and on which it is not clear that the District Court ruled. P.. 21 F.2d 948 reversed and remanded.

1955_60

https://www.oyez.org/cases/1955/60

MR. JUSTICE HARLAN delivered the opinion of the Court. Petitioner was charged, in a three-count indictment, with wilfully attempting to evade federal income taxes for 1951, 1952, and 1953 by filing with the Collector "false and fraudulent" tax returns, "in violation of Section 145(b), Title 26, United States Code." That section of the Internal Revenue Code of 1939, 53 Stat. 63, provided: "Any person . . . who willfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years, or both, together with the costs of prosecution." Section 3616(a) of the 1939 Code, 53 Stat. 440, also made it a crime for any person to deliver to the Collector "any false or fraudulent list, return, account, or statement, with intent to defeat or evade the valuation, enumeration, or assessment intended to be made. . . ." The penalty for violation of § 3616(a), however, was a fine of not more than $1,000, or imprisonment not exceeding one year, or both, together with the costs of prosecution. At the close of the trial judge's charge to the jury, petitioner asked that the jury be instructed with respect to each count that a verdict of guilty of the "lesser crime" under § 3616(a) would be permissible. No motions addressed to the validity of the indictment, judgment of conviction, or sentence under § 145(b) were made before, during, or after trial, and we read the requested instruction as aimed at leaving to the jury the question of whether the defendant should be convicted under § 145(b) or § 3616(a) if the jury found him guilty. The instruction was refused, and, after conviction, petitioner was sentenced to four years' imprisonment on each count, the sentences to run concurrently. Thus, petitioner has been sentenced to imprisonment greater than the maximum possible had the conviction been under § 3616(a) alone. The Court of Appeals affirmed, 221 F.2d 590, and we granted certiorari, 350 U.S. 910, limited to the question of whether it was error for the trial judge to refuse to give the requested instruction. The Court of Appeals, in affirming the conviction, held that § 3616(a) did not apply to income tax returns, and that any instruction relating to that section would therefore have been irrelevant under the evidence in this case. Both parties agree, however, that § 3616(a) was applicable to income tax returns, and we shall assume, arguendo, the correctness of that interpretation of the statute. Rule 31(c) of the Federal Rules of Criminal Procedure provides that a defendant may be found guilty of an offense "necessarily included in the offense charged." In a case where some of the elements of the crime charged themselves constitute a lesser crime, the defendant, if the evidence justified it, would no doubt be entitled to an instruction which would permit a finding of guilt of the lesser offense. See Stevenson v. United States,. But this is not such a case. For here, the method of evasion charged was the filing of a false return, and it is apparent that the facts necessary to prove that petitioner "willfully" attempted to evade taxes by filing a false return, § 145(b), were identical with those required to prove that he delivered a false return with "intent" to evade taxes, § 3616(a). In this instance. §§ 145(b) and 3616(a) covered precisely the same ground. Petitioner contends that he was nevertheless entitled to the requested instruction. He argues that, since there was no difference in the proof required to establish violations of §§ 145(b) and 3616(a), the indictment must be taken as charging violations of both sections, and the jury, under Rule 31(c), should have been permitted to make the choice between the two crimes. We do not agree. The role of the jury in a federal criminal case is to decide only the issues of fact, taking the law as given by the court. Sparf v. United States,,. Certainly Rule 31(c) was never intended to change this traditional function of the jury. Here, whether § 145(b) or § 3616(a) be deemed to govern, the factual issues to be submitted to the jury were the same; the instruction requested by petitioner would not have added any other such issue for the jury's determination. When the jury resolved those issues against petitioner, its function was exhausted, since there is here no statutory provision giving to the jury the right to determine the punishment to be imposed after the determination of guilt. Whatever other questions might have been raised as to the validity of petitioner's conviction and sentence, because of the assumed overlapping of §§ 145(b) and 3616(a), were questions of law for the court. No such questions are presented here. The only question before us is whether the jury should have been allowed to decide whether it would apply § 3616(a), rather than § 145(b), and that we hold was not for the jury. It was, therefore, not error to refuse the requested instruction. Affirmed.

Petitioner was indicted for wilfully attempting to evade federal income taxes by filing with the Collector "false and fraudulent" tax returns in violation of 26 U.S.C. (1952 ed.) § 145(b). This, it is here assumed, is also a violation of 26 U.S.C. (1952 ed.) § 3616(a), the penalty for the violation of which is lesser than for a violation of § 145(b). Petitioner was convicted and sentenced to imprisonment greater than the maximum possible had the conviction been under § 3616(a). Held: it was not error for the trial judge to refuse to give to the jury an instruction requested by petitioner that a verdict of guilty of the "lesser crime" under § 3616(a) would be permissible. . (a) It is here assumed, arguendo, that § 3616(a) is applicable to income tax returns. P.. (b) The contention that, since there was no difference in the proof required to establish violations of §§ 145(b) and 3616(a), the indictment must be taken as charging violations of both sections, and that, under Rule 31(c) of the Federal Rules of Criminal Procedure, the jury should have been permitted to make the choice between the two crimes, cannot be sustained. . (c) Rule 31(c) was not intended to change the jury's traditional function of deciding only the issues of fact, and taking the law as given by the court. P.. (d) Whether § 3616(a), rather than § 145(b), should apply was not for the jury to determine. . 221 F.2d 590 affirmed.

1955_92

https://www.oyez.org/cases/1955/92

MR. JUSTICE CLARK delivered the opinion of the Court. In 1949, Mrs. Doris Walker was discharged from her job at Cutter Laboratories, a manufacturer of pharmaceutical and biological products, on the claimed grounds that she was an active member of the Communist Party and had falsified her application for employment there.

A corporation manufacturing pharmaceutical and biological products in California discharged an employee on the grounds that she was an active member of the Communist Party and had falsified her application for employment. Her union sought her reinstatement before an arbitration board pursuant to a valid collective bargaining agreement which authorized discharge for "just cause" only. Finding that she was an active member of the Communist Party and had falsified her application for employment, but that these grounds for discharge had been waived by the employer and that she actually was discharged for union activities, the board ordered her reinstatement. The lower California courts affirmed this order, but the Supreme Court of California reversed. Certiorari was granted by this Court on a petition contending that the decision and opinion violated the Equal Protection and Due Process Clauses of the Fourteenth Amendment. Upon an analysis of the record, however, it appeared that the Supreme Court of California construed the term "just cause" to embrace membership in the Communist Party, and refused to apply a doctrine of waiver. Held: the decision involves only California's construction of a local contract under local law, no substantial federal question is presented, and the writ of certiorari is dismissed. . (a) This Court reviews judgments, not statements in opinions, and it will not pass on federal questions discussed in the opinion of a state court where it appears that the judgment rests on adequate state grounds. . (b) The scope of review of the findings of the arbitration board under the California Arbitration Act is a matter exclusively for the courts of that State. P.. (c) The Supreme Court of California construed the term "just cause" to embrace membership in the Communist Party, and refused to apply a doctrine of waiver. . (d) Such a decision involves only California's construction of a local contract under local law, and no substantial federal question is presented. P.. Writ of certiorari dismissed.

1955_110

https://www.oyez.org/cases/1955/110

MR. JUSTICE BLACK delivered the opinion of the Court. 18 U.S.C. § 401(2) empowers a court of the United States to punish as contempt "Misbehavior of any of its officers in their official transactions. . . ."

A lawyer is not the kind of "officer" who can be tried summarily for contempt under 18 U.S.C. § 401(2), which empowers a court of the United States to punish as contempt "[m]isbehavior of any of its officers in their official transactions." . (a) This section derives from the Contempt Act of March 2, 1831, 4 Stat. 487, and should be narrowly construed, because its legislative history shows that Congress intended drastically to limit the contempt power of federal courts, and because the exercise of any broader contempt power would permit too great inroads on the procedural safeguards of the Bill of Rights. . (b) The term "officers," as used in 18 U.S.C. § 401(2), should not be expanded beyond the group of persons -- such as marshals, bailiffs, court clerks, and judges -- who serve as conventional court officers and are regularly treated as such in the laws. P.. (c) The legislative history of the 1831 Act is completely inconsistent with a purpose to treat lawyers as "officers of the court" subject to summary punishment. . ___ U.S.App.D.C. ___, 223 F.2d 322, reversed.

1955_76

https://www.oyez.org/cases/1955/76

MR. JUSTICE BURTON delivered the opinion of the Court. This is a multiple claims action in which the District Court entered a judgment disposing of but one claim. Pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, as amended in 1946, that court expressly determined that there was no just reason for delay, and expressly directed the entry of judgment. Thereupon, an appeal was taken to the Court of Appeals, and the issue before us is whether the latter court has jurisdiction to entertain that appeal under 28 U.S.C. § 1291, although an unadjudicated counterclaim awaits disposition in the District Court. The issue is comparable to that decided in Sears, Roebuck & Co. v. Mackey, ante, p., except that here, the unadjudicated claim is a counterclaim arising in part out of the same transactions and occurrences as the adjudicated claim. By applying the reasoning used in the Sears case, we reach a like conclusion here, and uphold the jurisdiction of the Court of Appeals. While the counterclaim arises in part out of the same transactions as does the adjudicated claim, it was filed long after the principal proceeding was begun, and is in the nature of an action ancillary to the principal proceeding, and bears a separate case number. Upon request of both parties, the District Court has removed the counterclaim from the trial calendar, without prejudice to either party, leaving it subject to reinstatement for trial at any time by order of the court upon its own initiative, or upon request of either party after reasonable notice. A brief review of the entire proceedings and a disclosure of its subject matter throws light on the relationship between the adjudicated claim and the counterclaim. In 1927, petitioner, The Cold Metal Process Company, an Ohio corporation, and United Engineering & Foundry Company, a Pennsylvania corporation, entered into a contract for the purpose of securing a patent in the name of Cold Metal relating to a certain type of steel rolling mill and of granting to United an exclusive license to make, use, and sell mills under such patent. To that end, the parties contributed claims under their respective patent applications, and it was agreed that the license should be granted when the patent was issued. The parties also agreed to try, by negotiation, to determine the amount of the payment by United for the license. If the parties could not agree on that point, the subject was to be submitted to arbitration in a manner specified in the contract. In 1930, the patent was issued, but Cold Metal refused to treat the 1927 contract as conferring an exclusive license on United. Cold Metal maintained that United was not a licensee until the amount due Cold Metal had been determined and paid. United, on the other hand, treated the contract as an enforceable exclusive license under which the license fee was to be determined later. After litigation not now material, Cold Metal, in 1934, instituted the present proceeding, Equity No. 2991, against United in the United States District Court for the Western District of Pennsylvania. Cold Metal asked (1) for an injunction restraining United from prosecuting certain suits, pending in Ohio and elsewhere, founded upon United's claim of exclusive rights under the patent, and (2) for determination of the amount to be paid by United under the 1927 contract. The court declined to issue a preliminary injunction, 9 F. Supp. 994, but Cold Metal appealed from such denial and, in 1935, obtained a reversal directing the injunction to be issued, 79 F.2d 666. In 1939, Cold Metal, in line with the foregoing results, filed a supplemental complaint asking that the 1927 contract be "cancelled, revoked and annulled," and that United be enjoined from further operations under the patent. However, in 1938, the District Court, after trial, held the contract valid and enforceable, and directed an accounting before a master. 83 F. Supp. 914. Cold Metal appealed, but, in 1939, the Court of Appeals reversed its 1935 decision and largely sustained United's position. It ordered that the injunction against United's infringement suits be dissolved, and held that the 1927 contract created a valid and enforceable exclusive license in favor of United. It also stated that the master could determine, from an "understanding" between the parties as shown by the record, the amount due from United under the 1927 contract. 107 F.2d 27. In 1941, United asked leave to file an amended answer and counterclaim, complaining that Cold Metal's recent acts were inconsistent with the 1939 judgment of the Court of Appeals. In 1942, the District Court denied that motion on the ground that it could carry out only the existing mandate of the Court of Appeals. 43 F. Supp. 375. It suggested, however, that the injunction sought by United in its counterclaim should be the subject matter of another action, and that United could assert, before the master, Cold Metal's breaches of the 1927 contract. In 1943, the District Court modified its 1938 decree to make it conform to the Court of Appeals' order of 1939. It also appointed a master to determine not only the amount due Cold Metal from United for its past operations, but the payments to be made on licensed mills in the future. In 1949, United refiled its claims as an "Ancillary Cross Complaint" in Civil Action No. 7744. United sought, inter alia, (1) to enjoin the prosecution of infringement suits by Cold Metal against parties using mills under licenses granted by United, (2) to require Cold Metal to account for any funds it had collected for the use of such mills within the field of United's exclusive license, and (3) to set off those funds from any payment or royalty that might be due from United to Cold Metal under the 1927 contract. In 1950, the District Court dismissed the cross-complaint on the ground that it was not ancillary to Equity No. 2991. 92 F. Supp. 596. However, in 1951, the Court of Appeals reversed the District Court. It held that United's cross complaint was, in reality, a counterclaim, ancillary to Equity No. 2991, and therefore within the jurisdiction of the District Court. 190 F.2d 217. The Court of Appeals reviewed the previous course of the proceedings and pointed out that the claims now made by United in this counterclaim are entirely dependent upon the 1939 decision of that court, 107 F.2d 27, which upheld the validity of United's exclusive license. Into this situation, in 1954, came the master's report on the accounting in Equity No. 2991. It listed the licensed mills, fixed the compensation payable under the 1927 contract, and found that United's license had existed from 1930 to 1947, and that United's customers were duly licensed to use the patented mills. It also held that certain United mills were exempt from royalty, that Cold Metal had failed to respect the license or to perform all of its obligations under the 1927 contract, but that United owed Cold Metal a substantial sum under it. In 1955, the District Court approved the master's report in all respects and entered judgment against United for $387,650, with interest at 6% from the date of filing of the report. Both parties appealed. Cold Metal at once moved to dismiss United's appeal on the ground that the District Court had not made the certification required by Rule 54(b). With permission of the Court of Appeals, the District Court then amended its judgment to add such certification. Again, both parties appealed. Again, Cold Metal moved to dismiss United's appeal from the amended judgment because the Court of Appeals lacked jurisdiction to entertain it. This time, the motion was denied with a per curiam opinion in which the Court of Appeals said, "We think the determination made under the circumstances of this case is the very kind of thing Rule 54(b) was written to provide for. We see no violation of discretion on the part of the district judge in entering it." 221 F.2d 115. Accordingly, on October 3, 1955, in the Court of Appeals, the parties argued their respective appeals on their merits in Equity No. 2991. However, before any decision was rendered on the merits, we granted certiorari upon Cold Metal's petition questioning the jurisdiction of the Court of Appeals to entertain the appeal. 350 U.S. 819. We agree with the Court of Appeals that this is the very kind of case for which amended Rule 54(b) was designed. The appealability of the adjudicated claim is upheld so that the merits of the existing judgment may be determined at this stage of the proceedings. Prior to the promulgation of the Federal Rules of Civil Procedure in 1939, it may well have been true that the Court of Appeals would not at this stage have had jurisdiction over United's appeal. Under the single judicial unit theory of finality which was then recognized, the Court of Appeals would have been without jurisdiction until United's counterclaim also had been decided by the District Court. That would have been so even if the counterclaim did not arise out of the same transaction and occurrence as Cold Metal's claim. However, as stated in Sears, Roebuck & Co. v. Mackey, ante, p., Rule 54(b), in its original form, modified the judicial unit theory in respect to multiple claims actions. Accordingly, under that rule, it is likely that, if United's counterclaim qualified as "permissive," rather than as "compulsory," the Court of Appeals would have had jurisdiction to entertain the appeal now before us. This conclusion follows from the fact that the test of appealability under the original rule was whether the adjudicated claims were separate from, and independent of, the unadjudicated claims. See Reeves v. Beardall,. However, as set forth in Sears, Roebuck & Co. v. Mackey, ante, that test led to uncertainty, of which the present case might have been an example. The amended rule overcomes that difficulty, and, under its terms, we need not decide whether United's counterclaim is compulsory or permissive. The amended rule, in contrast to the rule in its original form, treats counterclaims, whether compulsory or permissive, like other multiple claims. It provides that "When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, the [district] court may direct the entry of a final judgment upon one or more but less than all of the claims. . . ." (Emphasis supplied.) Counterclaims and cross-claims are thus equated with the others. See Bendix Aviation Corp. v. Glass, 195 F.2d 267. Therefore, under the amended rule, the relationship of the adjudicated claims to the unadjudicated claims is one of the factors which the District Court can consider in the exercise of its discretion. If the District Court certifies a final order on a claim which arises out of the same transaction and occurrence as pending claims, and the Court of Appeals is satisfied that there has been no abuse of discretion, the order is appealable. The reasoning and the result in Sears, Roebuck & Co. v. Mackey, ante, is dispositive of this case. The order appealed from finally adjudicates Cold Metal's claim for relief, and the Court of Appeals has held that the trial court did not abuse its discretion in certifying the absence of just reasons for delay. That this order is appealable at a time when it would not have been appealable prior to the Federal Rules of Civil Procedure, or under Rule 54(b) in its original form, does not mean that Rule 54(b), as amended, is invalid. It applies only to a final decision of one or more claims for relief. The amended rule meets the needs and problems of modern judicial administration by adjusting the unit for appeal to fit multiple claims actions, while retaining a right of judicial review over the discretion exercised by the District Court in determining when there is no just reason for delay. This does not impair the statutory concept of finality embraced in § 1291, and, as held in Sears, Roebuck & Co. v. Mackey, ante, is within the rulemaking power of this Court. Affirmed.

In a multiple claims action, the Federal District Court, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, as amended in 1946, expressly determined that there was no just reason for delay and expressly directed entry of judgment on one of the claims. The unadjudicated claim was a counterclaim arising in part out of the same transactions and occurrences as the adjudicated claim. Held: the Court of Appeals had jurisdiction under 28 U.S.C. § 1291 to entertain an appeal from the judgment. . (a) Rule 54(b), as amended, treats counterclaims, whether "compulsory" or "permissive," like other multiple claims. P.. (b) Under amended Rule 54(b), the relationship of the adjudicated claims to the unadjudicated claims is one of the factors which the District Court can consider in the exercise of its discretion. P.. (c) That the order in this case is appealable at a time when it would no have been appealable prior to the Federal Rules of Civil Procedure, or under Rule 54(b) in its original form, does not mean that Rule 54(b), as amended, is invalid. . (d) Amended Rule 54(b) meets the needs and problems of modern judicial administration by adjusting the unit for appeal to fit multiple claims actions, while retaining a right of judicial review over the discretion exercised by the District Court in determining when there is no just reason for delay. P.. (e) Rule 54(b), as amended, does not impair the statutory concept of finality embraced in 28 U.S.C. § 1291, and it is within the rulemaking power of this Court. P.. 221 F.2d 115 affirmed.

1955_442

https://www.oyez.org/cases/1955/442

Opinion of the Court by MR. JUSTICE HARLAN, announced by MR. JUSTICE BURTON. This case presents the question of the meaning of the term "national security" as used in the Act of August 26, 1950, giving to the heads of certain departments and agencies of the Government summary suspension and unreviewable dismissal powers over their civilian employees, when deemed necessary "in the interest of the national security of the United States." Petitioner, a preference-eligible veteran under § 2 of the Veterans' Preference Act of 1944, 58 Stat. 387, as amended, 5 U.S.C. § 851, held a position in the classified civil service as a food and drug inspector for the New York District of the Food and Drug Administration, Department of Health, Education, and Welfare. In November, 1953, he was suspended without pay from his position pending investigation to determine whether his employment should be terminated. He was given a written statement of charges alleging that he had "a close association with individuals reliably reported to be Communists" and that he had maintained a "sympathetic association" with, had contributed funds and services to, and had attended social gatherings of an allegedly subversive organization. Although afforded an opportunity to do so, petitioner declined to answer the charges or to request a hearing, as he had the right to do. Thereafter, the Secretary of the Department of Health, Education, and Welfare, after "a study of all the documents in [petitioner's] case," determined that petitioner's continued employment was not "clearly consistent with the interests of national security," and ordered the termination of his employment. Petitioner appealed his discharge to the Civil Service Commission, which declined to accept the appeal on the ground that the Veterans' Preference Act, under which petitioner claimed the right of appeal, was inapplicable to such discharges. Petitioner thereafter brought an action in the District Court for the District of Columbia seeking a declaratory judgment that his discharge was invalid and that the Civil Service Commission had improperly refused to entertain his appeal, and an order requiring his reinstatement in his former position. The District Court granted the respondents' motion for judgment on the pleadings and dismissed the complaint. 125 F. Supp. 284. The Court of Appeals, with one judge dissenting, affirmed. 96 U.S.App.D.C. 379, 226 F.2d 337. Because of the importance of the questions involved in the field of Government employment, we granted certiorari. 350 U.S. 900. Section 14 of the Veterans' Preference Act, 58 Stat. 390, as amended, 5 U.S.C. § 863, provides that preference eligibles may be discharged only "for such cause as will promote the efficiency of the service" and, among other procedural rights, "shall have the right to appeal to the Civil Service Commission," whose decision is made binding on the employing agency. Respondents concede that petitioner's discharge was invalid if that Act is controlling. They contend, however, as was held by the courts below, that petitioner's discharge was authorized by the Act of August 26, 1950, supra, which eliminates the right of appeal to the Civil Service Commission. Thus the sole question for decision is whether petitioner's discharge was authorized by the 1950 Act. The 1950 Act provides in material part that, notwithstanding any other personnel laws, the head of any agency to which the Act applies "may, in his absolute discretion and when deemed necessary in the interest of national security, suspend, without pay, any civilian officer or employee of [his agency]. . . . The agency head concerned may, following such investigation and review as he deems necessary, terminate the employment of such suspended civilian officer or employee whenever he shall determine such termination necessary or advisable in the interest of the national security of the United States, and such determination by the agency head concerned shall be conclusive and final. . . ." The Act was expressly made applicable only to the Departments of State, Commerce, Justice, Defense, Army, Navy, and Air Force, the Coast Guard, the Atomic Energy Commission, the National Security Resources Board, and the National Advisory Committee for Aeronautics. Section 3 of the Act provides, however, that the Act may be extended "to such other departments and agencies of the Government as the President may, from time to time, deem necessary in the best interests of national security," and the President has extended the Act under this authority "to all other departments and agencies of the Government." While the validity of this extension of the Act depends upon questions which are in many respects common to those determining the validity of the Secretary's exercise of the authority thereby extended to her, we will restrict our consideration to the latter issue and assume, for purposes of this decision, that the Act has validly been extended to apply to the Department of Health, Education, and Welfare. The Act authorizes dismissals only upon a determination by the Secretary that the dismissal is "necessary or advisable in the interest of the national security." That determination requires an evaluation of the risk of injury to the "national security" that the employee's retention would create, which, in turn, would seem necessarily to be a function not only of the character of the employee and the likelihood of his misconducting himself, but also of the nature of the position he occupies and its relationship to the "national security." That is, it must be determined whether the position is one in which the employee's misconduct would affect the "national security." That, of course, would not be necessary if "national security" were used in the Act in a sense so broad as to be involved in all activities of the Government, for then the relationship to the "national security" would follow from the very fact of employment. For the reasons set forth below, however, we conclude (1) that the term "national security" is used in the Act in a definite and limited sense, and relates only to those activities which are directly concerned with the Nation's safety, as distinguished from the general welfare; and (2) that no determination has been made that petitioner's position was affected with the "national security," as that term is used in the Act. It follows that his dismissal was not authorized by the 1950 Act, and hence violated the Veterans' Preference Act. I In interpreting the 1950 Act, it is important to note that that Act is not the only, nor even the primary, source of authority to dismiss Government employees. The general personnel laws -- the Lloyd-LaFollette and Veterans' Preference Acts -- authorize dismissals for "such cause as will promote the efficiency of the service," and the ground which we conclude was the basis for petitioner's discharge here -- a reasonable doubt as to his loyalty -- was recognized as a "cause" for dismissal under those procedures as early as 1942. Indeed, the President's so-called Loyalty Program, Exec.Order No. 9835, 12 Fed.Reg.1935, which prescribed an absolute standard of loyalty to be met by all employees regardless of position, had been established pursuant to that general authority three years prior to the 1950 Act, and remained in effect for nearly three years after its passage. Thus, there was no want of substantive authority to dismiss employees on loyalty grounds, and the question for decision here is not whether an employee can be dismissed on such grounds, but only the extent to which the summary procedures authorized by the 1950 Act are available in such a case. As noted above, the issue turns on the meaning of "national security," as used in the Act. While that term is not defined in the Act, we think it clear from the statute as a whole that that term was intended to comprehend only those activities of the Government that are directly concerned with the protection of the Nation from internal subversion or foreign aggression, and not those which contribute to the strength of the Nation only through their impact on the general welfare. Virtually conclusive of this narrow meaning of "national security" is the fact that, had Congress intended the term in a sense broad enough to include all activities of the Government, it would have granted the power to terminate employment "in the interest of the national security" to all agencies of the Government. Instead, Congress specified 11 named agencies to which the Act should apply, the character of which reveals, without doubt, a purpose to single out those agencies which are directly concerned with the national defense and which have custody over information the compromise of which might endanger the country's security, the so-called "sensitive" agencies. Thus, of the 11 named agencies, 8 are concerned with military operations or weapons development, and the other 3, with international relations, internal security, and the stockpiling of strategic materials. Nor is this conclusion vitiated by the grant of authority to the President, in § 3 of the Act, to extend the Act to such other agencies as he "may, from time to time, deem necessary in the best interests of national security." Rather, the character of the named agencies indicates the character of the determination required to be made to effect such an extension. Aware of the difficulties of attempting an exclusive enumeration and of the undesirability of a rigid classification in the face of changing circumstances, Congress simply enumerated those agencies which it determined to be affected with the "national security" and authorized the President, by making a similar determination, to add any other agencies which were, or became, "sensitive." That it was contemplated that this power would be exercised "from time to time" confirms the purpose to allow for changing circumstances and to require a selective judgment, necessarily implying that the standard to be applied is a less than all-inclusive one. The limitation of the Act to the enumerated agencies is particularly significant in the light of the fact that Exec.Order No. 9835, establishing the Loyalty Program, was in full effect at the time of the consideration and passage of the Act. In that Order, the President had expressed his view that it was of "vital importance" that all employees of the Government be of "complete and unswerving loyalty" and had prescribed a minimum loyalty standard to be applied to all employees under the normal civil service procedures. Had Congress considered the objective of insuring the "unswerving loyalty" of all employees, regardless of position, as a matter of "national security" to be effectuated by the summary procedures authorized by the Act, rather than simply a desirable personnel policy to be implemented under the normal civil service procedures, it surely would not have limited the Act to selected agencies. Presumably, therefore, Congress meant something more by the "interest of the national security" than the general interest the Nation has in the loyalty of even "nonsensitive" employees. We can find no justification for rejecting this implication of the limited purpose of the Act or for inferring the unlimited power contended for by the Government. Where applicable, the Act authorizes the agency head summarily to suspend an employee pending investigation and, after charges and a hearing, finally to terminate his employment, such termination not being subject to appeal. There is an obvious justification for the summary suspension power where the employee occupies a "sensitive" position in which he could cause serious damage to the national security during the delay incident to an investigation and the preparation of charges. Likewise, there is a reasonable basis for the view that an agency head who must bear the responsibility for the protection of classified information committed to his custody should have the final say in deciding whether to repose his trust in an employee who has access to such information. On the other hand, it is difficult to justify summary suspensions and unreviewable dismissals on loyalty grounds of employees who are not in "sensitive" positions, and who are thus not situated where they could bring about any discernible adverse effects on the Nation's security. In the absence of an immediate threat of harm to the "national security," the normal dismissal procedures seem fully adequate, and the justification for summary powers disappears. Indeed, in view of the stigma attached to persons dismissed on loyalty grounds, the need for procedural safeguards seems even greater than in other cases, and we will not lightly assume that Congress intended to take away those safeguards in the absence of some overriding necessity, such as exists in the case of employees handling defense secrets. The 1950 Act itself reflects Congress' concern for the procedural rights of employees and its desire to limit the unreviewable dismissal power to the minimum scope necessary to the purpose of protecting activities affected with the "national security." A proviso to § 1 of the Act provides that a dismissal by one agency under the power granted by the Act "shall not affect the right of such officer or employee to seek or accept employment in any other department or agency of the Government" if the Civil Service Commission determines that the employee is eligible for such other employment. That is, the unreviewable dismissal power was to be used only for the limited purpose of removing the employee from the position in which his presence had been determined to endanger the "national security"; it could affect his right to employment in other agencies only if the Civil Service Commission, after review, refused to clear him for such employment. This effort to preserve the employee's procedural rights to the maximum extent possible hardly seems consistent with an intent to define the scope of the dismissal power in terms of the indefinite and virtually unlimited meaning for which the respondents contend. Moreover, if Congress intended the term to have such a broad meaning that all positions in the Government could be said to be affected with the "national security," the result would be that the 1950 Act, though in form but an exception to the general personnel laws, could be utilized effectively to supersede those laws. For why could it not be said that national security in that sense requires not merely loyal and trustworthy employees, but also those that are industrious and efficient? The relationship of the job to the national security being the same, its demonstrated inadequate performance because of inefficiency or incompetence would seem to present a surer threat to national security, in the sense of the general welfare, than a mere doubt as to the employee's loyalty. Finally, the conclusion we draw from the face of the Act that "national security" was used in a limited and definite sense is amply supported by the legislative history of the Act. In the first place, it was constantly emphasized that the bill, first introduced as S. 1561 in the 80th Congress and passed as H.R. 7439 in the 81st Congress, was intended to be applied, or be extended, only to "sensitive" agencies, a term used to imply a close and immediate concern with the defense of the Nation. Thus, the Senate Committee on Armed Services, in reporting out S.1561, stated: "This bill provides authority to terminate employment of indiscreet or disloyal employees who are employed in areas of the Government which are sensitive from the standpoint of national security." "* * * *" "[Section 3 will permit] the President to determine additional sensitive areas and include such areas in the scope of the authorities contained in this bill." "* * * *" "Insofar as the [addition of § 3] is concerned, it was recognized by all witnesses that there were other sensitive areas within the various departments of the Government which are now, or might in the future become, deeply involved in national security. . . . In view . . . of the fact that there are now and will be in the future other sensitive areas of equal importance to the national security, it is believed that the President should have authority to make a finding concerning such areas and, by Executive action, place those areas under the authorities contained in this act. " The House Committee on Post Office and Civil Service reported that "The provisions of the bill extend only to departments and agencies which are concerned with vital matters affecting the national security of our Nation. " The committee reports on H.R. 7439 in the next Congress similarly referred to the bill as granting the dismissal power only to the heads of the "sensitive" agencies. While these references relate primarily to the agencies to be covered by the Act, rather than to the exercise of the power within an agency, the standard for both is the same -- in the "interests of the national security" -- and the statements thus clearly indicate the restricted sense in which "national security" was used. In short, "national security" is affected only by "sensitive" activities. Secondly, the history makes clear that the Act was intended to authorize the suspension and dismissal only of persons in sensitive positions. Throughout the hearings, committee reports, and debates, the bill was described as being designed to provide for the dismissal of "security risks." In turn, the examples given of what might be a "security risk" always entailed employees having access to classified materials; they were security risks because of the risk they posed of intentional or inadvertent disclosure of confidential information. Mr. Larkin, a representative of the Department of Defense, which Department had requested and drafted the bill, made this consideration more explicit: "They are security risks because of their access to confidential and classified material. . . . But if they do not have classified material, why, there is no notion that they are security risks to the United States. They are security risks to the extent of having access to classified material. " "A person is accused of being disloyal, but is cleared by the loyalty board, because there is not enough evidence against him. If that person is not in a sensitive job, it is not of any further concern to us. We are willing to take the view that, while we might have misgivings about his loyalty, he cannot prejudice our security because he does not have access to any of the classified or top secret material. " It is clear, therefore, both from the face of the Act and the legislative history, that "national security" was not used in the Act in an all-inclusive sense, but was intended to refer only to the protection of "sensitive" activities. It follows that an employee can be dismissed "in the interest of the national security" under the Act only if he occupies a "sensitive" position, and thus that a condition precedent to the exercise of the dismissal authority is a determination by the agency head that the position occupied is one affected with the "national security." We now turn to an examination of the Secretary's action to show that no such determination was made as to the position occupied by petitioner. II The Secretary's action in dismissing the petitioner was expressly taken pursuant to Exec. Order No. 10450, 18 Fed.Reg. 2489, promulgated in April, 1953, to provide uniform standards and procedures for the exercise by agency heads of the suspension and dismissal powers under the 1950 Act. That Order prescribes as the standard for dismissal, and the dismissal notice given to petitioner contained, a determination by the Secretary that the employee's retention in employment "is not clearly consistent with the interests of national security." Despite this verbal formula, however, it is our view that the Executive Order does not, in fact, require the agency head to make any determination whatever on the relationship of the employee's retention to the "national security" if the charges against him are within the categories of the charges against petitioner -- that is, charges which reflect on the employee's loyalty. Rather, as we read the Order, it enjoins upon the agency heads the duty of discharging any employee of doubtful loyalty irrespective of the character of his job and its relationship to the "national security." That is, the Executive Order deems an adverse determination as to loyalty to satisfy the requirements of the statute, without more. The opening preamble to the Order recites, among other things, that "the interests of the national security require" that "all" Government employees be persons "of complete and unswerving loyalty." It would seem to follow that an employee's retention cannot be "clearly consistent" with the "interests of the national security" as thus defined unless he is "clearly" loyal -- that is unless there is no doubt as to his loyalty. And § 8(a) indicates that that is, in fact, what was intended by the Order. That section provides that the investigation of an employee pursuant to the Order shall be designed to develop information "as to whether . . . [his employment] is clearly consistent with the interests of the national security," and prescribes certain categories of facts to which "such" information shall relate. The first category, § 8(a)(1), includes nonloyalty-oriented facts which, in general, might reflect upon the employee's reliability, trustworthiness, or susceptibility to coercion, such as dishonesty, drunkenness, sexual perversion, mental defects, or other reasons to believe that he is subject to influence or coercion. Section 8(a)(1) expressly provides, however, that such facts are relevant only "depending on the relation of the Government employment to the national security." The remaining categories include facts which, in general, reflect upon the employee's "loyalty," such as acts of espionage, advocacy of violent overthrow of the Government, sympathetic association with persons who so advocate, or sympathetic association with subversive organizations. § 8(a)(2)-(8). Significantly, there is wholly absent from these categories -- under which the charges against petitioner were expressly framed -- any qualification making their relevance dependent upon the relationship of the employee's position to the national security. The inference we draw is that, in such cases, the relationship to the national security is irrelevant, and that an adverse "loyalty" determination is sufficient ex proprio vigore to require discharge. Arguably, this inference can be avoided on the ground that § 8(a) relates only to the scope of information to be developed in the investigation, and not to the evaluation of it by the agency head. That is, while loyalty information is to be developed in all cases regardless of the nature of the employment, that does not mean that the agency head should not consider the nature of the employment in determining whether the derogatory information is sufficient to make the employee's continued employment not "clearly consistent" with the "national security." No doubt that is true to the extent that the greater the sensitivity of the position the smaller may be the doubts that would justify termination; the Order undoubtedly leaves it open to an agency head to apply a stricter standard in some cases than in others, depending on the nature of the employment. On the other hand, by making loyalty information relevant in all cases, regardless of the nature of the job, § 8(a) seems strongly to imply that there is a minimum standard of loyalty that must be met by all employees. It would follow that the agency head may terminate employment in cases where that minimum standard is not met without making any independent determination of the potential impact of the person's employment on the national security. Other provisions of the Order confirm the inferences that may be drawn from § 8(a). Thus, § 3(b) directs each agency head to designate as "sensitive" those positions in this agency "the occupant of which could bring about, by virtue of the nature of the position, a material adverse effect on the national security." By definition, therefore, some employees are admittedly not in a position to bring about such an effect. Nevertheless, the Order makes this distinction relevant only for purposes of determining the scope of the investigation to the conducted, not for purposes of limiting the dismissal power to such "sensitive" positions. Section 3(a) is more explicit. That provides that the appointment of all employees shall be made subject to an investigation the scope of which shall depend upon the degree of adverse effect on the national security the occupant of the position could bring about, but which "in no event" is to be less than a prescribed minimum. But the sole purpose of such an investigation is to provide a basis for a "clearly consistent" determination. Thus, the requirement of a minimum investigation of all persons appointed implies that an adverse "clearly consistent" determination may be made as to any such employee, regardless of the potential adverse effect he could cause to the national security. Finally, the second "Whereas" clause of the preamble recites as a justification for the Order that "all persons . . . privileged to be employed . . . [by the Government should] be adjudged by mutually consistent and no less than minimum standards," thus implying that the Order prescribes minimum standards that all employees must meet irrespective of the character of the positions held, one of which is the "complete and unswerving loyalty" standard recited in the first "Whereas" clause of the preamble. Confirmation of this reading of the Order is found in its history. Exec. Order No. 9835, supra, as amended by Exec.Order No. 10241, 16 Fed.Reg. 3690, had established the Loyalty Program under which all employees, regardless of their positions, were made subject to discharge if there was a "reasonable doubt" as to their loyalty. That Order was expressly revoked by § 12 of the present Executive Order. There is no indication, however, that it was intended thereby to limit the scope of the persons subject to a loyalty standard. And any such implication is negatived by the remarkable similarity in the preambles to the two Orders and in the kinds of information considered to be relevant to the ultimate determinations. In short, all employees, were still to be subject to at least a minimum loyalty standard, though under new procedures which do not afford a right to appeal to the Civil Service Commission. We therefore interpret the Executive Order as meaning that, when "loyalty" charges are involved, an employee may be dismissed regardless of the character of his position in the Government service, and that the agency head need make no evaluation as to the effect which continuance of his employment might have upon the "national security." We recognize that this interpretation of the Order rests upon a chain of inferences drawn from less than explicit provisions. But the Order was promulgated to guide the agency heads in the exercise of the dismissal power, and its failure to state explicitly what determinations are required leaves no choice to the agency heads but to follow the most reasonable inferences to be drawn. Moreover, whatever the practical reasons that may have dictated the awkward form of the Order, its failure to state explicitly what was meant is the fault of the Government. Any ambiguities should therefore be resolved against the Government, and we will not burden the employee with the assumption that an agency head, in stating no more than the formal conclusion that retention of the employee is not "clearly consistent with the interests of national security," has made any subsidiary determinations not clearly required by the Executive Order. From the Secretary's determination that petitioner's employment was not "clearly consistent with the interests of national security," therefore, it may be assumed only that the Secretary found the charges to be true and that they created a reasonable doubt as to petitioner's loyalty. No other subsidiary finding may be inferred, however, for, under the Executive Order as we have interpreted it, no other finding was required to support the Secretary's action. From our holdings (1) that not all positions in the Government are affected with the "national security" as that term is used in the 1950 Act, and (2) that no determination has been made that petitioner's position was one in which he could adversely affect the "national security," it necessarily follows that petitioner's discharge was not authorized by the 1950 Act. In reaching this conclusion, we are not confronted with the problem of reviewing the Secretary's exercise of discretion, since the basis for our decision is simply that the standard prescribed by the Executive Order and applied by the Secretary is not in conformity with the Act. Since petitioner's discharge was not authorized by the 1950 Act, and hence violated the Veterans' Preference Act, the judgment of the Court of Appeals is reversed, and the case is remanded to the District Court for further proceedings not inconsistent with this opinion. Reversed and remanded.

The Act of August 26, 1950, gave to the heads of certain departments and agencies of the Government summary suspension and unreviewable dismissal powers over their civilian employees, when deemed necessary "in the interest of the national security," and its provisions were extended to "all other departments and agencies of the Government" by Executive Order No. 10450. Petitioner, a preference-eligible veteran under the Veterans' Preference Act, was summarily suspended from his classified civil service position as a food and drug inspector for the Department of Health, Education, and Welfare on charges of close association with alleged Communists and an allegedly subversive organization. Later, he was dismissed on the ground that his continued employment was not "clearly consistent with the interests of national security." His appeal to the Civil Service Commission under the Veterans' Preference Act was denied on the ground that that Act was inapplicable to such discharges. Held: his discharge was not authorized by the 1950 Act, and hence it violated the Veterans' Preference Act. . 1. The 1950 Act authorizes a dismissal only upon a determination that it is "necessary or advisable in the interest of the national security." Such a determination requires an evaluation of the risk to the "national security" that the employee's retention would create, which depends not only upon the character of the employee and the likelihood of his misconducting himself, but also upon the nature of the position he occupies and its relationship to the "national security." P.. 2. The 1950 Act is not the only, nor even the primary, source of authority to dismiss government employees, and the question in this case is not whether an employee can be dismissed on such grounds, but only the extent to which the summary procedures authorized by the 1950 Act are available in such a case. . 3. This depends on the meaning of the term "national security," as used in the 1950 Act. . 4. The term "national security" is not defined in that Act, but it is clear from the statute as a whole that it was intended to comprehend only those activities of the Government that are directly concerned with the protection of the Nation from internal subversion or foreign aggression, and not those which contribute to the strength of the Nation only through their impact on the general welfare. . 5. This conclusion is supported by the legislative history of the Act. . 6. A condition precedent to the exercise of the dismissal authority conferred by the 1950 Act is a determination by the agency head that the position occupied is one affected with the "national security," as that term is used in the Act. P.. 7. No determination was made that petitioner's position was one in which he could adversely affect the "national security," as that term is used in the Act. . (a) Executive Order No. 10450 treats an adverse determination as to the loyalty of an employee as satisfying the statute, irrespective of the character of his job or the effect his continued employment might have upon the "national security." . (b) The failure of the Executive Order to state explicitly what was meant is the fault of the Government, and any ambiguities should be resolved against the Government. P.. (c) From the Secretary's determination that petitioner's employment was not "clearly consistent with the interests of national security," in the light of the Executive Order, it may be assumed only that the Secretary found the charges to be true, and that they created reasonable doubt as to petitioner's loyalty. . 96 U.S.App.D.C. 379, 226 F.2d 337, reversed and remanded.

1955_523

https://www.oyez.org/cases/1955/523

MR. JUSTICE FRANKFURTER delivered the opinion of the Court. Adolphus Henry Collins was killed in an accident near Ehrenburg, Arizona, on September 30, 1953. The accident resulted from the blowout of a tire on an American Buslines' vehicle which Collins was driving on a regular run from Phoenix to Los Angeles. Collins had been employed as a bus driver for American since 1944. He had done his driving on various routes in the Southwest, and, from 1952 until the time of his death, he was regularly employed on the Los Angeles to Phoenix and return route. He and his wife and minor child -- the petitioners in this proceeding -- made their home in Los Angeles, California, in which State Collins was covered by workmen's compensation. Petitioners applied on October 14, 1953, to the Industrial Commission of Arizona for compensation in accordance with the terms of the Arizona Workmen's Compensation Act. In an award dated November 30, 1953, that agency made, inter alia, the following findings: "That the defendant employer maintained workmen's compensation coverage in the State of California, and that payroll premium on the said Adolphus Henry Collins was reported to the State of California. That no reporting of such was made at any time to the Industrial Commission of Arizona." "That the said Adolphus Henry Collins, at the time of his death, was not regularly employed in the State of Arizona as said term has been defined by the Supreme Court of Arizona in the case of Industrial Commission v. Watson Brothers Transportation Company [75 Ariz. 357, 256 P.2d 730]. *" "That the Industrial Commission of Arizona does not have jurisdiction in the premises, and that said . . . claim on file herein should be denied for lack of jurisdiction." On certiorari to the Supreme Court of Arizona, the construction of the Arizona statute on which the Commission based its award was rejected, but its disposition of petitioners' claim was affirmed. After concluding that American Buslines "operated exclusively in interstate commerce," the court held that the Commerce Clause of the United States Constitution precluded recovery under the Arizona Workmen's Compensation Act because Collins was covered by the California statute, and to require his interstate employer to insure also in Arizona would place an undue burden on interstate commerce. 79 Ariz. 220, 286, P.2d 214. We granted certiorari because of the important federal question thus presented. 350 U.S. 931. The only respondent here is the Arizona Industrial Commission. It is not at all clear from the record before us what the interest of the state agency is in this litigation. If the employer were actively before the Court, it could claim, we assume, that an award in the circumstances of the present case burdens the interstate commerce in that the consequences of such an award would to be require it in the future to obtain insurance sufficiently comprehensive to cover potential awards in the various States through which it passes. The apparent interest of the Commission is different, namely, that, as a result of an award in this case, interstate carriers will seek insurance from a single private insurance carrier capable of giving coverage in all States through which they run. The desire by interstate carriers for such insurance will cause a defection from the state compensation fund, and it is this potential defection which leads to the Commission's claim that the Arizona Act cannot be applicable in an interstate situation. But this asserted burden upon interstate commerce -- the disadvantageous effect upon the state compensation fund -- is too intangible and elusive to be deemed a constitutionally disallowable burden. We have been advised, however, that American Buslines has been a nonparticipating defendant throughout this litigation; that it is in receivership in Nebraska; that an order has been issued by the Nebraska court barring claims against it except in that court; and that petitioners' claim is against the state compensation fund, administered by the Industrial Commission, which will in a separate proceeding be put to such recourse as it may have against American Buslines. This is not controverted. The Commission therefore appears to have an immediate interest of the same character and extent that American Buslines would have were it here. Thus, the Commission can invoke the employer's claim under the Commerce Clause. But that claim -- of an increased insurance burden imposed as a practical matter upon an interstate carrier -- while perhaps less tenuous than the defection argument directly pertinent to the Commission's case, is hardly more substantial. Whatever dollars and cents burden an eventual judgment for claimants in the position of petitioners may cast either upon a carrier or the State's fund is insufficient, compared with the interest of the State in affording remedies for injuries committed within its boundaries, see Carroll v. Lanza,, to dislodge state power. The State's power is not dislodged so long as the Federal Government has not taken over the field of remedies for injuries of employees on interstate buses, as it has done in the case of employees of interstate railroad carriers. New York Central R. Co. v. Winfield,. The court below and the Commission here rely on Southern Pacific Co. v. Arizona,. It is too slender a reed. Two less similar situations in which shelter from an exercise of state power is sought under the Commerce Clause would be difficult to find than that presented by the circumstances of this case compared with the circumstances of the Southern Pacific case. The judgment of the Supreme Court or Arizona is reversed, and the case is remanded to that court for further proceedings. Reversed and remanded.

The widow and child of a bus driver applied for compensation under the Arizona Workmen's Compensation Act for his accidental death while driving an interstate bus in Arizona. He was a resident of California, and was covered by the California Workmen's Compensation Act. The bus line operated exclusively in interstate commerce, and was not insured in Arizona. Held: the Commerce Clause of the Federal Constitution did not preclude Arizona from awarding compensation, even if the effect were to force the bus line to obtain insurance against liabilities arising in Arizona. . 79 Ariz. 220, 286 P.2d 214, reversed and remanded.

1955_373

https://www.oyez.org/cases/1955/373

MR. JUSTICE BLACK delivered the opinion of the Court. This case involves the federal income tax liability of respondent LoBue for the years 1946 and 1947. From 1941 to 1947, LoBue was manager of the New York Sales Division of the Michigan Chemical Corporation, a producer and distributor of chemical supplies. In 1944, the company adopted a stock option plan making 10,000 shares of its common stock available for distribution to key employees at $5 per share over a 3-year period. LoBue and a number of other employees were notified that they had been tentatively chosen to be recipients of nontransferable stock options contingent upon their continued employment. LoBue's notice told him: "You may be assigned a greater or less amount of stock based entirely upon your individual results and that of the entire organization." About 6 months later, he was notified that he had been definitely awarded an option to buy 150 shares of stock in recognition of his "contribution and efforts in making the operation of the Company successful." As to future allotments, he was told "It is up to you to justify your participation in the plan during the next two years." LoBue's work was so satisfactory that the company in the course of 3 years delivered to him 3 stock options covering 340 shares. He exercised all these $5 per share options in 1946 and in 1947, paying the company only $1,700 for stock having a market value when delivered of $9,930. Thus, at the end of these transactions, LoBue's employer was worth $8,230 less to its stockholders and LoBue was worth $8,230 more than before. The company deducted this sum as an expense in its 1946 and 1947 tax returns, but LoBue did not report any part of it as income. Viewing the gain to LoBue as compensation for personal services, the Commissioner levied a deficiency assessment against him, relying on § 22(a) of the Internal Revenue Code of 1939, 53 Stat. 9, as amended, 53 Stat. 574, which defines gross income as including "gains, profits, and income derived from . . . compensation for personal service . . . of whatever kind and in whatever form paid. . . ." LoBue petitioned the Tax Court to redetermine the deficiency, urging that "The said options were not intended by the Corporation or the petitioner to constitute additional compensation, but were granted to permit the petitioner to acquire a proprietary interest in the Corporation and to provide him with the interest in the successful operation of the Corporation deriving from an ownership interest." The Tax Court held that LoBue had a taxable gain if the options were intended as compensation, but not if the options were designed to provide him with "a proprietary interest in the business." Finding after hearings that the options were granted to give LoBue "a proprietary interest in the corporation, and not as compensation for services," the Tax Court held for LoBue. 22 T.C. 440, 443. Relying on this finding, the Court of Appeals affirmed, saying: "This was a factual issue which it was the peculiar responsibility of the Tax Court to resolve. From our examination of the evidence, we cannot say that its finding was clearly erroneous." 223 F.2d 367, 371. Disputes over the taxability of stock option transactions such as this are longstanding. We granted certiorari to consider whether the Tax Court and the Court of Appeals had given § 22(a) too narrow an interpretation. 350 U.S. 893. We have repeatedly held that, in defining "gross income" as broadly as it did in § 22(a), Congress intended to "tax all gains except those specifically exempted." See, e.g., Commissioner v. Glenshaw Glass Co.,,. The only exemption Congress provided from this very comprehensive definition of taxable income that could possibly have application here is the gift exemption of § 22(b)(3). But there was not the slightest indication of the kind of detached and disinterested generosity which might evidence a "gift" in the statutory sense. These transfers of stock bore none of the earmarks of a gift. They were made by a company engaged in operating a business for profit, and the Tax Court found that the stock option plan was designed to achieve more profitable operations by providing the employees "with in incentive to promote the growth of the company by permitting them to participate in its success." 22 T.C. at 445. Under these circumstances, the Tax Court and the Court of Appeals properly refrained from treating this transfer as a gift. The company was not giving something away for nothing. Since the employer's transfer of stock to its employee LoBue for much less than the stock's value was not a gift, it seems impossible to say that it was not compensation. The Tax Court held there was no taxable income, however, on the ground that one purpose of the employer was to confer a "proprietary interest." But there is not a word in § 22(a) which indicates that its broad coverage should be narrowed because of an employer's intention to enlist more efficient service from his employees by making them part proprietors of his business. In our view, there is no statutory basis for the test established by the courts below. When assets are transferred by an employer to an employee to secure better services, they are plainly compensation. It makes no difference that the compensation is paid in stock, rather than in money. Section 22(a) taxes income derived from compensation "in whatever form paid." And, in another stock option case, we said that § 22(a) "is broad enough to include in taxable income any economic or financial benefit conferred on the employee as compensation, whatever the form or mode by which it is effected." Commissioner v. Smith,,. LoBue received a very substantial economic and financial benefit from his employer prompted by the employer's desire to get better work from him. This is "compensation for personal service" within the meaning of § 22(a). LoBue nonetheless argues that we should treat this transaction as a mere purchase of a proprietary interest on which no taxable gain was "realized" in the year of purchase. It is true that our taxing system has ordinarily treated an arm's length purchase of property, even at a bargain price, as giving rise to no taxable gain in the year of purchase. See Palmer v. Commissioner,,. But that is not to say that, when a transfer which is in reality compensation is given the form of a purchase, the Government cannot tax the gain under § 22(a). The transaction here was unlike a mere purchase. It was not an arm's length transaction between strangers. Instead, it was an arrangement by which an employer transferred valuable property to his employees in recognition of their services. We hold that LoBue realized taxable gain when he purchased the stock. A question remains as to the time when the gain on the shares should be measured. LoBue gave his employer promissory notes for the option price of the first 300 shares, but the shares were not delivered until the notes were paid in cash. The market value of the shares was lower when the notes were given than when the cash was paid. The Commissioner measured the taxable gain by the market value of the shares when the cash was paid. LoBue contends that this was wrong, and that the gain should be measured either when the options were granted or when the notes were given. It is, of course, possible for the recipient of a stock option to realize an immediate taxable gain. See Commissioner v. Smith,,. The option might have a readily ascertainable market value, and the recipient might be free to sell his option. But this is not such a case. These three options were not transferable, and LoBue's right to buy stock under them was contingent upon his remaining an employee of the company until they were exercised. Moreover, the uniform Treasury practice since 1923 has been to measure the compensation to employees given stock options subject to contingencies of this sort by the difference between the option price and the market value of the shares at the time the option is exercised. We relied in part upon this practice in Commissioner v. Smith,,. And, in its 1950 Act affording limited tax benefits for "restricted stock option plans," Congress adopted the same kind of standard for measurement of gains. § 130A, Internal Revenue Code of 1939, 64 Stat. 942. And see § 421, Internal Revenue Code of 1954, 68A Stat. 142. Under these circumstances there is no reason for departing from the Treasury practice. The taxable gain to LoBue should be measured as of the time the options were exercised, and not the time they were granted. It is possible that a bona fide delivery of a binding promissory note could mark the completion of the stock purchase, and that gain should be measured as of that date. Since neither the Tax Court nor the Court of Appeals passed on this question, the judgment is reversed and the case is remanded to the Court of Appeals with instructions to remand the case to the Tax Court for further proceedings. Reversed and remanded.

In recognition of his "contribution and efforts in making the operation of the Company successful," a corporation gave an employee options to purchase stock in the corporation. The options were nontransferable, and were contingent upon continued employment. After some time had elapsed and the value of the shares had increased, the employee exercised the options and purchased the stock at less than the then current market price. For some of the shares, he gave the employer a promissory note for the option price; but the shares were not delivered until the notes were paid in cash, when the value of the shares had increased. Held: under the Internal Revenue Code of 1939, as amended, the resulting gain to the employee was taxable as income received at the time he exercised the option and purchased the stock, and his taxable gain should be measured as of the time when the options were exercised, and not as of the time when they were granted. . (a) In defining "gross income" as broadly as it did in § 22(a) of the Internal Revenue Code of 1939, as amended, Congress intended to tax all gains except those specifically exempted . P.. (b) The only exemption that could possibly apply to these transactions is the gift exemption of § 22(b)(3), and these transactions were not "gifts" in the statutory sense. . (c) There is no statutory basis for excluding such transactions from "gross income" on the ground that one purpose of the employer was to confer on the employee a "proprietary interest" in the business. P.. (d) The employee received a substantial economic and financial benefit from his employer, prompted by the employer's desire to get better work from the employee, and this is "compensation for personal service" within the meaning of § 22(a). P.. (e) In these circumstances, the employee "realized" a taxable gain when he purchased the stock. P.. (f) The employee's taxable gain should be measured by the difference between the option price and the market value of the shares as of the time when the options were exercised, and not as of the time when the options were granted. . (g) On remand, the Tax Court may consider the question, not previously passed on, whether delivery of a promissory note for the purchase price marked the completion of the stock purchase, and whether the gain should be measured as of that date or as of the date the note was paid. P.. 223 F.2d 367 reversed and remanded.

1955_286

https://www.oyez.org/cases/1955/286

MR. JUSTICE CLARK delivered the opinion of the Court. The Southwest Exploration Co., respondent in No. 286, contracted to develop certain oil deposits lying off the coast of California by whipstock drilling from sites located on the property of adjacent upland owners. Southwest agreed to pay to such owners 24 1/2% of the net profits for the use of their land. Both Southwest and the upland owners sought to take the statutory depletion allowance of 27 1/2% on this share of the profits. The Tax Court decided that Southwest was entitled to the depletion allowance, 18 T.C. 961, and the Ninth Circuit affirmed, 220 F.2d 58. In the other case, the Court of Claims held that one of the upland owners, Huntington Beach Co., respondent in No. 287, was entitled to the depletion allowance on its share of the net income, 132 F. Supp. 718, 132 Ct.Cl. 427. We granted certiorari in both cases, 350 U.S. 818, because both the drilling company and the upland owners cannot be entitled to depletion on the same income. We agree with the Court of Claims. The California State Lands Act of 1938 provided that the State's offshore oil might be extracted only from wells drilled on filled lands or slant drilled from upland drill sites to the submerged oil deposits. Other provisions of the same statute required that "derricks, machinery, and any and all other surface structures, equipment and appliances" be located only on filled lands or uplands. It was further provided that the state commission might require each prospective bidder for such a state lease to furnish, as a condition precedent to consideration of his bid, satisfactory evidence of "present ability to furnish all necessary sites and rights of way for all operations contemplated under the provisions of the proposed leased. " In 1938, California published notice of its intention to receive bids for the lease of certain oil lands pursuant to this statute. At the time, Southwest -- a corporation organized in 1933 but completely inactive until the transaction at issue here -- did not own, lease, operate, or control any of the uplands adjacent to the area of oil deposits. It is agreed that there were no filled lands available. Southwest entered into three agreements with the upland owners, and was granted the right of ingress to and egress from the designated uplands and the right to construct, use and maintain all equipment necessary for drilling on the same lands. The upland owners reserved to themselves the right to give easements or subsurface well crossings in the uplands, except that they would not allow such easements for the purpose of drilling into the off-shore oil deposits while Southwest retained an interest granted to it by state easement. Southwest's rights were expressly subject to all rights previously granted by the upland owners. The agreements defined "net profits" and provided that Southwest would pay a total of 24 1/2% of its net profits from extraction and sale of oil to the upland owners. It was also provided that the upland owners did not acquire a share in the lease or oil deposit by virtue of the last agreement, and that it was not the intention of the parties to create a partnership relationship. As a result of these agreements, the upland owners endorsed Southwest's bid for a lease submitted to the State of California. Southwest, as the only bidder, was granted "Easement No. 392" by the State in consideration of the "royalty to be paid, the covenants to be performed, and the conditions to be observed by the Grantee." One such condition was that set out in paragraph (1): "That each well drilled pursuant to the terms of this agreement shall be slant drilled from the uplands to and into the subsurface of the State lands. Derricks, machinery, and any and all other surface structures, equipment, and appliances shall be located only upon the uplands, and all surface operations shall be conducted therefrom." The agreement further provided that, if Southwest should "default in the performance or observance of any of the terms, covenants and stipulations hereof," the State might reenter, cancel the agreement, or close down wells not being operated according to the agreement. The wells drilled pursuant to this lease have produced oil continuously since 1939. In No. 286, Southwest Exploration Co., the tax years 1939 through 1945 are involved. If Southwest may claim the depletion allowance on the upland owner's share of the profits during this period, its tax liability is reduced by approximately $175,000. In No. 287, Huntington Beach Co., the upland owner is claiming a tax refund of $135,000 for the year 1948 alone. An allowance for depletion has been recognized in our revenue laws since 1913. It is based on the theory that the extraction of minerals gradually exhausts the capital investment in the mineral deposit. Presently, the depletion allowance is a fixed percentage of gross income which Congress allows to be excluded; this exclusion is designed to permit a recoupment of the owner's capital investment in the minerals, so that, when the minerals are exhausted, the owner's capital is unimpaired. The present allowance, however, bears little relationship to the capital investment, and the taxpayer is not limited to a recoupment of his original investment. The allowance continues so long as minerals are extracted, and even though no money was actually invested in the deposit. The depletion allowance in the Internal Revenue Code of 1939 is solely a matter of congressional grace; it is limited to 27 1/2% of gross income from the property after excluding from gross income "any rents or royalties" paid by the taxpayer with respect to the property. The complexities of oil operations and risks incident to prospecting have led to intricate, multiparty transactions, so that it is often difficult to determine which parties are entitled to a part of the allowance. The statute merely provides in § 23(m) that, in the case of leases, the depletion allowance should be "equitably apportioned between the lessor and lessee." In determining which parties are entitled to depletion on oil and gas income, this Court has relied on two interrelated concepts which were first formulated in Palmer v. Bender,. There, the taxpayer, a lessee of certain oil and gas properties, had transferred his interest in these properties to two oil companies in return for a cash bonus, a future payment to be made "out of one-half of the first oil produced and saved," and an additional royalty of one-eight of the oil produced and saved. In upholding the taxpayer's right to depletion on all such income, the Court based its decision on the grounds that a taxpayer is entitled to depletion where he has: (1) "acquired, by investment, any interest in the oil in place," and (2) secured by legal relationship "income derived from the extraction of the oil, to which he must look for a return of his capital." 287 U.S. at. These two factors, usually considered together, constitute the requirement of "an economic interest." This Court has found the requisite interest in the oil in place to have been retained by the assignor of an oil lease, Thomas v. Perkins,, the lessor of oil properties for a share of net profits, Kirby Petroleum Co. v. Commissioner,, and the grantor of oil lands considered as an assignor of drilling rights, Burton-Sutton Oil Co. v. Commissioner,. The Court found no such interest in the case of a processor of natural gas who had only contracted to buy gas after extraction, Helvering v. Bankline Oil Co.,, and in the case of a former stockholder who had traded his shares in a corporation which owned oil leases for a share of net income from production of the leased wells, Helvering v. O'Donnell,. The second factor has been interpreted to mean that the taxpayer must look solely to the extraction of oil or gas for a return of his capital, and depletion has been denied where the payments were not dependent on production, Helvering v. Elbe Oil Land Co.,, or where payments might have been made from a sale of any part of the fee interest as well as from production. Anderson v. Helvering,. It is not seriously disputed here that this requirement has been met. The problem revolves around the requirement of an interest in the oil in place. It is to be noted that, in each of the prior cases where the taxpayer has had a sufficient economic interest to entitle him to depletion, he has once had at least a fee or leasehold in the oil-producing properties themselves. No prior depletion case decided by this Court has presented a situation analogous to that here, where a fee owner of adjoining lands necessary to the extraction of oil is claiming a depletion allowance. Southwest contends that there can be no economic interest separate from the right to enter and drill for oil on the land itself. Since the upland owners did not themselves have the right to drill for offshore oil, it is argued that respondent -- who has the sole right to drill -- has the sole economic interest. It is true that the exclusive right to drill was granted to Southwest, and it is also true that the agreements expressly create no interest in the oil in the upland owners. But the tax law deals in economic realities, not legal abstractions, and, upon closer analysis, it becomes clear that these factors do not preclude an economic interest in the upland owners. Southwest's right to drill was clearly a conditional, rather than an absolute, grant. Without the prior agreements with the upland owners, Southwest could not even have qualified as a bidder for a state lease. Permission to use the upland sites was the express condition precedent to the State's consideration of Southwest's bid, and it was one of the express conditions on which "Easement No. 392" was granted to Southwest. For a default in that condition, the State retained the right to reenter or to cancel the lease. Thus, it is seen that the upland owners have played a vital role at each successive stage of the proceedings. Without their participation, there could have been no bid, no lease, no wells, and no production. But Southwest contends that the upland owners have contributed merely property which was useful, but not necessary to the drilling operation. The facts are to the contrary. State law required that the wells be drilled either on the uplands or on filled lands, and there were no filled lands available. By hindsight, Southwest now suggests that it might have constructed a drilling island which might have been considered as filled land under the statute. Then, too, perhaps the State itself might have changed the law or condemned the uplands under existing law. But none of these possibilities occurred. The fact is that the drilling arrangement was achieved and oil produced in the only way that it could have been, consistent with state law and the express requirements of the State's lease. Recognizing that the law of depletion requires an economic, rather than a legal, interest in the oil in place, we may proceed to the question of whether the upland owners had such an economic interest here. We find that they did. Proximity to the offshore oil deposits and effect of the state law combined to make the upland owners essential parties to any drilling operations. This controlling position greatly enhanced the value of their land when extraction of oil from the State's offshore fields became a possibility. The owners might have realized this value by selling their interest for a stated sum, and no problem of depletion would have been presented. But, instead, they chose to contribute the use of their land in return for rental based on a share of net profits. This contribution was an investment in the oil in place sufficient to establish their economic interest. Their income was dependent entirely on production, and the value of their interest decreased with each barrel of oil produced. No more is required by any of the earlier cases. Southwest contends, finally, that if depletion is allowed to the upland owners in this case, it would be difficult to limit the principle in instances of strangers "disassociated from the lease" who may have contributed an essential facility to the drilling operation in return for a share of the net profits. But those problems are not before us in this case, where the upland owners could hardly be said to be "disassociated from the lease." We decide only that where, in the circumstances of this case, a party essential to the drilling for and extraction of oil has made an indispensable contribution of the use of real property adjacent to the oil deposits in return for a share in the net profits from the production of oil, that party has an economic interest which entitles him to depletion on the income thus received. For the foregoing reasons, the judgment in No. 286, as to Southwest Exploration Company, is reversed, and that in No. 287, as to Huntington Beach Company, is affirmed

A drilling company contracted to develop certain oil deposits lying off the coast of California by slant drilling from sites located on the property of adjacent upland owners. State law permitted such offshore oil to be extracted only by drilling from upland drill sites or filled land, and no filled lands were available. The drilling company agreed to pay the upland owners 24 1/2% of the net profits for the use of their land. Held: under the Internal Revenue Code of 1939, the upland owners, not the drilling company, were entitled to take the statutory depletion allowance on this share of the profits. . (a) The right to depletion is determined by whether or not the taxpayer has an economic interest, i.e., an interest in the oil in place and income derived solely from production. . (b) Since the uplands were essential to any production from the offshore oil deposits, agreement of the upland owners to let their land be used for drilling in return for a share of the net profits gave them the requisite economic interest. . (c) Their income was dependent entirely on production, and the value of their interest decreased with each barrel of oil produced. P.. (d) Where, as here, a party essential to the drilling for and extraction of oil has made an indispensable contribution of the use of real property adjacent to the oil deposits in return for a share in the net profits from the production of oil, that party has an economic interest which entitles him to depletion on the income thus received. . 220 F.2d 58 reversed. 132 Ct.Cl. 427, 132 F. Supp. 718, affirmed.

1955_48

https://www.oyez.org/cases/1955/48

MR. JUSTICE FRANKFURTER delivered the opinion of the Court. This case is here to review the judgment of the Court of Appeals for the District of Columbia affirming an order of the Subversive Activities Control Board that petitioner register with the Attorney General as a "Communist action" organization, as required by the Subversive Activities Control Act of 1950, Title I of the Internal Security Act of 1950, 64 Stat. 987. That Act sets forth a comprehensive plan for regulation of "Communist action" organizations. Section 2 of the Act describes a world Communist movement directed from abroad and designed to overthrow the Government of the United States by any means available, including violence. Section 7 requires all Communist action organizations to register as such with the Attorney General. If the Attorney General has reason to believe that an organization, which has not registered, is a Communist action organization, he is required by § 13(a) to bring a proceeding to determine that fact before the Subversive Activities Control Board, a five-man board appointed by the President with the advice and consent of the Senate and created for the purpose of holding hearings and making such determinations. Section 13(e) lays down certain standards for judgment by the Board. If the Board finds that an organization is a Communist action organization, it enters an order requiring the organization to register with the Attorney General. § 13(g). Section 14 provides the right to file a petition for review of Board action in the Court of Appeals for the District of Columbia, with opportunity for review by this Court upon certiorari. Once an organization registers or there is outstanding a final order of the Board requiring it to register, several consequences follow with respect to the organization and its members, but these need not now be detailed. See §§ 4, 5, 6, 7, 8, 10, 11, 15, 22, 25, 50 U.S.C. §§ 783-787, 789, 790, 792(a, e, g), 793, 794. Proceeding under § 13(a) of this statute, the Attorney General, on November 22, 1950, petitioned the Board for an order directing petitioner to register pursuant to § 7 of the Act. Petitioner sought unsuccessfully by numerous motions before the Board and by proceedings in the United States District Court for the District of Columbia -- one case is reported at 96 F. Supp. 47 (Communist Party of United States of America v. McGrath) -- to attack the validity of, and to abort, the hearing. The hearing began on April 23, 1951, before three members of the Board, later reduced to two, sitting as a hearing panel, and it terminated on July 1, 1952. Proposed findings of fact and briefs were filed by both parties, and oral argument was held before the hearing panel in August, 1952. In October, 1952 the hearing panel issued a recommended decision that the Board order petitioner to register as a Communist action organization. Exceptions to the panel's findings were filed by both parties, and oral argument was held before the Board in January, 1953. The Board filed its report, which occupies 251 pages of the record in this case, on April 20, 1953. In its report, the Board found that there existed a world Communist movement, substantially as described in § 2 of the Act, organized and directed by a foreign government. The Board detailed the history of the Communist Party of the United States and its close relation to the world Communist movement. It then set forth illustrative evidence and made findings with respect to the statutory criteria of § 13(e) of the Act, which required the Board to consider "the extent to which" the organization met them. The Board found that the conditions set forth in each of the paragraphs were applicable to petitioner. On the basis of these findings, the Board concluded that petitioner was a Communist action organization, as defined by § 3, and ordered it to register as such with the Attorney General. Petitioner brought this order to the Court of Appeals for the District of Columbia for review. While the case was pending, it filed a motion, supported by affidavit, for leave to adduce additional evidence pursuant to § 14(a) of the Act. The basis of the motion was that the additional material evidence became available to the petitioner subsequent to the administrative proceeding, and that this evidence would "establish that the testimony of three of the witnesses for the Attorney General, on which [the Board] relied extensively and heavily in making findings which are of key importance to the order now under review, was false. . . . In summary, this evidence will establish that Crouch, Johnson, and Matusow, all professional informers heretofore employed by the Department of Justice as witnesses in numerous proceedings, have committed perjury, are completely untrustworthy, and should be accorded no credence; that at least two of them are now being investigated for perjury by the Department of Justice, and that, because their character as professional perjurors [sic] has now been conclusively and publicly demonstrated, the Attorney General has ceased to employ any of them as witnesses." Petitioner listed a number of witnesses whom it proposed to call to substantiate its claim, and also set forth a detailed affidavit in support of its allegations. The Government did not deny these allegations. It filed a "Memorandum in Opposition to Motion for Leave to Adduce Additional Evidence," signed by the General Counsel to the Board and by officials of the Department of Justice. The memorandum asserted that the hearing should not be reopened for the receipt of evidence merely questioning, as it claimed, the credibility of some witnesses, but not any fact at issue, and it maintained that the findings of the Board were amply supported by evidence apart from the testimony of the three witnesses sought to be discredited. On December 23, 1954, this motion was formally denied by the Court of Appeals without opinion. In its full opinion on the merits, filed the same day, however, the Court of Appeals supported its rejection of petitioner's motion: "The Party attacks the credibility of the witnesses presented by the Government. In this connection, it stresses that some of these witnesses . . . were under charges of false swearing. Full opportunity for cross-examination of these witnesses was afforded at the hearing before the Board, and full opportunity was also afforded for the presentation of rebuttal testimony. The evaluation of credibility is primarily a matter for the trier of the facts, and a reviewing court cannot disturb that evaluation unless a manifest error has been made. Moreover, the testimony of the witnesses against whom charges are said to have been made was consistent with, and supported by, masses of other evidence. . . ." 96 U.S.App.D.C. 66, 100, 223 F.2d 531, 565. The Court of Appeals affirmed the order of the Board. It sustained § 13(e) against the contention that its standards were vague and irrational. It held that the findings of the Board had been established by a preponderance of the evidence, except that it struck, as not being supported by a preponderance of the evidence, the finding that the secret practices were undertaken for the purpose of promoting the objectives, and concealing the true nature, of petitioner; and it also struck the finding in connection with reporting to a foreign government, because the record supported only a finding of reporting by Party leaders "upon occasion," not a finding which implied a constant, systematic reporting. The court, however, found that the Board's conclusion was supported by the basic findings which it had affirmed. With respect to petitioner's other attacks on the constitutional validity of the statute, the court found it necessary to consider some of the so-called "sanction" sections, §§ 5, 6, 10, 11, 22, and 25, as well as § 7, the registration section. It held that they were all constitutional, and therefore affirmed the order of the Board. The challenge to the Act on which the order was based plainly raises constitutional questions appropriate for this Court's consideration, and so we brought the case here. 349 U.S. 943. At the threshold, we are, however, confronted by a particular claim that the Court of Appeals erred in refusing to return the case to the Board for consideration of the new evidence proffered by petitioner's motion and affidavit. This nonconstitutional issue must be met at the outset because the case must be decided on a nonconstitutional issue, if the record calls for it, without reaching constitutional problems. Peters v. Hobby,. In considering this nonconstitutional issue raised by denial of petitioner's motion, we must avoid any intimation with respect to the other issues raised by petitioner. We do not so intimate by concluding that the testimony of the three witnesses, against whom the uncontested challenge of perjury was made, was not inconsequential in relation to the issues on which the Board had to pass. No doubt a large part of the record consisted of documentary evidence. However, not only was the human testimony significant, but the documentary evidence was also linked to the activities of the petitioner and to the ultimate finding of the Board by human testimony, and such testimony was in part that of these three witnesses. The facts bearing on the issue are not in controversy. The direct testimony of witness Crouch occupied 387 pages of the typewritten transcript; that of Johnson, 163 pages; and that of Matusow, 118 pages. The annotated report of the Board, in which citations to the evidence were made to illustrate the support for its findings, contained 36 references to the testimony of Crouch, 25 references to the testimony of Johnson, and 24 references to the testimony of Matusow. These references were made in support of every finding under the eight criteria of § 13(e), and it is also not to be assumed that the evidence given by these three witnesses played no role in the Board's findings of fact even when not specifically cited. Testimony, for example, directed toward proving that the Communist Party of the United States was an agency utilized by a foreign government to undermine the loyalty of the armed forces, and to be in a position to paralyze shipping and prevent transportation of soldiers and war supplies through the Panama Canal, Hawaii, and the ports of San Francisco and New York in time of war, cannot be deemed insignificant in such a determination as that which the Board made in this proceeding. This is a proceeding under an Act which Congress conceived necessary for "the security of the United States and to the existence of free American institutions. . . ." 64 Stat. at 989. The untainted administration of justice is certainly one of the most cherished aspects of our institutions. Its observance is one of our proudest boasts. This Court is charged with supervisory functions in relation to proceedings in the federal courts. See McNabb v. United States,. Therefore, fastidious regard for the honor of the administration of justice requires the Court to make certain that the doing of justice be made so manifest that only irrational or perverse claims of its disregard can be asserted. When uncontested challenge is made that a finding of subversive design by petitioner was in part the product of three perjurious witnesses, it does not remove the taint for a reviewing court to find that there is ample innocent testimony to support the Board's findings. If these witnesses in fact committed perjury in testifying in other cases on subject matter substantially like that of their testimony in the present proceedings, their testimony in this proceeding is inevitably discredited, and the Board's determination must duly take this fact into account. We cannot pass upon a record containing such challenged testimony. We find it necessary to dispose of the case on the grounds we do not in order to avoid a constitutional adjudication, but because the fair administration of justice requires it. Since reversal is thus demanded, however, we do not reach the constitutional issues. The basis for challenging the testimony was not in existence when the proceedings were concluded before the Board. Petitioner should therefore be given leave to make its allegations before the Board in a proceeding under § 14(a) of the Act. The issue on which the case must be returned to the Board lies within a narrow compass, and the Board has ample scope of discretion in passing upon petitioner's motion. The purpose of this remand, as is its reason, is to make certain that the Board bases its findings upon untainted evidence. To that end, it may hold a hearing to ascertain the truth of petitioner's allegations, and, if the testimony of the three witnesses is discredited, it must not leave that testimony part of the record. Alternatively, the Board may choose to assume the truth of petitioner's allegations and, without further hearing, expunge the testimony of these witnesses from the record. In either event, the Board must then reconsider its original determination in the light of the record as freed from the challenge that now beclouds it. The case is reversed and remanded for proceedings in conformity with this opinion. Reversed and remanded.

An order of the Subversive Activities Control Board that petitioner register with the Attorney General as a "Communist action" organization, as required by the Subversive Activities Control Act of 1950, was appealed by petitioner to the Court of Appeals for the District of Columbia. While the appeal was pending, petitioner filed a motion for leave to adduce additional evidence pursuant to § 14(a) of the Act, alleging, inter alia, that evidence which became available to petitioner subsequent to the administrative proceeding would establish that the testimony of three of the Attorney General's witnesses on which the Board relied was perjurious. The Government did not deny petitioner's allegations. The Court of Appeals denied the motion, upheld the constitutionality of the Act, and affirmed the Board's order. Both the Government and the Court of Appeals deemed the innocent testimony sufficient to sustain the Board's conclusion. Held: the Court of Appeals erred in refusing to return the case to the Board for consideration of the new evidence proffered by petitioner's motion and affidavit. . (a) The case must be decided on the nonconstitutional issue, if the record calls for it, without reaching constitutional problems. P.. (b) The testimony of the three allegedly perjurious witnesses was not inconsequential in relation to the issues on which the Board had to pass. . (c) When uncontested challenge is made that a finding of subversive design by petitioner was in part the product of three perjurious witnesses, it does not remove the taint for a reviewing court to find that there is ample innocent testimony to support the Board's findings. . (d) Since the basis for challenging the testimony was not in existence when the proceedings were concluded before the Board, petitioner should be given leave to make its allegations before the Board in a proceeding under § 14(a) of the Act. P.. (e) The Board must reconsider its original determination in the light of the record freed from the challenge that now beclouds it, and must base its findings upon untainted evidence. P.. 96 U.S.App.D.C. 66, 223 F.2d 531, reversed and remanded.

1955_20

https://www.oyez.org/cases/1955/20

MR. JUSTICE CLARK delivered the opinion of the Court. This case concerns the tax treatment to be accorded certain transactions in commodity futures. In the Tax Court, petitioner Corn Products Refining Company contended that its purchases and sales of corn futures in 1940 and 1942 were capital asset transactions under § 117(a) of the Internal Revenue Code of 1939. It further contended that its futures transactions came within the "wash sales" provisions of § 118. The 1940 claim was disposed of on the ground that § 118 did not apply, but, for the year 1942, both the Tax Court and the Court of Appeals for the Second Circuit, 215 F.2d 513, held that the futures were not capital assets under § 117. We granted certiorari, 348 U.S. 911, because of an asserted conflict with holdings in the Courts of Appeals for the Third, Fifth, and Sixth Circuits. Since we hold that these futures do not constitute capital assets in petitioner's hands, we do not reach the issue of whether the transactions were "wash sales." Petitioner is a nationally known manufacturer of products made from grain corn. It manufactures starch, syrup, sugar, and their byproducts, feeds, and oil. Its average yearly grind of raw corn during the period 1937 through 1942 varied from thirty-five to sixty million bushels. Most of its products were sold under contracts requiring shipment in thirty days at a set price or at market price on the date of delivery, whichever was lower. It permitted cancellation of such contracts, but, from experience, it could calculate with some accuracy future orders that would remain firm. While it also sold to a few customers on long-term contracts involving substantial orders, these had little effect on the transactions here involved. In 1934 and again in 1936, droughts in the corn belt caused a sharp increase in the price of spot corn. With a storage capacity of only 2,300,000 bushels of corn, a bare three weeks' supply, Corn Products found itself unable to buy at a price which would permit its refined corn sugar, cerealose, to compete successfully with cane and beet sugar. To avoid a recurrence of this situation, petitioner, in 1937, began to establish a long position in corn futures "as a part of its corn buying program" and "as the most economical method of obtaining an adequate supply of raw corn" without entailing the expenditure of large sums for additional storage facilities. At harvest time each year, it would buy futures when the price appeared favorable. It would take delivery on such contracts as it found necessary to its manufacturing operations, and sell the remainder in early summer if no shortage was imminent. If shortages appeared, however, it sold futures only as it bought spot corn for grinding. In this manner, it reached a balanced position with reference to any increase in spot corn prices. It made no effort to protect itself against a decline in prices. In 1940, it netted a profit of $680,587.39 in corn futures, but, in 1942, it suffered a loss of $109,969.38. In computing its tax liability, Corn Products reported these figures as ordinary profit and loss from its manufacturing operations for the respective years. It now contends that its futures were "capital assets" under § 117, and that gains and losses therefrom should have been treated as arising from the sale of a capital asset. In support of this position, it claims that its futures trading was separate and apart from its manufacturing operations, and that, in its futures transactions, it was acting as a "legitimate capitalist." United States v. New York Coffee & Sugar Exchange,,. It denies that its futures transactions were "hedges" or "speculative" dealings as covered by the ruling of General Counsel's Memorandum 17322, XV-2 Cum.Bull. 151, and claims that it is in truth "the forgotten man" of that administrative interpretation. Both the Tax Court and the Court of Appeals found petitioner's futures transactions to be an integral part of its business designed to protect its manufacturing operations against a price increase in its principal raw material and to assure a ready supply for future manufacturing requirements. Corn Products does not level a direct attack on these two court findings, but insists that its futures were "property" entitled to capital asset treatment under § 117, and, as such, were distinct from its manufacturing business. We cannot agree. We find nothing in this record to support the contention that Corn Products' futures activity was separate and apart from its manufacturing operation. On the contrary, it appears that the transactions were vitally important to the company's business as a form of insurance against increases in the price of raw corn. Not only were the purchases initiated for just this reason, but the petitioner's sales policy, selling in the future at a fixed price or less, continued to leave it exceedingly vulnerable to rises in the price of corn. Further, the purchase of corn futures assured the company a source of supply which was admittedly cheaper than constructing additional storage facilities for raw corn. Under these facts, it is difficult to imagine a program more closely geared to a company's manufacturing enterprise or more important to its successful operation. Likewise, the claim of Corn Products that it was dealing in the market as a "legitimate capitalist" lacks support in the record. There can be no quarrel with a manufacturer's desire to protect itself against increasing costs of raw materials. Transactions which provide such protection are considered a legitimate form of insurance. United States v. New York Coffee & Sugar Exchange, 263 U.S. at; Browne v. Thorn,,. However, in labeling its activity as that of a "legitimate capitalist" exercising "good judgment" in the futures market, petitioner ignores the testimony of its own officers that, in entering that market, the company was "trying to protect a part of [its] manufacturing costs;" that its entry was not for the purpose of "speculating and buying and selling corn futures," but to fill an actual "need for the quantity of corn [bought] . . . in order to cover . . . what [products] we expected to market over a period of fifteen or eighteen months." It matters not whether the label be that of "legitimate capitalist" or "speculator;" this is not the talk of the capital investor, but of the far-sighted manufacturer. For tax purposes, petitioner's purchases have been found to "constitute an integral part of its manufacturing business" by both the Tax Court and the Court of Appeals, and, on essentially factual questions, the findings of two courts should not ordinarily be disturbed. Comstock v. Group of Institutional Investors,,. Petitioner also makes much of the conclusion by both the Tax Court and the Court of Appeals that its transactions did not constitute "true hedging." It is true that Corn Products did not secure complete protection from its market operations. Under its sales policy, petitioner could not guard against a fall in prices. It is clear, however, that petitioner feared the possibility of a price rise more than that of a price decline. It therefore purchased partial insurance against its principal risk, and hoped to retain sufficient flexibility to avoid serious losses on a declining market. Nor can we find support for petitioner's contention that hedging is not within the exclusions of § 117(a). Admittedly, petitioner's corn futures do not come within the literal language of the exclusions set out in that section. They were not stock in trade, actual inventory, property held for sale to customers, or depreciable property used in a trade or business. But the capital asset provision of § 117 must not be so broadly applied as to defeat, rather than further, the purpose of Congress. Burnet v. Harmel,,. Congress intended that profits and losses arising from the everyday operation of a business be considered as ordinary income or loss, rather than capital gain or loss. The preferential treatment provided by § 117 applies to transactions in property which are not the normal source of business income. It was intended "to relieve the taxpayer from . . . excessive tax burdens on gains resulting from a conversion of capital investments, and to remove the deterrent effect of those burdens on such conversions." Burnet v. Harmel, 287 U.S. at. Since this section is an exception from the normal tax requirements of the Internal Revenue Code, the definition of a capital asset must be narrowly applied, and its exclusions interpreted broadly. This is necessary to effectuate the basic congressional purpose. This Court has always construed narrowly the term "capital assets" in § 117. See Hort v. Commissioner,,; Kieselbach v. Commissioner,,. The problem of the appropriate tax treatment of hedging transactions first arose under the 1934 Tax Code revision. Thereafter, the Treasury issued G.C.M. 17322, supra, distinguishing speculative transactions in commodity futures from hedging transactions. It held that hedging transactions were essentially to be regarded as insurance, rather than a dealing in capital assets, and that gains and losses therefrom were ordinary business gains and losses. The interpretation outlined in this memorandum has been consistently followed by the courts as well as by the Commissioner. While it is true that this Court has not passed on its validity, it has been well recognized for 20 years, and Congress has made no change in it though the Code has been reenacted on three subsequent occasions. This bespeaks congressional approval. Helvering v. Winmill,,. Furthermore, Congress has since specifically recognized the hedging exception here under consideration in the short-sale rule of § 1233(a) of the 1954 Code. We believe that the statute clearly refutes the contention of Corn Products. Moreover, it is significant to note that practical considerations lead to the same conclusion. To hold otherwise would permit those engaged in hedging transactions to transmute ordinary income into capital gain at will. The hedger may either sell the future and purchase in the spot market or take delivery under the future contract itself. But if a sale of the future created a capital transaction, while delivery of the commodity under the same future did not, a loophole in the statute would be created, and the purpose of Congress frustrated. The judgment is Affirmed

Petitioner's purchases and sales of corn futures in 1940 and 1942, which, though not "true hedges," were an integral part of its manufacturing business, held not capital asset transactions under § 117(a) of the Internal Revenue Code of 1939, and gains and losses therefrom gave rise to ordinary income and ordinary deductions. . (a) The finding by both the Tax Court and the Court of Appeals that petitioner's purchases constitute "an integral part of its manufacturing business" is here sustained. . (b) Through its purchases of commodity futures, petitioner obtained partial insurance against its principal risk -- the possibility of a price rise. P.. (c) The capital asset provision of § 117 is to be narrowly construed. P.. (d) Congress intended that profits and losses arising from the everyday operation of a business be considered as ordinary income or loss, rather than capital gain or loss. P.. (e) The Treasury ruling, G.C.M. 17322, that hedging transactions were essentially to be regarded as insurance, rather than dealings in capital assets, and that gains and losses therefrom were ordinary business gains and losses, has been consistently followed by the courts as well as by the Commissioner, and has had the tacit approval of Congress. . (f) The conclusion here reached is supported by practical considerations, as well as by the statute. . 215 F.2d 513, affirmed.

1955_72

https://www.oyez.org/cases/1955/72

MR. JUSTICE BLACK delivered the opinion of the Court. We granted certiorari in this case to consider a single question: "May a defendant be required to stand trial and a conviction be sustained where only hearsay evidence was presented to the grand jury which indicted him?" 350 U.S. 819. Petitioner, Frank Costello, was indicted for wilfully attempting to evade payment of income taxes due the United States for the years 1947, 1948, and 1949. The charge was that petitioner falsely and fraudulently reported less income than he and his wife actually received during the taxable years in question. Petitioner promptly filed a motion for inspection of the minutes of the grand jury and for a dismissal of the indictment. His motion was based on an affidavit stating that he was firmly convinced there could have been no legal or competent evidence before the grand jury which indicted him, since he had reported all his income and paid all taxes due. The motion was denied. At the trial which followed, the Government offered evidence designed to show increases is Costello's net worth in an attempt to prove that he had received more income during the years in question than he had reported. To establish its case, the Government called and examined 144 witnesses and introduced 368 exhibits. All of the testimony and documents related to business transactions and expenditures by petitioner and his wife. The prosecution concluded its case by calling three government agents. Their investigations had produced the evidence used against petitioner at the trial. They were allowed to summarize the vast amount of evidence already heard, and to introduce computations showing, if correct, that petitioner and his wife had received far greater income than they had reported. We have held such summarizations admissible in a "net worth" case like this. United States v. Johnson,. Counsel for petitioner asked each government witness at the trial whether he had appeared before the grand jury which returned the indictment. This cross-examination developed the fact that the three investigating officers had been the only witnesses before the grand jury. After the Government concluded its case, petitioner again moved to dismiss the indictment on the ground that the only evidence before the grand jury was "hearsay," since the three officers had no firsthand knowledge of the transactions upon which their computations were based. Nevertheless, the trial court again refused to dismiss the indictment, and petitioner was convicted. The Court of Appeals affirmed, holding that the indictment was valid even though the sole evidence before the grand jury was hearsay. Petitioner here urges: (1) that an indictment based solely on hearsay evidence violates that part of the Fifth Amendment providing that "No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury . . . ," and (2) that, if the Fifth Amendment does not invalidate an indictment based solely on hearsay, we should now lay down such a rule for the guidance of federal courts. See McNabb v. United States,,. The Fifth Amendment provides that federal prosecutions for capital or otherwise infamous crimes must be instituted by presentments or indictments of grand juries. But neither the Fifth Amendment nor any other constitutional provision prescribes the kind of evidence upon which grand juries must act. The grand jury is an English institution, brought to this country by the early colonists and incorporated in the Constitution by the Founders. There is every reason to believe that our constitutional grand jury was intended to operate substantially like its English progenitor. The basic purpose of the English grand jury was to provide a fair method for instituting criminal proceedings against persons believed to have committed crimes. Grand jurors were selected from the body of the people, and their work was not hampered by rigid procedural or evidential rules. In fact, grand jurors could act on their own knowledge, and were free to make their presentments or indictments on such information as they deemed satisfactory. Despite its broad power to institute criminal proceedings, the grand jury grew in popular favor with the years. It acquired an independence in England free from control by the Crown or judges. Its adoption in our Constitution as the sole method for preferring charges in serious criminal cases shows the high place it held as an instrument of justice. And, in this country, as in England of old, the grand jury has convened as a body of laymen, free from technical rules, acting in secret, pledged to indict no one because of prejudice and to free no one because of special favor. As late as 1927, an English historian could say that English grand juries were still free to act on their own knowledge if they pleased to do so. And, in 1852, Mr. Justice Nelson, on circuit, could say "No case has been cited, nor have we been able to find any, furnishing an authority for looking into and revising the judgment of the grand jury upon the evidence, for the purpose of determining whether or not the finding was founded upon sufficient proof. . . ." United States v. Reed, 27 Fed.Cas. pages 727, 738. In Holt v. United States,, this Court had to decide whether an indictment should be quashed because supported in part by incompetent evidence. Aside from the incompetent evidence, "there was very little evidence against the accused." The Court refused to hold that such an indictment should be quashed, pointing out that "[t]he abuses of criminal practice would be enhanced if indictments could be upset on such a ground." 218 U.S. at. The same thing is true where, as here, all the evidence before the grand jury was in the nature of "hearsay." If indictments were to be held open to challenge on the ground that there was inadequate or incompetent evidence before the grand jury, the resulting delay would be great indeed. The result of such a rule would be that, before trial on the merits, a defendant could always insist on a kind of preliminary trial to determine the competency and adequacy of the evidence before the grand jury. This is not required by the Fifth Amendment. An indictment returned by a legally constituted and unbiased grand jury, like an information drawn by the prosecutor, if valid on its face, is enough to call for trial of the charge on the merits. The Fifth Amendment requires nothing more. Petitioner urges that this Court should exercise its power to supervise the administration of justice in federal courts and establish a rule permitting defendants to challenge indictments on the ground that they are not supported by adequate or competent evidence. No persuasive reasons are advanced for establishing such a rule. It would run counter to the whole history of the grand jury institution, in which laymen conduct their inquiries unfettered by technical rules. Neither justice nor the concept of a fair trial requires such a change. In a trial on the merits, defendants are entitled to a strict observance of all the rules designed to bring about a fair verdict. Defendants are not entitled, however, to a rule which would result in interminable delay but add nothing to the assurance of a fair trial. Affirmed.

A defendant in a criminal case in a federal court may be required to stand trial, and his conviction may be sustained, where only hearsay evidence was presented to the grand jury which indicted him. . (a) An indictment based solely on hearsay evidence does not violate the provision of the Fifth Amendment that "No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury. . . ." . (b) In the exercise of its power to supervise the administration of justice in the federal courts, this Court declines to establish a rule permitting defendants in criminal cases to challenge indictments on the ground that they are not supported by adequate or competent evidence. . 221 F.2d 668, affirmed.

1955_380

https://www.oyez.org/cases/1955/380

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court. The application of Article VII-A, Title 3, of the New York Tax Law to the mentally incompetent ward of appellant is challenged as being repugnant to the Due Process and Equal Protection Clauses of the Fourteenth Amendment. The statute, in § 165 et seq., provides for the judicial foreclosure of tax liens on real property. The filing at the county clerk's office of a list of taxes delinquent more than four years constitutes the filing of a notice of lis pendens and of a complaint, and commences an action against the property. Provision is made for notice by publication, by posting, and by mailing. The prescribed notice is to the effect that, unless the amount of unpaid tax liens, together with interest and penalties which are a lien against the property, are paid within 7 weeks, or an answer interposed within 20 days thereafter, any person having the right to redeem or answer shall be forever foreclosed of all his right, title, and interest and equity of redemption in and to the delinquent property. Provision is made for entry of a judgment of foreclosure awarding possession of the property to the tax district and directing execution of a deed conveying an estate in fee simple absolute to the district. The provisions of Title 3 purport to be applicable to and valid and effective with respect to all defendants, even though one or more of them be infants, incompetents, absentees, or nonresidents of the State of New York. Section 165-h(7) makes the deed presumptive evidence of the regularity of the proceedings. After two years, this presumption becomes conclusive. The Section further provides that no action to set aside the deed may be maintained unless commenced and a lis pendens notice filed prior to the time the presumption becomes conclusive. We are met at the outset with the contention of appellee and the State of New York, amicus curiae, that an action, as distinguished from the motion in the original proceeding here utilized, was the exclusive remedy in this case. The statute itself contains no suggestion that a new action is the exclusive remedy; it merely limits the time within which an action may be brought to set aside the deed. The Second Department of the Appellate Division, which decided this case, has recognized the existence of equitable power to entertain a motion to open a default in an in rem tax proceeding. If that were not enough, appellee, on oral argument, conceded that, in an action of the sort contemplated by § 165-h(7), the appellant would have been able to attack the deed only on the ground of alleged irregularities in the assessment and foreclosure proceedings. Although the Attorney General of New York has supported a contrary position, it was admitted at the argument that there was no decision to support his view. Our conclusion that the constitutional question was properly raised by appellant's motion is reinforced by the action of the Court of Appeals which amended its remittitur to disclose that a constitutional question was presented and necessarily decided on the appeal to that court. 308 N.Y. 941, 127 N.E.2d 90. Manifestly, no constitutional question could have been reached if the Court of Appeals had been of the opinion that the appellant had pursued the wrong remedy. This proceeding started on May 8, 1952. The Town of Somers instituted it to foreclose many tax liens, one of which was its lien against the parcel of real property owned by the incompetent. In compliance with the statute, notice was given to the incompetent taxpayer by mail, by posting a notice at the post office, and by publication in two local newspapers. No answer having been filed by the incompetent, judgment of foreclosure was entered on September 8, 1952, and on October 24, 1952, a deed to her property was delivered to the town. Five days later, on October 29, 1952, Nora Brainard was certified by the County Court as a person of unsound mind, and one week later, November 6, 1952, she was committed to the Harlem Valley State Hospital for the insane. Thereafter, on February 13, 1953, appellant filed bond pursuant to an order appointing him Committee of the person and property of the incompetent. Sometime prior to September 22, 1953, the town offered the incompetent's property for sale at a minimum bid price of $6,500. The unpaid taxes, interest, penalties, costs of foreclosure, attorney's fees, and maintenance charges on the property to September 22, 1953, aggregated $480. On that date, appellant's attorney appeared before the Town Board and offered to repay the town the amount due on the property in consideration of its return to the incompetent's estate. The offer was refused. Appellant then filed a motion in the County Court of Westchester County, where the judgment of foreclosure had been entered, for an order to show cause why the default should not be opened, the judgment vacated, and the deed set aside, and permission granted "to answer or appear or otherwise move with respect to" the notice of foreclosure. He alleged in a supporting affidavit that, although Nora Brainard's incompetency was known to the town officials, no guardian was appointed until shortly after the foreclosure. Appellant contended that the notice given to Nora Brainard, although in compliance with the statute, was inadequate in the case of a known incompetent, and, therefore, that the statute as applied was repugnant to the Fourteenth Amendment. The trial court, finding that the incompetent had not been deprived of her constitutional rights and that the statute is valid, denied the motion. The Appellate Division of the Supreme Court, one judge dissenting, affirmed on the ground that the rights of the parties are fixed after expiration of the 7 weeks and 20 days provided for redemption or answer in § 165-a of the tax law. 283 App.Div. 883, 129 N.Y.S.2d 537. The Court of Appeals, which, as noted before, certified that a question under the Fourteenth Amendment was raised and necessarily decided, likewise affirmed. 308 N.Y. 798, 125 N.E.2d 862. We noted probable jurisdiction. 350 U.S. 882. At this stage of the proceedings, we are bound, as were the courts below, to assume that the facts are as disclosed by the uncontroverted affidavits filed with appellant's motion for an order to show cause. From these it appears that Nora Brainard was a long-time resident of the Town of Somers in the State of New York, and a person of means at all times financially able to meet her obligations, owning four pieces of improved real property in addition to the home property which has been taken by foreclosure. She lived alone, however, and had no relative in the State of New York or any other person present or available to assist her or to act in her behalf in connection with her taxes, despite the fact that she was and for upwards of 15 years had been an incompetent. Although she was known by the officials and citizens of the Town of Somers to be a person without mental capacity to handle her affairs or to understand the meaning of any notice served upon her, no attempt was made to have a Committee appointed for her person or property until after entry of the judgment of foreclosure in this proceeding. Appellee argues that the Fourteenth Amendment does not require the State to take measures in giving notice to an incompetent beyond those deemed sufficient in the case of the ordinary taxpayer. "An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. . . . [W]hen notice is a person's due, process which is a mere gesture is not due process. The means employed must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it." Mullane v. Central Hanover Bank & Trust Co.,,. Notice to a person known to be an incompetent who is without the protection of a guardian does not measure up to this requirement. Assuming the truth of the uncontradicted assertions that the taxpayer Nora Brainard was wholly unable to understand the nature of the proceedings against her property (from which it must be inferred that she was unable to avail herself of the statutory procedure for redemption or answer), and that the town authorities knew her to be an unprotected incompetent, we must hold that compliance with the statute would not afford notice to the incompetent, and that a taking under such circumstances would be without due process of law. The question was appropriately raised and the issue improperly decided against the appellant. The judgment must therefore be reversed, and the cause remanded for proceedings not inconsistent with this opinion. Reversed and remanded.

Under Article VII-A, Title 3, of the New York Tax Law, a town proceeded to foreclose a lien for delinquent taxes on the real estate of a long-time resident. In accordance with the statute, the taxpayer was given no notice except by mail, posting notice at the post office, and publication in two local newspapers. She filed no answer, judgment of foreclosure was entered, and a deed to her property was delivered to the town. A few days later, she was adjudged insane and committed to a hospital for the insane. Subsequently, appellant was appointed committee of her person and property, and he filed a motion in the trial court where the judgment of foreclosure had been entered to have the default opened, the judgment vacated and the deed set aside. He alleged that, prior to entry of the judgment of foreclosure, the taxpayer was well known by town officials to be financially able to meet her obligations but mentally incompetent to handle her affairs or to understand the meaning of any notice served upon her, and that no attempt had been made to have a committee appointed for her person or property. Held: assuming the truth of these allegations, the notice provided under the statute was inadequate as applied to this incompetent taxpayer, and the taking of her property would violate the Due Process Clause of the Fourteenth Amendment. . (a) It appears that, in an action to set aside the deed (which is contemplated by the statute), only such irregularities as failure to observe the statutory procedure may be attacked. The state court has recognized the existence of equitable power to entertain a motion to open a default in an in rem tax proceeding, and the State Court of Appeals amended its remittitur in this case to disclose that a constitutional question was presented and necessarily decided on the appeal to that Court. Therefore, the constitutional question is properly before this Court. . (b) Notice to a person known to be an incompetent and without the protection of a guardian does not measure up to the requirements of the Due Process Clause of the Fourteenth Amendment. . 308 N.Y. 798, 941, 125 N.E.2d 862, 127 N.E.2d 90, reversed and remanded.

1955_342

https://www.oyez.org/cases/1955/342

Opinion of the Court by MR. JUSTICE HARLAN, announced by MR. JUSTICE BURTON. Czaplicki was injured in 1945 while working as a longshoreman on the "SS Hoegh Silvercloud," a vessel owned by the Norwegian Shipping and Trade Mission and operated by the Kerr Steamship Company. The injury occurred when some steps, constructed by the Hamilton Marine Contracting Company, gave way, causing Czaplicki to fall about five feet. At the time, Czaplicki was employed by the Northern Dock Company, which was insured for purposes of the Longshoremen's and Harbor Workers' Compensation Act by the Travelers Insurance Company. Travelers, which was also the insurer of the Hamilton Company, filed notice with the Compensation Commission that any compensation claim by Czaplicki would be controverted. Three weeks after the accident, Czaplicki elected to accept compensation rather than proceed against any third parties, and, one day later, a formal compensation award was entered by a Deputy Commissioner. Payments under the award were made by Travelers. In 1952, Czaplicki filed a libel against the vessel, her owners and operators, and the Hamilton Company, claiming damages for his injuries on grounds of unseaworthiness and negligence. After various proceedings in the District Court for the Southern District of New York, the libel was dismissed as to all respondents on the ground that Czaplicki was not the proper party libelant, since his election to accept compensation under the award had operated, under §§ 33(b) and 33(i), as an assignment to Northern and its insurer, Travelers, of his rights of action against third parties. The District Court also overruled Czaplicki's contention that the compensation award was invalid because of alleged procedural defects, and denied his motion to add Travelers "as party libelant to sue in its behalf and as trustee for libelant," or simply to add Travelers as a party. The District Court found it unnecessary, in light of this disposition of the case, to consider the defense of laches, which had been interposed by each respondent. The Court of Appeals, affirming the District Court, held the compensation award valid and the libel barred by laches; although it indicated some doubt as to the correctness of the District Court's decision on Czaplicki's right to maintain the suit, it did not pass on that question. We granted certiorari, 350 U.S. 872, because of the importance of these questions in the administration of the Longshoremen's and Harbor Workers' Compensation Act. 1. Czaplicki seeks to avoid the assignment question by attacking the compensation award itself, on the ground of asserted procedural defects. However, we think that the award must be treated as a valid one. In the first place, the alleged irregularity could not have prejudiced Czaplicki, since it resulted from a failure to afford his employer a procedural benefit which, we assume arguendo, the statute gives. The defect, if any, is one of which only the employer could complain; Czaplicki, who has not been in any way harmed by it, cannot use it as a vehicle for setting aside the award. Secondly, the supposed defect cannot be used to attack collaterally an otherwise valid award. The statute provides a means for contesting action by the Deputy Commissioner in compensation award cases, and, unless that procedure is followed, the award becomes binding. In short, the defect was not one which would deprive the Deputy Commissioner of jurisdiction to enter an award. 2. Under § 33(b) of the Compensation Act, Czaplicki's acceptance of the compensation award had the effect of assigning his rights of action against third parties to his employer, Northern. Travelers, as Northern's insurer, was in turn subrogated to all Northern's rights by § 33(i). Travelers therefore was the proper party to sue on those rights of action. Travelers was also the insurer of Hamilton, one of the third parties subject to suit. Hamilton had constructed the steps on which the accident occurred, and might be held liable if its negligence was the cause of Czaplicki's injuries; it might also be subject to a claim over by Kerr or the Norwegian Trade Mission if either of them should be held liable. Cf. Ryan Stevedoring Co. v. Pan-Atlantic S.S. Corp.,. The result is that Czaplicki's rights of action were held by the party most likely to suffer were the rights of action to be successfully enforced. In these circumstances, we cannot agree that Czaplicki is precluded by the assignment of his rights of action from enforcing those rights in an action brought by himself. Although § 33(b) assigns to the employer "all right of the person entitled to compensation to recover damages" against third parties when there has been acceptance of compensation under an award, this does not mean that the assignee is entitled to retain all damages in the event of a recovery against a third party. Instead, § 33(e) specifically apportions any such recovery between the assignee and the employee whose right of action it was originally, giving to the former an amount equal to the expenses incurred in enforcing the right, expenses of medical care for the employee, and any amounts paid and payable as compensation, and to the latter any balance remaining. In a very real sense, therefore, the injured employee has an interest in his right of action even after it has been assigned. Normally, this interest will not be inconsistent with that of the assignee, for presumably the assignee will want to recoup the payments made to the employee. Since the assignee's right to recoup comes before the employee's interest, and because the assignee is likely to be in a better position to prosecute any claims against a third party, control over the right of action is given to the assignee, who can either institute proceedings for the recovery of damages against a third person "or may compromise with such third person either without or after instituting such proceeding." § 33(d), 33 U.S.C. § 933(d). In giving the assignee exclusive control over the right of action, however, we think that the statute presupposes that the assignee's interests will not be in conflict with those of the employee, and that, through action of the assignee, the employee will obtain his share of the proceeds of the right of action, if there is a recovery. Here, where there is such a conflict of interests, the inaction of the assignee operates to defeat the employee's interest in any possible recovery. Since an action by Travelers would, in effect, be an action against itself, Czaplicki is the only person with sufficient adverse interest to bring suit. In this circumstance, we think the statute should be construed to allow Czaplicki to enforce, in his own name, the rights of action that were his originally. We need not go so far as to say that, by giving the employee an interest in the proceeds of a third-party action, the statute places the assignee in the position of a fiduciary, cf. United States Fidelity & Guaranty Co. v. United States, 152 F.2d 46, 48; all we hold is that, given the conflict of interests and inaction by the assignee, the employee should not be relegated to any rights he may have against the assignee, but can maintain the third-party action himself. In so holding, we recognize that one Court of Appeals has held otherwise under this same statute, see Hunt v. Bank Line, 35 F.2d 136, as have certain state courts under similar statutes, see Taylor v. New York Central R. Co., 294 N.Y. 397, 62 N.E.2d 777; cf. Whalen v. Athol Mfg. Co., 242 Mass. 547, 136 N.E. 600. We think, however, that allowing suit by the employee in these circumstances is the proper way to ensure him the rights given by the Compensation Act. Travelers is, of course, a proper party to this suit, since any recovery must first go to reimburse it for amounts already paid out. If Travelers is subject to the court's jurisdiction, it should therefore be made a party, pursuant to Czaplicki's motion, assuming that there has been proper service of process. 3. Respondents contend that, since Czaplicki did not, under § 33(a), 33 U.S.C. § 933(a), elect to proceed against third parties, but rather chose to accept compensation, he can in no event revoke this election and maintain this suit. But, as this Court has already pointed out, "election not to sue a third party and assignment of the cause of action are two sides of the same coin." American Stevedores, Inc., v. Porello,,. Czaplicki can bring this suit not because there has been no assignment, but because, in the peculiar facts here, there is no other procedure by which he can secure his statutory share in the proceeds, if any, of his right of action. For the same reason, we hold that the election to accept compensation, as a step toward the compensation award, does not bar this suit. 4. The Court of Appeals found it unnecessary to consider whether Czaplicki could maintain this suit, because it was held barred in any event on account of laches. The only reason given for this holding was that both the New York and New Jersey statutes of limitations, the two that might be applicable, had run. It is well settled, however, that laches as a defense to an admiralty suit is not to be measured by strict application of statutes of limitations; instead, the rule is that "the delay which will defeat such a suit must in every case depend on the peculiar equitable circumstances of that case." The Key City, 14 Wall. 653,. In cases where suit has been brought after some lapse of time, the question is whether it would be inequitable, because of the delay, to enforce the claim. Holmberg v. Armbrecht,,; Southern Pacific Co. v. Bogert,,. "Where there has been no inexcusable delay in seeking a remedy and where no prejudice to the defendant has ensued from the mere passage of time, there should be no bar to relief." Gardner v. Panama R. Co.,,. This does not mean, of course, that the state statutes of limitations are immaterial in determining whether laches is a bar, but it does mean that they are not conclusive, and that the determination should not be made without first considering all the circumstances bearing on the issue. In this case, the District Court never passed on the defense of laches, which, although properly put in issue, was made irrelevant by the holding that, because of the statutory assignment of his right of action, Czaplicki could not maintain this action. Not only was there no decision on laches, but there was never an opportunity for Czaplicki to introduce evidence to justify the delay, since the suit was dismissed after preliminary hearings and argument on the issue of Czaplicki's "standing." When the case reached the Court of Appeals, therefore, the record was incomplete on the issue of laches. There is nothing in the record to show that Czaplicki was given any more opportunity in the Court of Appeals to explain the delay than he had been given in the District Court. The only "finding" made by the Court of Appeals was that the running of the statutes of limitations constituted laches, and that, as we have stated, was insufficient. From all that appears, Czaplicki may have failed to bring suit earlier because he relied on the assignee of the right of action to enforce what was presumably an interest common to both of them. The record does not disclose when Czaplicki discovered the assignee's conflicting interest, or whether there has been unjustifiable delay since that discovery. Nor has there been opportunity to prove the statement, made in an affidavit to the District Court, that the delay has in no way prejudiced the respondents. These are questions on which the parties should have been allowed to present evidence. The present record is inadequate to justify a holding that this action was barred by laches. Since "the existence of laches is a question primarily addressed to the discretion of the trial court," Gardner v. Panama R. Co., supra, at, we remand the case to the District Court for further proceedings not inconsistent with this opinion. Reversed and remanded.

Petitioner, a longshoreman, was injured in 1945 while working on a ship when steps built by a contractor collapsed, causing him to fall. Shortly thereafter, he elected to accept compensation under the Longshoremen's and Harbor Workers' Compensation Act, and an award was made by a Deputy Commissioner. Payments thereunder were made by an insurer which had insured both petitioner's employer and the contractor who had built the steps. In 1952, petitioner filed a libel against the ship, her owners, her operators and the contractor who had built the steps, claiming damages for his injuries on grounds of unseaworthiness and negligence. He also tried unsuccessfully to join the insurer as a party. Held: 1. An alleged procedural defect in the compensation award was not such as to prejudice petitioner or to deprive the Deputy Commissioner of jurisdiction to enter the award; and the award cannot now be set aside on that ground. . 2. Under § 33(b) of the Compensation Act, petitioner's acceptance of the award had the effect of assigning his rights of action against third parties to his employer, to whom the insurer was subrogated; but that did not preclude petitioner from bringing the libel in the circumstances of this case, because petitioner's rights were held by the insurer -- the party most likely to suffer from enforcement of those rights. . (a) Even after the assignment, petitioner had an interest in his right of action against third parties, since any recovery must be apportioned between the employee and the assignee under § 33(e). . (b) Though § 33(d) gives the assignee control over enforcement of the employee's right of action against third parties, it should not be construed to enable the assignee to defeat the employee's interest in any possible recovery where there is such a conflict of interests as exists in this case. . (c) If the insurer is within the court's jurisdiction, it should be made a party to petitioner's suit. P.. 3. Under § 33(a), petitioner's election to accept the compensation award instead of proceeding against third parties does not bar this suit in the circumstances of this case. . 4. Though the statutes of limitations that might have been applicable had run, petitioner was not necessarily barred by laches on the present record from bringing this suit. . (a) Laches as a defense to an admiralty suit is not to be measured by strict application of statutes of limitations; it depends on the peculiar equitable circumstances of each case. P.. (b) Since the District Court did not consider the defense of laches, but dismissed the libel on other grounds, and the Court of Appeals held, on a record that was incomplete on the issue of laches, that it was barred solely because the statutes of limitations had run, the present record is inadequate to justify a holding that this libel is barred by laches. . (c) The existence of laches is a question primarily addressed to the discretion of the trial court, and the case is remanded to the District Court for further proceedings. P.. 223 F.2d 189, reversed and remanded.

1955_529

https://www.oyez.org/cases/1955/529

Opinion of the Court by MR. JUSTICE HARLAN, announced by MR. JUSTICE BURTON. The present Copyright Act provides for a second 28-year copyright after the expiration of the original 28-year term, if application for renewal is made within one year before the expiration of the original term. This right to renew the copyright appears in § 24 of the Act: "And provided further, That in the case of any other copyrighted work, . . . the author of such work, if still living, or the widow, widower, or children of the author, if the author be not living, or if such author, widow, widower, or children be not living, then the author's executors, or in the absence of a will, his next of kin shall be entitled to a renewal and extension of the copyright in such work for a further term of twenty-eight years when application for such renewal and extension shall have been made to the copyright office and duly registered therein within one year prior to the expiration of the original term of copyright. . . ." In this case, an author who secured original copyright on numerous musical compositions died before the time to apply for renewals arose. He was survived by his widow and one illegitimate child, who are both still living. The question this case presents is whether that child is entitled to share in the copyrights which come up for renewal during the widow's lifetime. Respondent, the child's mother, brought this action on the child's behalf against the widow, who is the petitioner here, seeking a declaratory judgment that the child has an interest in the copyrights already renewed by the widow and those that will become renewable during her lifetime, and for an accounting of profits from such copyrights as have been already renewed. The District Court, holding that the child was within the meaning of the term "children" as used in the statute but that the renewal rights belonged exclusively to the widow, gave judgment for the widow. Agreeing with the District Court on the first point, the Court of Appeals reversed, holding that, on the author's death, both widow and child shared in the renewal copyrights. 226 F.2d 623. Because of the great importance of these questions in the administration of the Copyright Act, we granted certiorari, 350 U.S. 931. The controversy centers around the words "or the widow, widower, or children of the author, if the author be not living." Two questions are involved: class, or in order of enumeration, and (2) class, or in order of enumeration, and (2) if they take as a class, does "children" include an illegitimate child. Strangely enough, these questions have never before been decided, although the statutory provisions involved have been part of the Act in their present form since 1870. I The widow first contends that, after the death of the author, she alone is entitled to renew copyrights during her lifetime, exclusive of any interest in "children" of the author. That is, she interprets the clause as providing for the passing of the renewal rights, on the death of the author, first to the widow, and then only after her death to the "children" of the author. If the word "or" which follows "widower" is to be read in its normal disjunctive sense, this is not an unreasonable interpretation of the statute, which might then well be read to mean that "children" are to renew only if there is no "widow" or "widower." The statute is hardly unambiguous, however, and presents problems of interpretation not solved by literal application of words as they are "normally" used. The statute must be read as a whole, and, putting each word in its proper context, we are unable to say, as the widow contends we should, that the clear purport of the clause in question is the same as if it read "or the widow, or widower, if the author be not living, or the children of the author, if the author, and widow or widower, be not living." We start with the proposition that the word "or" is often used as a careless substitute for the word "and"; that is, it is often used in phrases where "and" would express the thought with greater clarity. That trouble with the word has been with us for a long time -- see, e.g., 70 U. S. Fisk, 3 Wall. 445. In this instance, we need look no further than the very next clause in this same section of the Copyright Act for an example of this careless usage: ". . . or if such author, widow, widower or children be not living, then the author's executors. . . ." If the italicized "or" in that clause is read disjunctively, then the author's executors would be entitled to renew the copyright if any one of the persons named "be not living." It is clear, however, that the executors do not succeed to the renewal interest unless all of the named persons are dead, since from the preceding clause it is at least made explicit that the "widow, widower, or children of the author" all come before the executors after the author's death. The clause would be more accurate, therefore, were it to read "author, widow or widower, and children." It is argued with some force, then, that if, in the succeeding clause, the "or" is to be read as meaning "and" in the same word grouping as is involved in the clause in question, it should be read that way in this clause as well. If this is done, it is then an easy step to read "widow" and "children" as succeeding to the renewal interest as a class, as the Court of Appeals held they did. This Court has already traced the development of the renewal term in the several copyright statutes enacted in this country. See Fred Fisher Music Co. v. M. Witmark & Sons,, where it was held that the author, during his lifetime, could make a binding assignment of the expectancy in his future rights of renewal. The first federal statute, the Act of May 31, 1790, 1 Stat. 124, did not allow renewal by anyone except the author. In 1831, however, a new Act was passed which for the first time gave to the author's family the right to renew after his death. Act of February 3, 1831, 4 Stat. 436. Section 2 of that Act provided: "That if at the expiration of the aforesaid term of years, such author . . . be still living, and a citizen . . . of the United States, or resident therein, or being dead, shall have left a widow, or child, or children, either or all then living, the same exclusive right shall be continued to such author . . . , or, if dead, then to such widow and child, or children, for the further term of fourteen years. . . ." (Italics supplied.) It is significant that this statute, which instituted the present scheme of allowing a copyright to be renewed after the author's death, provided for the renewal interest in the "widow and child, or children," rather than in the widow or children separately. Petitioner concedes that, under this statute, the widow and children took as a class. This statute marked a major development in this phase of copyright legislation, and created a system which, in its basic form, has been continued even to the present statute. Section 88 of the Act of July 8, 1870, 16 Stat. 212, in consolidating the language of § 2 of the 1831 Act, made one important change in the language of the renewal section: the right of renewal was given to the author's widow or children, rather than to the widow and children. The section read as follows: "That the author, . . . if he be still living and a citizen of the United States or resident therein, or his widow or children, if he be dead, shall have the same exclusive right continued for the further term of fourteen years. . . ." (Italics supplied.) This section became § 4954 of the Revised Statutes, and was amended in 1891, 26 Stat. 1107, by deleting the requirement that the author be a citizen or resident of the United States. The section was otherwise left intact. The present renewal provision appeared first as § 23 of the Copyright Act of March 4, 1909, 35 Stat. 1080, and was continued without change in 17 U.S.C. § 24. Knowing, as we do, that "or" can be ambiguous when used in such a context as this, it is difficult to say that the change made in the 1870 Copyright Act had the effect of changing, as petitioner contends it did, the children's interest from an interest shared with the widow to one which became effective only after her death. There is no legislative history, either when the 1870 Act was passed or in the subsequent sessions of Congress, to indicate that Congress in fact intended to change in this respect the existing scheme of distribution of the renewal rights. Rather, what scant material there is indicates that no substantial changes in the Act were intended. It would not seem unlikely that the framers of the 1870 statute, interested in compressing the somewhat cumbersome phrasing of the prior Copyright Act, simply deleted the words "and child" with the thought that the remaining phrase "or children" expressed precisely the same result, leaving unaffected the rights of the author's children which had been the same for almost forty years. We then come to the 1909 Copyright Act. By § 23 of that Act, now 17 U.S.C. § 24, there were added to those entitled to renewal rights after the author's death -- the widow or children -- the author's executors, or, in the absence of a will, his next of kin. Each of these named classes is separated in the statute by a condition precedent to the passing of the renewal rights, namely, that the persons named in the preceding class be deceased. As already noted, it is at least clear that, if the author and his widow have both died, survived by a child, that child is entitled to renew copyrights maturing during his lifetime. But if this interest were to take effect only after the death of the widow, it might be expected that the drafters of the Act would have separated "widow or widower" from "children" with the same condition precedent used in defining the succession of the other classes to the renewal rights, since it would, in effect, be placing the children in a class lower than that occupied by the widow or widower. Granting that the absence of this structure might simply have been due to carelessness in adding the new class to the prior renewal section, we think it may nevertheless be taken as some indication that the widow and children are to take the right to renew at the same time. The Solicitor General has filed a helpful brief on behalf of the Register of Copyrights, as amicus curiae, in which the administrative practice of the Copyright Office is discussed. It appears that the Regulations issued under the 1909 Act, in force until 1948 (when new Regulations, not touching on this point, were issued), allowed the children of the author to apply for copyright renewals after the author's death along with the widow or widower -- that is, the children were not treated as being entitled to renewal only after the death of the widow or widower. The practice of the Copyright Office has been to register renewal claims by children during the lifetime of an author's widow or widower, although this practice, it is frankly admitted, is more the result of a decision that there is substantial doubt over the question, rather than the result of a confident interpretation of the statute as treating widows, widowers, and children as members of one class. Although we would ordinarily give weight to the interpretation of an ambiguous statute by the agency charged with its administration, cf. Mazer v. Stein,,, we think the Copyright Office's explanation of its practice deprives the practice of any force as an interpretation of the statute, and we therefore do not rely on it in this instance. Petitioner and several of the associations which have filed amicus briefs point out that the "universal" interpretation of § 24 has been that children are entitled to renewal only after the death of the widow or widower. In light of the Copyright Office practice alone, that is obviously an overstatement. Nevertheless, had there been a longstanding consistent attitude by the specialists in this field of law, and a more adequate basis for it than exists here, we might hesitate to overturn what had come to be a generally accepted view of a statute having such important consequences. But we cannot escape the conclusion that, in this instance, any such reliance on that interpretation of the Act was misplaced -- the statute is far from clear, the Copyright Office has recognized its ambiguity, renewal applications have for many years been filed by children before the death of the widow or widower, and more than one qualified commentator has either expressed doubt on the question or has concluded that the widow or widower and children take as a class. Nor is it possible for us to say, as petitioner suggests, that the only way to satisfy the congressional purpose is to hold that, during her lifetime, the widow has exclusive renewal rights. Petitioner argues that the statute, contemplating the normal situation of a widow taking care of her children, gives the widow exclusive control of the copyright on the author's death, since she is presumably more capable of dealing with it, and will more likely be in need of the copyright income. This branch of the argument, however, becomes very much diluted when it is observed that, if the deceased author be a woman, the statute disposes of the renewal rights in the same manner as if the author were a male. It is further argued that, since the value of the copyright depends to an appreciable extent on the ability to convey clear publication rights, the statute should not be construed to diminish the value of the copyright by scattering its ownership, which might make it difficult to transfer clear title. One difficulty with this argument is that it ignores the 1831 statute, which, as petitioner recognizes, divided the ownership of the renewal rights between the surviving spouse of the author and his children. What we are asked to do is to avoid, on policy grounds, an interpretation of the successor statute which embodies the policy of the earlier Act, a policy which Congress saw fit to effectuate at least until 1870 and which, if changed then, was changed without any discernible display of dissatisfaction with that policy. This is not the type of case where we can use, as a guide to statutory interpretation, an unwillingness to attribute to Congress results which on their face are harsh, or present constitutional difficulties, or which are so extraordinary that clear, unambiguous wording is required. Cf. United States v. Minker,. In view of this explicit prior legislation, this Court should not transfuse the successor statute with a gloss of its own choosing, especially where the choice between the alternative policies is as close as this one. While the matter is far from clear, we think, on balance, the more likely meaning of the statute to be that adopted by the Court of Appeals, and we hold that, on the death of the author, the widow and children of the author succeed to the right of renewal as a class, and are each entitled to share in the renewal term of the copyright. II We come, then, to the question of whether an illegitimate child is included within the term "children" as used in § 24. The scope of a federal right is, of course, a federal question, but that does not mean that its content is not to be determined by state, rather than federal, law. Cf. Reconstruction Finance Corp. v. Beaver County,; Board of County Commissioners v. United States,,. This is especially true where a statute deals with a familial relationship; there is no federal law of domestic relations, which is primarily a matter of state concern. If we look at the other persons who, under this section of the Copyright Act, are entitled to renew the copyright after the author's death, it is apparent that this is the general scheme of the statute. To decide who is the widow or widower of a deceased author, or who are his executors or next of kin, requires a reference to the law of the State which created those legal relationships. The word "children," although it to some extent describes a purely physical relationship, also describes a legal status not unlike the others. To determine whether a child has been legally adopted, for example, requires a reference to state law. We think it proper, therefore, to draw on the ready-made body of state law to define the word "children" in § 24. This does not mean that a State would be entitled to use the word "children" in a way entirely strange to those familiar with its ordinary usage, but, at least to the extent that there are permissible variations in the ordinary concept of "children," we deem state law controlling. Cf. Seaboard Air Line Railway v. Kenney,. This raises two questions: first, to what State do we look, and second, given a particular State, what part of that State's law defines the relationship. The answer to the first question, in this case, is not difficult, since it appears from the record that the only State concerned is California, and both parties have argued the case on that assumption. The second question, however, is less clear. An illegitimate child who is acknowledged by his father, by a writing signed in the presence of a witness, is entitled under § 255 of the California Probate Code to inherit his father's estate as well as his mother's. The District Court found that the child here was within the terms of that section. Under California law, the child is not legitimate for all purposes, however; compliance with § 230 of the Civil Code is necessary for full legitimation, and there are no allegations in the complaint sufficient to bring the child within the section. Hence, we may take it that the child is not "adopted" in the sense that he is to be regarded as a legitimate child of the author. Considering the purposes of § 24 of the Copyright Act, we think it sufficient that the status of the child is that described by § 255 of the California Probate Code. The evident purpose of § 24 is to provide for the family of the author after his death. Since the author cannot assign his family's renewal rights, § 24 takes the form of a compulsory bequest of the copyright to the designated persons. This is really a question of the descent of property, and we think the controlling question under state law should be whether the child would be an heir of the author. It is clear that, under § 255, the child is, at least to that extent, included within the term "children." Finally, there remains the question of what are the respective rights of the widow and child in the copyright renewals, once it is accepted that they both succeed to the renewals as members of the same class. Since the parties have not argued this point, and neither court below has passed on it, we think it should not be decided at this time. For the foregoing reasons, the judgment of the Court of Appeals is Affirmed.

The Copyright Act grants to the author, "or the widow, widower, or children of the author, if the author be not living," the right of renewal of a copyright for a further 28-year term after the expiration of the original 28-year term. Held: 1. After the author's death, the widow and children of the author succeed to the right of renewal as a class, and are each entitled to share in the renewal term of the copyright. . 2. In the instant case, an illegitimate child of the author, who under the applicable state law would be an heir of the author, is within the term "children." . (a) While the scope of a federal right is a federal question, its content may yet be determined by state, rather than federal, law, especially where the law of domestic relations is concerned. P.. (b) Whether an illegitimate child is within the term "children," as used in this provision of the Act, is to be determined by whether, under state law, the child would be an heir of the author. . (c) In the instant case, the only State concerned is California, and the question is to be determined with reference to the law of that State. P.. (d) Under § 255 of the California Probate Code, an illegitimate child who is acknowledged by his father, by a writing signed in the presence of a witness, is entitled to inherit his father's estate as well as his mother's (although he may not be legitimate for all purposes), and that is sufficient for the purposes of the copyright Act. . 226 F.2d 623 affirmed.

1955_117

https://www.oyez.org/cases/1955/117

MR. JUSTICE BLACK delivered the opinion of the Court. These cases all involve the validity of a single order of the Interstate Commerce Commission establishing through railroad routes and prescribing joint through rates for carriage of certain goods over the routes. The Commission's order was made after lengthy hearings upon complaint of the Denver & Rio Grande Western Railroad Company. The Rio Grande's main line runs from Ogden, Salt Lake City, and Provo, Utah, across much of Colorado to Denver, Pueblo, and Trinidad. The chief controversy involved in this case is between the Rio Grande and the Union Pacific Railroad Company. The Union Pacific lines which are relevant here run from points in Washington and Oregon through Idaho, Utah, Wyoming, Colorado, Kansas, and Nebraska, going as far east as Omaha and Kansas City. The Union Pacific and Rio Grande connect at Ogden, Salt Lake City, and Provo, Utah, and at Denver, Colorado. The connection at Ogden is known as the Ogden Gateway, meaning the gateway between the northwestern states served by the Union Pacific and states to the south and east served by the Rio Grande. The Union Pacific has used its strategic position in the northwest territory in such a way that practically all traffic between the Northwest, Denver, and points east and south of Denver goes over its lines. For this reason, the Northwest is often referred to as "closed door" territory. This situation caused the Rio Grande to file its complaint with the Commission. It charged that the Union Pacific had agreements with other connecting railroads named defendants under which goods could be carried to and from the Northwest at joint through rates, but that the only way the Rio Grande could carry goods to and from this area was by exacting higher "combination rates," which are the sum of local rates. These high rates practically bar the Rio Grande as a connecting carrier for through shipments to and from the Northwest. The Rio Grande asked the Commission to order the Union Pacific to establish and maintain for the future "just, reasonable and nondiscriminatory competitive joint through rates" with the Rio Grande. It charged that the Union Pacific's failure to establish and maintain such rates violated §§ 1(4), 3, 15(1), and 15(3) of the Interstate Commerce Act. Section 15(1) authorizes the Commission to proscribe individual or joint rates or practices that are "unjust or unreasonable or unjustly discriminatory or unduly preferential or prejudicial," and to prescribe rates and practices that are "just, fair, and reasonable." Section 15(3) empowers the Commission to establish through routes and joint rates whenever deemed by the Commission "to be necessary or desirable in the public interest." Section 15(4), which is very important in this controversy, places restrictive conditions upon the Commission's power to establish through routes under § 15(3) when the establishment of a through route would require a railroad "without its consent, to embrace in such route substantially less than the entire length of its railroad and of any intermediate railroad operated in conjunction and under a common management or control therewith, which lies between the termini of such proposed through route. . . . " This provision is generally referred to as a prohibition against making a railroad "short-haul" itself. Among other findings the Commission must make under § 15(4) before establishing a through route which requires a railroad to short-haul itself is that the new route "is needed in order to provide adequate, and more efficient or more economic, transportation. . . ." The Rio Grande's petition before the Commission alleged that through routes with the Union Pacific already existed through the Ogden Gateway. It contended that they had been created and used by the Union Pacific. On this basis, Rio Grande claimed that the restrictive conditions of § 15(4) did not apply. and that the Commission need not concern itself with those conditions, but should proceed to establish reasonable joint rates under § 15(3). After hearing much evidence, the Commission rejected this contention and found that the through routes claimed by Rio Grande did not exist. The Commission went on to find, however, that through routes should be established with reference to certain commodities such as fruits, perishable foods, and livestock in a limited geographical area. The Commission found, in accordance with § 15(4), that these new routes were needed "to provide adequate and more economic transportation. . . ." It also found, as required by § 15(3), that through routes and joint rates for the specified commodities were "necessary and desirable in the public interest." 287 I.C.C. 611, 659. On the basis of its findings, the Commission ordered the Union Pacific to establish through routes for the specified commodities and to establish joint rates the same as applied on its own and other connecting lines. The Union Pacific considered itself aggrieved because the order required establishment of some through routes and joint rates. The Rio Grande considered itself aggrieved both because of the geographical limitations of the Commission's order and because joint rates were not established for all commodities. The Union Pacific challenged the ICC order in a three-judge United States District Court in Nebraska, and the Rio Grande challenged it in a three-judge United States District Court in Colorado. See 28 U.S.C. §§ 1336, 2284, 2321-2325. The Colorado court upset the order on a single ground. It held that there was no substantial evidence to support the finding that through routes were not in existence. Had the Commission found there were established through routes, the Colorado court reasoned, much broader relief for the Rio Grande might have been ordered, since the restrictions of § 15(4) would not have been applicable. Consequently, the Colorado court remanded the case to the Commission for further consideration. 131 F. Supp. 372. The Nebraska court accepted the Commission's finding that no through routes were in existence. It then held that there was evidence before the Commission sufficient to support the finding under § 15(4) that through routes were needed "in order to provide adequate and more economic transportation" for specified commodities shipped from the Northwest to initial destination points on the Rio Grande for "in-transit privileges incident to reshipment to points east of Denver. . . ." 132 F. Supp. 72, 82. The Nebraska court declined, however, to sustain the Commission's action with reference to shipments not requiring such transit services. Both District Court decrees are now before us on direct appeal under 28 U.S.C. §§ 1253 and 2101(b). They were consolidated for oral argument, and we treat them together here. It is convenient to take up first the Colorado court's holding. In considering the question of through routes under § 15(4), we begin with our recent holdings and opinions in Thompson v. United States,; United States v. Great Northern R. Co.,. We there emphasized the purpose of § 15(4) to bar the Commission from compelling railroads to establish through routes resulting in trunkline "short-hauls" without faithful observance of restrictive conditions imposed by that section. At the same time, we recognized that Commission action is not necessary to the creation of through routes. We pointed out that a through route is ordinarily a voluntary arrangement, express or implied, between connecting carriers, and that the existence of such an arrangement depends on the circumstances of particular cases. We said in Thompson v. United States, supra, at, that, "In short, the test of the existence of a 'through route' is whether the participating carriers hold themselves out as offering through transportation service." Findings of through routes can therefore be made on the basis of express agreements between carriers or on the basis of inferences drawn from continuous practices sufficient to show that through routes exist even though not provided for in formal contracts or tariffs. The question in each case is one of fact. Cf. Through Routes and Through Rates, 12 I.C.C. 163, 166-167. The Colorado court viewed the evidence here as showing beyond dispute the existence of through routes both by formal tariffs and by long railroad practices. Whether the evidence could have justified the Commission in finding the existence of through routes we need not determine. We are satisfied, however, that the evidence before the Commission did not compel it to make such a finding, and that its conclusion that the through routes claimed were not in existence is supported by substantial evidence. There was evidence that, as early as 1897, the Union Pacific and lines it controlled did establish through routes to and from points in the "closed" northwest territory through the Ogden Gateway, and did establish joint through rates with the Rio Grande on the same basis as the joint through rates on Union Pacific's own lines. But these joint rates were canceled by Union Pacific in amended tariffs published between 1906 and 1912. Apparently there was no language in the published amended tariffs expressly and formally declaring that the through routes by way of the Ogden Gateway were also to be deemed closed. The amended tariffs, however, resulted in very high combination rates for northwest traffic transported by the Rio Grande. The effect of these high rates has been greatly to handicap, if not actually to close, the Rio Grande as an artery for through traffic between the Northwest, Denver, and points south and east. Of course, the effect of such rates might not be enough, standing alone, to show a voluntary abandonment of the through routes. See Virginia R. Co. v. United States,,; Thompson v. United States, supra, at. At the same time, it cannot be said that the Union Pacific's failure formally to declare the through routes abandoned in 1906 (when it canceled joint rates) automatically left the through routes in existence for § 15(4) purposes in 1949 when this litigation started. Cancellation of the rates in 1906 without formal cancellation of the routes is only a circumstance to be considered along with other circumstances in determining whether through routes now exist. The Colorado court relied on railroad practices as other circumstances which, considered with the failure expressly to abandon through routes, were sufficient to compel the Commission to hold that through routes did exist. We turn to that. At best for the Rio Grande, the evidence of railroad practices with reference to the continued existence of through routes showed the following. Despite the high combination rates, a small number of shipments continue to trickle through the Ogden Gateway to and from the closed northwest territory. In 1948, which the Commission considered a representative year, a number of carload shipments moved on through bills of lading along the alleged through routes. But none of them coming from the Northwest went further than points on the Rio Grande in Colorado also served by the Union Pacific and connecting lines. There were a few shipments of various commodities from east and south of Denver which went by way of the Rio Grande through the Ogden Gateway. The total shipments over the alleged through routes, however, were no more than a fractional part of one percent of the traffic carried to and from the Northwest by way of the Union Pacific routes. It is also undisputed that through routes and joint rates exist for eastbound shipments of sheep and goats. During World War II, some Army troop and supply trains moved over the Rio Grande on through bills of lading. In addition to the foregoing, some traffic moved over the Rio Grande in 1949 when snow storms blocked the Union Pacific route through Wyoming. These movements were made under service orders of the Commission, which did not exercise its authority under § 15(4) to establish emergency through routes. The Union Pacific produced evidence tending to show that there were no through routes. It quite plainly appears from the record that there has been a longstanding struggle between the Union Pacific and the Rio Grande over the efforts of the Union Pacific to keep the Ogden Gateway closed. We think the record supports the finding of the Commission that: "There is no indication that any of the defendants has ever solicited any traffic from and to the areas here concerned for routing over a Rio Grande route by which a higher combination rate applied, or has ever used such a Rio Grande route except where called upon to do so by routing specified by the shipper or by a prior connecting carrier. In other words, so far as this record shows, 'the carriers' course of business' has been and is to use the Union Pacific routes except where called upon to use the Rio Grande routes by force of shippers' or connecting carriers' routing. The whole course of conduct of the Union Pacific, so far as revealed, has been for many years and is now to guard jealously its long haul, and not open commercially the Rio Grande routes on this traffic." 287 I.C.C. at 618. We adhere to the "holding out" test of the Thompson case. The evidence before the Commission was not such as to compel it to find that the Union Pacific held itself out as offering through service over the Rio Grande lines. It was error for the Colorado District Court to set aside the Commission's finding and to remand the case to the Commission. This brings us to a consideration of the Nebraska District Court's action. The Commission required the Union Pacific to establish through routes and joint rates with the Rio Grande for the carriage of certain commodities including livestock, fresh fruits and vegetables, frozen foods, butter, and eggs. The order rested on the Commission's conclusion that such through routes and joint rates were "necessary and desirable in the public interest, in order to provide adequate and more economic transportation. . . ." 287 I.C.C. at 659. This conclusion was based on findings from a vast amount of evidence both oral and written. The pertinent language of § 15(4) allows the Commission to establish through routes where "needed in order to provide adequate, and more efficient or more economic, transportation." The dispute in the Nebraska court and here relates principally to the adequacy of the existing transportation services. The efficiency of Union Pacific services was established beyond dispute. Section 15(4) empowers the Commission to consider the interests of shippers and the kind of services they get and need, as well as the interests of carriers in determining whether additional routes should be established to provide "adequate" and "more economic" transportation service. We have held that, in determining this question, the Commission should look beyond the mere adequacy of the carrier's physical operations "to the broader public interest which embraces service to shippers and the rates they pay." Pennsylvania R. Co. v. United States,,. The duty of the Commission, as we there stated, is to try to strike a fair balance in satisfying the needs of shippers, railroads, and the public. This, of course, calls for the Commission to exercise its informed judgment, having in mind its statutory obligation to develop, coordinate, and preserve an adequate national transportation system. This it did. Relying on our interpretation of § 15(4) in the Pennsylvania Railroad case, the Commission considered the various interests here. It found that: "Because of their generally perishable nature, food articles . . . must be moved to market with expedition and care, and over as many routes as possible. This requires that many routes be open in order that unnecessary interruptions of the free flow of such commodities may be avoided, and that as much flexibility as possible in the distribution process be permitted. A number of services, not only at origin and destination, but en route, which are not usually required in the movement of ordinary traffic must be provided for these perishable and semi-perishable commodities." 287 I.C.C. at 656. There are facilities along the Rio Grande route for feeding and grazing livestock in transit, and for partial unloading, storing or processing other shipments in transit. As a result, shippers in the northwest territory were found to be "debarred from effective participation in the widespread system developed for the marketing of such commodities," and processors, shippers and dealers along the Rio Grande were found to be at a disadvantage in competing with those on the Union Pacific. For the specified commodities, the Commission found the Union Pacific routes to be "inadequate and less economical than are the Rio Grande routes." The Nebraska District Court sustained the Commission's order with reference to shipments which required transit services on the Rio Grande. We agree with this portion of the holding. We cannot say that the Commission acted in excess of its authority in concluding, on the mass of evidence before it, that through routes and joint rates on the specified commodities were needed to provide adequate and more economic transportation and were necessary in the public interest. But the scope of the Commission's order was cut down by the Nebraska court insofar as it established through routes and joint rates on shipments that did not require transit services such as we have mentioned. We disagree with the Nebraska District Court in this respect. The evidence showed and the Commission found that, in marketing food and other perishable products, it is a general practice among railroads to allow diversion of carloads in transit as markets are found and sales are made. The successful operation of this practice requires the existence of joint through rates to the final market, since diversion or reconsignment would often, as a practical matter, be unavailable to a shipper who is compelled to reconsign his goods at high combination rates. The Commission found that, "If a shipment reaches a point through which a combination of rates applies and the sale is lost, it is frequently necessary to dispose of the shipment at that point at a forced or distress price. Such points are called closed or pocket markets." 287 I.C.C. at 642. To illustrate its conclusion that combination rates result in inadequate transportation service in situations where shippers are compelled to reconsign, the Commission noted that: "Idaho producers are in competition with shippers in other producing areas, and find it difficult to compete on shipments routed over the Rio Grande via Ogden or Salt Lake City. One Idaho shipper has made few sales of potatoes in the Southwest in the last several years, because of pocket markets there." 287 I.C.C. at 643. Pocket markets, of course, exist because reconsignment is possible only at high combination rates. We see no reason why a shipper's privilege to have his goods reconsigned at joint rates should not be considered on the same basis as transit services in determining the adequacy and economy of existing transportation. We think it was error for the Nebraska court to narrow the scope of the Commission's order by excluding shipments of commodities which so urgently need the advantage of reconsignment privileges at joint rates. Many other arguments are made against the Commission's order. It is pointed out, for example, that the Rio Grande road has more curves than the Union Pacific. Its grades are steeper. Consequently, its traffic is sometimes slower. It is contended that the evidence as a whole is insufficient to justify the holding that the establishment of through routes will be of such great advantage to shippers and the public that the Union Pacific should be compelled to short-haul itself. We are not unmindful of the force of the arguments made by the Union Pacific and by those who have intervened on its side. It is entirely possible that the Commission could have made findings contrary to those it did make. But, on the whole, we are unable to say that the Commission did not strike a fair balance in finding that the evidence required the establishment of these through routes and joint rates. After consideration of all the contentions made, we hold that the Nebraska court should have sustained the Commission's order in full. Since the Commission's order is justified under §§ 15(1), 15(3) and 15(4), we have no occasion to consider contentions raised under §§ 3(1) and 3(4). The judgment of the District Court of Colorado is reversed with directions to dismiss the bill. The judgment of the Nebraska District Court is affirmed insofar as it affirmed the order of the Commission, and is reversed insofar as the court refused to enforce the Commission's order. It is so ordered.

1. After hearings upon complaint of the Rio Grande Railroad, the Interstate Commerce Commission ordered the Union Pacific to establish through routes with the Rio Grande for certain commodities such as fruits, perishable foods, and livestock in a limited geographical area, and to establish joint rates the same as applied on its own and other connecting lines. The Rio Grande, considering itself aggrieved both because of the geographical limitations of the order and because joint rates were not established for all commodities, challenged the order in the Federal District Court in Colorado. The court set aside the order on the ground that there was no substantial evidence to support the Commission's finding that through routes were not in existence. Held: the Commission's conclusion that the through routes claimed were not in existence was supported by substantial evidence, and it was error for the Colorado District Court to set aside the Commission's finding and to remand the case to the Commission. . 2. The Union Pacific, considering itself aggrieved because the Commission's order required establishment of some through routes and joint rates, challenged the order in the Federal District Court in Nebraska. That court sustained the order of the Commission with reference to shipments which required certain transit services on the Rio Grande, but refused to sustain the order with reference to shipments not requiring such transit services. Held: the judgment of the Nebraska District Court is affirmed insofar as it affirmed the order of the Commission, and is reversed insofar as it refused to enforce the Commission's order. . (a) The Commission cannot be deemed to have acted in excess of its authority in concluding, on the evidence before it, that through routes and joint rates on the specified commodities were needed to provide adequate and more economic transportation, and were necessary in the public interest. . (b) The Nebraska District Court erred in cutting down the scope of the Commission's order insofar as it established through routes and joint rates on shipments that did not require certain transit services on the Rio Grande. . (c) A shipper's privilege to have his goods reconsigned at joint rates should be considered on the same basis as transit services in determining the adequacy and economy of existing transportation. P.. (d) The Commission's order was justified under §§ 15(1), 15(3), and 15(4) of the Interstate Commerce Act, and the Nebraska District Court should have sustained the order in full. . 131 F. Supp. 372, reversed. 132 F. Supp. 72, affirmed in part and reversed in part.

1955_233

https://www.oyez.org/cases/1955/233

MR. JUSTICE DOUGLAS delivered the opinion of the Court. Sulphur mined near Galveston, Texas, can be shipped to Danville, Illinois, either by rail or by barge and rail. If the sulphur goes by barge and rail, it is transported up the Mississippi via New Orleans to East St. Louis, and then by rail to Danville. The total charge for that movement is $9.77 per ton. The total of the various local rates for all-rail shipments from the mines to Danville is $11.68. But the railroads have established a joint all-rail rate of $9.184, which is lower than both the combination all-rail rate and the combination rail-barge rate. Appellants, who are water carriers, requested the competing railroads to establish a joint rail-barge rate of $7.67 on sulphur from Galveston to Danville. The railroads refused. Appellants thereupon filed a complaint with the Interstate Commerce Commission alleging that the existing rail-barge rates on sulphur were excessive and unreasonable, that through rail-barge routes and joint rates with reasonable differentials below the all-rail rates should be established, and that the refusal of the railroads to establish such joint rates discriminated against the barges as connecting carriers in violation of the Interstate Commerce Act, as amended by the Transportation Act of 1940. Appellants requested the Commission to establish a through rail-barge route and a joint rate, and suggested that the joint rate be fixed at $7.67. Appellants proposed that the Danville railroads receive $2.26 as a division of that rate, calculated to be the same as they receive from the all-rail rate from Galveston to Danville. Under the proposed rate, the cost of rail-barge shipments from the mines to Danville would be $9.17, as compared with the all-rail rate of $9.184. A Division of the Commission dismissed the complaint, one Commissioner dissenting. 287 I.C.C. 403. The Commission affirmed the Division, three Commissioners dissenting. 291 I.C.C. 422. A three-judge District Court sustained the Commission. 129 F. Supp. 28. The case is here on appeal, 28 U.S.C. §§ 1253, 2101(b), 2325. Section 3(4) of the Act provides that "All carriers subject to the provisions of this part . . . shall not discriminate in their rates, fares, and charges between connecting lines. . . ." Section 3(4) defines "connecting line" as including "any common carrier by water subject to Part III." Appellants are common carriers by water within that definition. They maintain that it is unlawful under § 3(4) of the Act for a railroad to refuse to join in through routes and joint rates with a water carrier when it has already joined in such routes and rates with a connecting rail line. They further maintain that the power of the Commission under § 307(d) to establish through routes and joint rates should have been exercised here. We had a closely related question before us in Interstate Commerce Commission v. Mechling,. In that case, we invalidated an order of the Commission which approved higher rail rates for the transportation of grain east of Chicago if it had arrived in Chicago by barge, rather than by rail. We reviewed the history of the Transportation Act of 1940 and concluded that that Act "unequivocally required the Commission to fix rates which would preserve for shippers the inherent advantages of barge transportation: lower cost of equipment, operation, and therefore service." Id. at. We held that the discrimination which was outlawed applied to through rates as well as to ordinary rates. The Mechling case involved an attempt to deprive water transportation of one of its "inherent advantages," as that phrase is used in the preamble of the 1940 Act, by increasing the cost of barge service. The Commission's present decision achieves the same result through the device of a joint rate allowed carriers by rail but denied carriers by water. It was recognized in the debates on the bill that became the Transportation Act of 1940 that manipulation of rail rates downward might deprive water carriers of their "inherent advantages," and therefore violate the Act. It was emphasized that one of the evils to be remedied was cutthroat competition, whereby strong rail carriers would reduce their rates, putting water carriers out of business. There was recognition, that for shippers to get the benefit of the "inherent advantages" of water transportation, there frequently would have to be joint rail-barge rates. Barge transportation frequently covers only one segment of the journey to market. The failure of the railroads to establish nondiscriminatory joint rates with barges might therefore seriously impair the development of barge service as a vital component of our national transportation system. Section 3 outlaws discrimination in all its forms. See New York v. United States,,. Where there is discrimination by the use of a joint rate to favor rail carriers over carriers by water and to deprive the latter of their "inherent advantages," the Commission has a duty to end it under § 307(d). That subsection makes it mandatory for the Commission to establish through routes and joint rates "whenever deemed by it to be necessary or desirable in the public interest." The public interest, as defined in the Act, is the guide to the Commission's action. McLean Trucking Co. v. United States,,. The policy is to preserve all the "inherent advantages" of the water carriers. That means that a joint barge-rail rate must be established when it appears, as here, that a joint rail rate discriminates against the water carriers. Otherwise a manipulated rate structure will take the business from the water carriers. In absence of the joint all-rail rate, the rail-barge combination rate for sulphur would be $1.91 per ton less than the all-rail combination rate between the same points. That differential reflects the lower cost of the barge segment of the journey. It is at once lost to shippers when joint rates are allowed rail carriers and withheld from the water carriers. To hold otherwise would be to sanction a rate structure which, through the use of discriminatory joint rates, denies shippers the "inherent advantages" of water transportation. Reversed.

On shipments of sulphur from mines near Galveston, Tex., to Danville, Ill., the railroads have established a joint all-rail rate which is lower than both the combination all-rail rate and the combination rail-barge rate; but they have refused to establish a joint rail-barge rate between the same points. Held: such refusal constitutes a discrimination in rates between connecting lines prohibited by § 3(4) of the Interstate Commerce Act, and it is the duty of the Commission under § 307(d) to establish through routes and joint rates for rail-barge transportation in order to effectuate the National Transportation Policy that the Act be administered to preserve the "inherent advantages" of each form of transportation. . 129 F. Supp. 28 reversed.

1955_129

https://www.oyez.org/cases/1955/129

MR. JUSTICE MINTON delivered the opinion of the Court. The appellants are a partnership and its agent, all residents of Illinois. The partnership was engaged exclusively in the business of selling and issuing money orders in the State of Illinois. This business activity was to be conducted through agents who are principally persons engaged in operating retail drug, hardware and grocery stores. Appellant Derrick, a drug store proprietor, contracted with the partnership to act as its agent for the sale of money orders which it issued. Illinois, by statute, has sought to license and regulate community currency exchanges. Section 1 of the Community Currency Exchanges Act defines a community currency exchange as "any person, firm, association, partnership or corporation, except banks incorporated under the laws of this State and National Banks organized pursuant to the laws of the United States, engaged . . . in the business or service of, and providing facilities for, cashing checks, drafts, money orders or any other evidences of money acceptable to such community currency exchange, for a fee or service charge or other consideration, or engaged in the business of selling or issuing money orders under his or their or its name, or any other money orders (other than United States Post Office money orders, American Express Company money order, Postal Telegraph Company money orders, or Western Union Telegraph Company money orders), or engaged in both such businesses, or engaged in performing any one or more of the foregoing services. " Subsequent sections of the Act provide for the licensing and comprehensive regulation of such businesses. Appellants brought this suit in the Northern District of Illinois seeking to enjoin the appellees, who are the Auditor of Public Accounts, the Attorney General of the State of Illinois and the State's Attorney of Cook County, Illinois, from enforcing the Community Currency Exchanges Act against them. Jurisdiction was asserted under 28 U.S.C. § 1331. Appellants argued that a permanent injunction should be issued on the ground that the Act denied them equal protection of the laws in violation of § 1 of the Fourteenth Amendment to the Federal Constitution in that appellants are required to obtain a license and submit to regulation in the conduct of their money order business in the State, while the American Express Company, which is engaged in the identical business activity in Illinois, is excepted from the operation of the Act. Since the complaint attacked the validity of a state statute under the Fourteenth Amendment to the Federal Constitution, the suit was tried before a three-judge District Court pursuant to 28 U.S.C. §§ 2281 and 2284. The District Court heard the case at length and made findings of fact, the material portions of which we have set forth above. The District Court dismissed the complaint, holding that it lacked jurisdiction to determine the constitutional question presented in the absence of an authoritative determination by the Supreme Court of Illinois as to whether the exemption of the American Express Company from the terms of the Act is unconstitutional as applied to these appellants. 127 F. Supp. 853. We noted probable jurisdiction. 350 U.S. 814. It is clear that the District Court had jurisdiction to entertain appellants' complaint by virtue of the authority vested in it by 28 U.S.C. §§ 2281 and 2284. This Court has never held that a district court is without jurisdiction to entertain a prayer for an injunction restraining the enforcement of a state statute on grounds of alleged repugnancy to the Federal Constitution simply because the state courts had not yet rendered a clear or definitive decision as to the meaning or federal constitutionality of the statute. We hold that the District Court has jurisdiction of this cause. It was error to dismiss the complaint for lack of jurisdiction. The judgment of the District Court is vacated, and the case is remanded to it. We do not decide what procedures the District Court should follow on remand. It is so ordered.

A three-judge federal district court has jurisdiction under 28 U.S.C. §§ 1331, 2281 and 2284 of a suit to enjoin enforcement of a state statute on grounds of alleged repugnancy to the Federal Constitution, even though the state courts have not yet rendered a clear or definitive decision as to the meaning or federal constitutionality of the statute. . 127 F.Supp 853, judgment vacated and case remanded.

1955_489

https://www.oyez.org/cases/1955/489

MR. JUSTICE BURTON delivered the opinion of the Court. In this case, our jurisdiction is questioned by the State of Florida because the judgment of the Supreme Court of that State, which we are asked to review and which was rendered without opinion, may have rested upon an adequate state ground. For the reasons hereafter stated, we find that to be true, with the result that we have no jurisdiction to entertain this petition or to consider the merits of the federal questions suggested by petitioner. While we thus deem petitioner's allegations of fact as to the merits of this case to be irrelevant here, we imply nothing as to their truth or falsity, and we refrain from any discussion that depends upon or assumes their truth. In 1945, petitioner Durley was convicted by a jury in the Criminal Court of Record for Polk County, Florida, on two informations. In each, he was charged, in three counts, with stealing cattle.

Upon reviewing the decision of the Supreme Court of Florida denying, without opinion, petitioner's petition for a writ of habeas corpus, in which he claimed, inter alia, that his state conviction and imprisonment for stealing cattle violated the Federal Constitution, it appeared that the judgment of that Court might have rested on one or both of two adequate state grounds. Held: the case is dismissed for lack of jurisdiction. . (a) Where the highest court of a State delivers no opinion and it appears that its judgment might have rested on a nonfederal ground, this Court will not take jurisdiction to review the judgment. Stembridge v. Georgia,. . (b) The Supreme Court of Florida might have rested its denial of the petition here involved on either or both of the following grounds: (1) that the several federal issues presented by it had been raised previously within the meaning of Fla.Stat.Ann., 1943, § 79.10, and therefore could not be raised again under state practice; (2) that they could have been raised in the prior proceedings and, accordingly, were not available as a matter of state law under Florida decisions. . (c) There is nothing in the order of the Supreme Court of Florida to show that that Court must have decided the case on federal grounds, rather than on the readily available and substantial state grounds. . Case dismissed.

1955_162

https://www.oyez.org/cases/1955/162

MR. JUSTICE DOUGLAS delivered the opinion of the Court. Three motor common carriers filed a complaint with the Interstate Commerce Commission under § 204(c) of Part II of the Interstate Commerce Act, 49 Stat. 547, as amended, 49 U.S.C. § 304(c), alleging that Frozen Food Express, a common carrier by motor vehicle, was and had been transporting fresh and frozen meats and fresh and frozen dressed poultry in interstate commerce without a certificate of convenience and necessity from the Commission which covers those commodities. The complaint prayed for a cease and desist order. Frozen Food Express admitted that it was and had been so transporting the named commodities. but asserted in defense that those operations were within the exemption of § 203(b)(6). The Commission found that Frozen Food Express had been performing unauthorized operations and that fresh and frozen meats and fresh and frozen dressed poultry were not within the exemption of § 203(b)(6). 62 M.C.C. 646. Accordingly it ordered Frozen Food Express to cease and desist from engaging in these operations. Frozen Food Express brought suit before a three-judge District Court, 28 U.S.C. § 2325, to set the Commission's order aside, 28 U.S.C. § 1336; 49 Stat. 550, as amended, 49 U.S.C. § 305(g); 60 Stat. 243, 5 U.S.C. § 1009. The answer of the United States and the complaint in intervention filed by the Secretary of Agriculture supported the position of Frozen Food Express. The original complainants before the Commission and other interested carriers and carrier associations intervened in support of the Commission. The District Court sustained the Commission's conclusion that fresh and frozen meats are nonexempt commodities. No appeal was taken from that holding. The District Court held that fresh and frozen dressed poultry are exempt commodities under § 203(b)(6), and restrained the Commission from enforcing its cease and desist order as respects those products. 128 F. Supp. 374. The cases are here by appeal. 28 U.S.C. §§ 1253, 2101(b). We agree with the District Court that the Commission's ruling does not square with the statute. The exemption of motor vehicles carrying "agricultural (including horticultural) commodities (not including manufactured products thereof)" was designed to preserve for the farmers the advantage of low-cost motor transportation. See especially 79 Cong.Rec. 12217. The victory in the Congress for the exemption was recognition that the price which the farmer obtains for his products is greatly affected by the cost of transporting them to the consuming market in their raw state or after they have become marketable by incidental processing. The history of the words "agricultural . . . commodities (not including manufactured products thereof)" contained in § 203(b)(6) supports that conclusion. The bill as it came to the floor of the House from the Interstate and Foreign Commerce Committee (79 Cong.Rec. 12204) exempted "motor vehicles used exclusively in carrying livestock or unprocessed agricultural products." Id., 12220. Mr. Pettengill for the Committee offered an amendment which substituted for the words "unprocessed agricultural products" the phrase "agricultural commodities not including manufactured products thereof." That amendment was agreed to after the following colloquy: "Mr. PETTENGILL. Mr. Chairman, we have heard a good deal of discussion this afternoon as to what is a processed agricultural product, whether that would include pasteurized milk or ginned cotton. It was not the intent of the committee that it should include those products. Therefore, to meet the views of many Members, we thought we would strike out the word 'unprocessed' and make it apply only to manufactured products." "* * * *" "Mr. WHITTINGTON. In other words, under the amendment to the committee amendment, cotton in bales and cottonseed transported from the ginneries to the market or to a public warehouse would be exempt, whereas they might not be exempt if the language remained, because ginning is sometimes synonymous with processing." "Mr. PETTENGILL. That is correct." It is plain from this change that the exemption of "agricultural commodities" was considerably broadened by making clear that the exemption was lost not by incidental or preliminary processing, but by manufacturing. Killing, dressing, and freezing a chicken is certainly a change in the commodity. But it is no more drastic a change than the change which takes place in milk from pasteurizing, homogenizing, adding vitamin concentrates, standardizing, and bottling. Yet the Commission agrees that milk so processed is not a "manufactured" product, but falls within the meaning of the "agricultural" exemption. 52 M.C.C. 511, 551. The Commission also agrees that ginned cotton and cottonseed are exempt. Id., 523-524. But there is hardly less difference between cotton in the field and cotton at the gin or in the bale or between cottonseed in the field and cottonseed at the gin, than between a chicken in the pen and one that is dressed. The ginned and baled cotton and the cottonseed, as well as the dressed chicken, have gone through a processing stage. But neither has been "manufactured" in the normal sense of the word. The Court, in Anheuser-Busch Brewing Assn. v. United States,,, in a case arising under the tariff laws, said, ". . . Manufacture implies a change, but every change is not manufacture, and yet every change in an article is the result of treatment, labor, and manipulation. But something more is necessary, as set forth and illustrated in Hartranft v. Wiegmann,. There must be transformation; a new and different article must emerge, 'having a distinctive name, character, or use.' " In that case, imported corks were made ready for use in beer bottles by stamping, by removal of dust, meal, bugs, and worms, by washing and steaming to remove tannin and to increase elasticity, and by drying. Plainly, the corks were processed. But the Court held they had not been manufactured within the drawback provision of the tariff laws. And see Hartranft v. Wiegmann,,; United States v. Dudley,. A chicken that has been killed and dressed is still a chicken. Removal of its feathers and entrails has made it ready for market. But we cannot conclude that this processing which merely makes the chicken marketable turns it into a "manufactured" commodity. At some point, processing and manufacturing will merge. But, where the commodity retains a continuing substantial identity through the processing stage, we cannot say that it has been "manufactured" within the meaning of § 203(b)(6). The Commission is the expert in the field of transportation. And its judgment is entitled to great deference because of its familiarity with the conditions in the industry which it regulates. American Trucking Assns. v. United States,,. But Congress has placed limits on its statutory powers, and our duty on judicial review is to determine those limits. See Social Security Board v. Nierotko,. Those limits would be passed here if the Commission were permitted to expand "manufactured" to include such incidental processing as is involved in dressing and freezing a chicken. Affirmed.

On complaint of three motor common carriers under § 204 (c) of the Interstate Commerce Act, the Commission ordered Frozen Food Express, another motor common carrier, to cease and desist from transporting in interstate commerce without a certificate of convenience and necessity fresh and frozen dressed poultry, which it found not to be within the exemption under § 203(b)(6) of the Act of "agricultural . . . commodities (not including manufactured products thereof)." Frozen Food Express sued in a Federal District Court to set aside the order. Held: fresh and frozen dressed poultry is an "agricultural" commodity within the meaning of § 203(b)(6), and not a "manufactured" product thereof, and the District Court properly set aside the Commission's order. . 128 F. Supp. 374 affirmed.

1955_51

https://www.oyez.org/cases/1955/51

MR. JUSTICE HARLAN delivered the opinion of the Court. This case presents questions under Title II of the Federal Power Act, 49 Stat. 847, 16 U.S.C. § 824 et seq., which are in part similar to those we have decided today under the Natural Gas Act in United Gas Pipe Line Co. v. Mobile Gas Service Corp., ante, p.. The pertinent provisions of the Federal Power Act, set forth in the margin, are §§ 205(c), (d), and (e), and 206(a), which are substantially identical to §§ 4(c), (d), and (e), and 5(a), respectively, of the Natural Gas. Act. Respondent Sierra Pacific Power Company (Sierra) distributes electricity to consumers in northern Nevada and eastern California. For many years, it has purchased the major part of its electric power from petitioner Pacific Gas and Electric Company (PG&E), a "public utility" subject to regulation under Part II of the Federal Power Act. In 1947 Sierra, faced with increased post-war demands and consumer agitation for cheaper power, began negotiating for power from other sources, including the Federal Bureau of Reclamation, which at the time had unused capacity at Shasta Dam. To forestall the potential competition, PG&E offered Sierra a 15-year contract for power at a special low rate, which offer Sierra finally accepted in June, 1948. The contract was duly filed with the Federal Power Commission. Early in 1953, when power from Shasta Dam was no longer available to Sierra, PG&E, without the consent of Sierra, filed with the Commission under § 205(d) of the Federal Power Act a schedule purporting to increase its rate to Sierra by approximately 28%. The Commission, acting under § 205(e), suspended the effective date of the new rate until September 6, 1953, and initiated a proceeding to determine its reasonableness. Sierra was permitted to intervene in the proceeding, but its motion to reject the filing on the ground that PG&E could not thus unilaterally change the contract was denied. After completion of the hearings, the Commission, by order dated June 17, 1954, reaffirmed its refusal to reject the filing and held the new rate not to be "unjust, unreasonable, unduly discriminatory, or preferential." 7 P.U.R. 3d 256. On Sierra's petition for review, the Court of Appeals for the District of Columbia, holding that the contract rate could be changed only upon a finding by the Commission that it was unreasonable, set aside the Commission's order and remanded the case with instructions to the Commission to dismiss the § 205(e) proceeding, but without prejudice to its instituting a new proceeding under § 206(a) to determine the reasonableness of the contract rate. 96 U.S.App.D.C. 140, 223 F.2d 605. We brought the case here because of the importance of the questions involved in the administration of the Federal Power Act. 349 U.S. 937. The first question before us is whether PG&E's unilateral filing of the new rate under § 205(d), and the approval of the new rate by the Commission under § 205(e), were effective to supersede PG&E's contract with Sierra. We think not. As the parties concede, the provisions of the Federal Power Act relevant to this question are in all material respects substantially identical to the equivalent provisions of the Natural Gas Act. In United Gas Pipe Line Co. v. Mobile Gas Service Corp., supra, decided today, we construed the Natural Gas Act as not authorizing unilateral contract changes, and that interpretation is equally applicable to the Federal Power Act. Accordingly, for the reasons there given, we conclude that neither PG&E's filing of the new rate nor the Commission's finding that the new rate was not unlawful was effective to change PG&E's contract with Sierra. This case, however, raises a further question not present in the Mobile case. The Commission has undoubted power under § 206(a) to prescribe a change in contract rates whenever it determines such rates to be unlawful. While this power is limited to prescribing the rate "to be thereafter observed," and thus can effect no change prior to the date of the order, the Commission's order here, if based on the necessary findings, could have been effective to prescribe the proposed rate as the rate to be in effect prospectively from the date of the order, June 17, 1954. If the proceedings here satisfied in substance the requirements of § 206(a), it would seem immaterial that the investigation was begun as one into the reasonableness of the proposed rate, rather than the existing contract rate. The condition precedent to the Commission's exercise of its power under § 206(a) is a finding that the existing rate is "unjust, unreasonable, unduly discriminatory or preferential." Petitioners contend that the Commission did, in fact, make such a finding. It was stipulated in the proceedings before the Commission that 5.5% was normally a reasonable rate of return for PG&E's operations, that the contract rate would produce a 2.6% rate of return, and that the proposed rate would produce a 4.75% rate of return. The Commission concluded that the proposed rate was not unreasonably high, because it provided no more than a fair return, and was not unreasonably low because the 0.75% deficiency of its yield from the stipulated reasonable rate of return was not being made up on other sales, and was justified in order to retain business the loss of which by PG&E would result in idle facilities. It also concluded that the proposed rate was not unduly discriminatory or preferential, despite substantial differences between it and the rates being charged other customers. While no further findings were necessary in view of the Commission's interpretation of the Act as permitting unilateral contract changes, the Commission went on to say: "However, we may point out that, if a finding on the lawfulness of the 1948 contract rate were necessary or appropriate, on the record before us, that finding would have to be that the 1948 rate is unreasonably low, and therefore unlawful. For none of the evidence in this record warrants a finding that any rate would be reasonable that would produce a return of substantially less than the 4.75% resulting from the proposed rate, which is the minimum PG&E is willing to accept." It is contended that by this statement the Commission in substance found that the existing contract rate was "unreasonable," and fixed the proposed rate as "the just and reasonable rate," thereby satisfying the requirements of § 206(a). But, even accepting this statement as a finding of unreasonableness of the contract rate, the Commission's conclusion appears, on its face, to be based on an erroneous standard. In short, the Commission holds that the contract rate is unreasonable solely because it yields less than a fair return on the net invested capital. But, while it may be that the Commission may not normally impose upon a public utility a rate which would produce less than a fair return, it does not follow that the public utility may not itself agree by contract to a rate affording less than a fair return or that, if it does so, it is entitled to be relieved of its improvident bargain. Cf. Arkansas Natural Gas Co. v. Arkansas Railroad Comm'n,. In such circumstances, the sole concern of the Commission would seem to be whether the rate is so low as to adversely affect the public interest -- as where it might impair the financial ability of the public utility to continue its service, cast upon other consumers an excessive burden, or be unduly discriminatory. That the purpose of the power given the Commission by § 206(a) is the protection of the public interest, as distinguished from the private interests of the utilities, is evidenced by the recital in § 201 of the Act that the scheme of regulation imposed "is necessary in the public interest." When § 206(a) is read in the light of this purpose, it is clear that a contract may not be said to be either "unjust" or "unreasonable" simply because it is unprofitable to the public utility. Whether, under the facts of this case, the contract rate is so low as to have an adverse effect on the public interest is, of course, a question to be determined in the first instance by the Commission. We shall therefore affirm the order of the Court of Appeals, with instructions to remand the case to the Federal Power Commission for such further proceedings, not inconsistent with this opinion, as the Commission may deem desirable. It is so ordered.

A supplier of electric power which is a "public utility" subject to regulation under Part II of the Federal Power Act entered into a contract, duly filed with the Federal Power Commission, to supply electric power to a distributor at a special low rate for 15 years. Before expiration of the contract, and without the consent of the distributor, the supplier filed with the Commission under § 205(d) of the Act a schedule purporting to increase its rate to the distributor. Acting under § 205(e), the Commission conducted proceedings to determine the reasonableness of the new rate, denied the distributor's motion to reject the filing on the ground that the supplier could not thus unilaterally change the contract, and held the new rate not to be "unjust, unreasonable, unduly discriminatory, or preferential." Held: 1. These proceedings were not effective to supersede the supplier's contract with the distributor. United Gas Pipe Line Co. v. Mobile Gas Service Corp., ante, p.. . 2. The requirements of § 206(a), which provides that, if the Commission finds an existing rate to be "unjust, unreasonable, unduly discriminatory or preferential," it may determine a "just and reasonable rate" and fix the same by order, were not satisfied by the Commission's statement that, "if a finding on the lawfulness of the [existing] contract rate were necessary or appropriate, on the record before us, that finding would have to be that the [existing] rate is unreasonably low, and therefore unlawful. For none of the evidence in this record warrants a finding that any rate would be reasonable that would produce a return of substantially less than the 4.75% resulting from the proposed rate, which is the minimum [the supplier] is willing to accept." . (a) Under § 206(a), the Commission has undoubted power to prescribe a change in contract rates whenever it determines them to be unlawful, but its power is limited to prescribing the rate "to be thereafter observed," and it can effect no change prior to the date of the order. P.. (b) If the proceeding here satisfied in substance the requirements of § 206(a), it would seem immaterial that the investigation was begun as one into the reasonableness of the proposed rate, rather than the existing contract rate. P.. (c) The purpose of the power given the Commission under § 206(a) is the protection of the public interest, as distinguished from the private interest of the utilities, and a contract may not be said to be either "unjust" or "unreasonable" simply because it is unprofitable to the public utility. . 3. The order of the Court of Appeals setting aside the Commission's approval of the new rate and remanding the case to the Commission is affirmed with instructions to remand the case to the Commission for such further proceedings, not inconsistent with this opinion, as the Commission may deem desirable. P.. 96 U.S.App.D.C. 140, 223 F.2d 605, affirmed.

1955_383

https://www.oyez.org/cases/1955/383

MR. JUSTICE REED delivered the opinion of the Court. General Box Company, an owner of trees of commercial value along the main stem of the Mississippi River in Louisiana, brought this action to recover from the United States the value of its timber destroyed by the Government through its duly authorized agent, a contractor. The trees grew upon land belonging to others and located between the low- and high-water mark of the river. Such land is known in Louisiana as "batture." Since colonial days, batture has been subject to a servitude of the State for use in the construction and maintenance of levees. It may be used for these purposes without the payment of compensation to the owner. The United States cooperates with Louisiana in the containment of the Mississippi within levees. To carry out federal plans in the area in controversy, the United States requires, and Louisiana agrees to furnish, the necessary rights-of-way "without cost" for the construction of levees. Louisiana has given general authority to its Levee Boards to donate to the United States the necessary "lands, movable or immovable property, rights of way, or servitudes" for flood control use. The Fifth Louisiana Levee District, the one here involved, agreed to meet the requirements of the Federal Flood Control Act. The location of the operation giving rise to this action was at the Brabston Levee in the Fifth Louisiana Levee District. The first step taken by the United States to obtain the permission of the State to use the State's servitude in the batture here in issue was the filing of the federal plans with the State District Engineer. The plans were approved by the Engineer, and the local Levee Board was so notified. On June 10, 1947, the Levee Board received the drawings from the United States District Engineer with the following request for authority: "It is desired that this District be furnished a formal statement by your Board that rights-of-way are available for the construction of the enlargement and granting the United States a right of entry to prosecute the work. This statement may be in the form of a letter signed by the President of the Board. " Under a standing resolution, adopted September 12, 1945, the President of the Board was empowered to honor applications for such authority. On June 12, 1947, the Board President responded to the United States Engineer, quoting the words of the request and adding: "The Board of Commissioners of the Fifth Louisiana Levee District hereby is glad to comply with your request and render you any assistance possible." On July 9, that letter was spread upon the minutes of the Board. We accept that, as did the Court of Appeals, as a ratification by the Board of the act of its President. On July 10, the contractors who were to execute the levee work were authorized by the United States to proceed within 20 days, and the clearing of the batture was commenced on July 22. No notice was given to petitioner of the intention to bulldoze its trees off the batture. On September 12, the petitioner discovered that the trees were being destroyed, and an objection was promptly made. The contractor, however, refused to halt its operations, relying upon its contract with the Government. Petitioner brought two actions in the District Court under the Tucker Act, 28 U.S.C. § 1346(a)(2), to recover the value of the destroyed timber. The suits were consolidated for trial, and ultimately a single judgment was entered against the United States in the amount of $10,801 plus interest. Both the United States and petitioner took appeals to the Court of Appeals, the former on the merits and the latter from so much of the judgment as fixed the interest at 4% from date of judgment. The Court of Appeals reversed, holding the United States to be free from liability. We granted certiorari to examine the liability of the United States for proceeding to clear this land without notice to petitioner, the owner of the trees, and thus without granting petitioner a reasonable opportunity to salvage the timber. One of the defenses relied upon by the United States throughout this litigation is a claim that it is not liable to petitioner for the timber losses because it received rights-of-way on the land involved from the Levee Board, and that the Levee Board legally appropriated those rights-of-way without compensation under its riparian servitude. Petitioner concedes that, under the civil law of Louisiana, the property on which its trees were standing, being batture, is subject to a riparian servitude for use by the State of Louisiana in constructing and repairing levees, and that historically the owner of such property has been required to permit State use without compensation of such part thereof as might be needed for levee purposes. And it is not denied that the timber on this land, as well as the land itself, is subject to the exercise of the servitude for levee purposes. Petitioner in effect does claim, however, that the State did not effectively exercise the riparian servitude for the reason that the appropriation here was arbitrary, and therefore beyond the power of the State. This contention is based upon the fact that no notice of the proposed destruction was given to petitioner. It is argued that, under Louisiana law, which, of course, defines the bounds of the riparian servitude, the power possessed by the State by reason of the servitude is not an unlimited and arbitrary power; that it would be arbitrary, oppressive, and unjust to exercise the State's rights under the servitude in the circumstances of this case without prior notice to petitioner; that therefore the attempt by the State to exercise the servitude without such notice was ineffective to cause an appropriation of the timber pursuant to the servitude. If Louisiana could not exercise its rights under the servitude without first giving notice to petitioner, the timber here involved was never successfully taken by the State free of an obligation to compensate for the taking. It would follow that the United States received no rights from the Levee Board permitting destruction of the trees by it free of that obligation. The Court of Appeals held, based upon its analysis of Louisiana law, that prior notice to petitioner was not a prerequisite to an appropriation of its timber for levee purposes. We ordinarily accept the determinations of the Courts of Appeals on questions of local law, and we do so here. Ragan v. Merchants Transfer & Warehouse Co.,,; Huddleston v. Dwyer,,. The Louisiana courts have made no pronouncement which directly controls this question. But see Board of Comm'rs v. Trouille, 212 La. 152, 31 So. 2d 700. The Supreme Court of Louisiana has, however, as recently as 1946, reviewed the long history of the riparian servitude. Dickson v. Board of Comm'rs, 210 La. 121, 26 So. 2d 474. In that case, it was noted that: ". . . while, in all of the remaining states of the Union, lands necessary for levee purposes can only be used after expropriation and proper indemnification, in Louisiana, the State has the right to act first, i.e., the authority to appropriate such land to a use to which it is subject under its very title, and talk later." "* * * *" ". . . And however unfair it may seem to the owners of this type of land, they are without right to complain, because their acquisition of such land was subject by law to this ancient servitude, and the private mischief must be endured, rather than the public inconvenience or calamity." 210 La. at 132, 136, 26 So. 2d at 478, 479. The court further stated that the rights of the State under the servitude can be exercised in the way found to be "most expeditious from an engineering, economical, and practical standpoint." 210 La. at 127, 138, 26 So. 2d at 480; Board of Comm'rs v. Franklin, 219 La. 859, 866, 54 So. 2d 125, 127-128. The levee enlargement plan here called for bulldozing standing timber for reasons of economy -- that operation admittedly being a less expensive method for clearing land than removing the stumps of cut timber. The servitude was developed so as to insure "that the shores of navigable rivers and streams in this state would always be kept free for the public for levee . . . purposes." 210 La. at 131-132, 26 So. 2d at 478. This historical background makes clear that the rights of the State in property subject to the servitude are very broad. By law, and for the good of all, lands were made available to the State for levee purposes in as convenient a manner to the State as was necessary for the public welfare, and with little regard for the severity of the obligations imposed on the individual property owner. Nothing in the development of the servitude indicates that, before the State can exercise its obviously comprehensive rights, it must provide an opportunity to remove timber from batture. Since, as we hold, petitioner's property was effectively appropriated by state authorities pursuant to the servitude, the United States cannot be liable to petitioner for the value of the property. The State, as owner of the servitude, legally could have destroyed the timber without prior notice and without any opportunity for mitigation of losses, and yet be free of liability to petitioner. The destruction, it seems to us, was consistent with the rights of the State under the servitude. Rather than undertake the levee project itself, Louisiana, through one of its agencies, donated its rights as against petitioner's timber to the United States. The United States, as donee of those rights, could exercise them to their full extent without incurring liability, just as its donor could have done. The petitioner sought compensation for the destruction of the trees based upon a claim that the "destruction of said timber was (a) taking . . . within the meaning of the Fifth Amendment to the Federal Constitution." But this property was not taken by the United States in the exercise of its power of eminent domain. In effect, the timber was "owned" by Louisiana for levee purposes, and the United States succeeded to that "ownership" by "conveyance." Louisiana furnished its batture as required by the law of both the United States and Louisiana for use in protecting the property in the State from floods. Petitioner did not assert in its complaints or in its question presented on petition for certiorari that the destruction violated the Due Process Clause of the Fifth Amendment. Affirmed.

Petitioner owned timber on "batture," land located between low- and high-water mark on the Mississippi River in Louisiana, which was subject to a servitude of the State for levee purposes. The rights of the State had been donated to the United States. Without notice to petitioner, the timber was destroyed by a government contractor in levee-building operations, and petitioner sued in the federal court under the Tucker Act to recover its value. Held: 1. This Court accepts the determination of the Court of Appeals that, under Louisiana law, prior notice to petitioner was not a prerequisite to an appropriation of its timber for levee purposes. . 2. Petitioner's property was effectively appropriated by state authorities pursuant to the servitude, and therefore the United States is not liable to petitioner for its value. . 3. The State having donated to the United States its rights as against petitioner's timber, the United States could exercise those rights to the fullest extent without incurring liability, just as the State could have done. P.. 4. The destruction of petitioner's timber was not a taking by the United States in the exercise of the power of eminent domain for which the Fifth Amendment required compensation. P.. 224 F.2d 7 affirmed.

1955_170

https://www.oyez.org/cases/1955/170

MR. JUSTICE DOUGLAS delivered the opinion of the Court. Petitioner instituted proceedings under c. XI of the Bankruptcy Act, 52 Stat. 905, as amended, 11 U.S.C. § 701 et seq., alleging it was unable to pay its debts as they matured. It proposed an arrangement of its general unsecured trade and commercial debts, none of which is evidence by any publicly held security. Petitioner has indeed no debts of any nature by way of bonds, mortgage certificates, notes, debentures, or obligations of like character, publicly held. It does, however, have over 2,000,000 shares of $1 par value common stock listed on the American Stock Exchange and held by over 7,000 shareholders. One of these -- an owner of 3,000 shares -- and the Securities and Exchange Commission moved that the proceedings be dismissed unless, within a time fixed by the court, the petition by amended to comply with the requirements of c. X of the Bankruptcy Act, 52 Stat. 883, as amended, 11 U.S.C. § 501 et seq., for a corporate reorganization. The District Court granted the motions. 129 F. Supp. 801. The Court of Appeals affirmed by a divided vote. 222 F.2d 234. The case is here on certiorari. 350 U.S. 809. Petitioner, formerly known as D. A. Schulte, Inc., has operated for some years a chain of stores for the sale of tobacco and accessory products. Petitioner has also had a chain of difficulties. Its financial problems go back at least to 1936, when it filed a petition for reorganization under former § 77B of the Bankruptcy Act. After its reorganization was completed in 1940, it had a few years of prosperity followed by a postwar decline in volume of business, a rise in costs, and substantial losses. During these years, $600,000 cash was raised by the sale of stock, and a new management installed with a view to converting some existing stores into candy, food, and drink establishments. That idea was abandoned, and the proceeds of the stock sale were used for general corporate purposes. It was then decided to liquidate the existing specialty stores and to have petitioner acquire the stock of two existing retail drugstore chains -- Stineway Drug Company and Ford Hopkins Company. The Stineway stock was acquired for $1,220,320, petitioner borrowing $870,000 from Stineway for the purpose. Later, petitioner borrowed an additional $440,000 from Stineway to help make the down payment on the Ford Hopkins stock, making a total indebtedness to Stineway of $1,310,000, represented by two non-interest-bearing notes. The Ford Hopkins stock was acquired for $2,800,000, the down payment being $735,000, the balance being payable in a yearly amount of $200,000 with 4 per cent interest and secured by the Stineway and Ford Hopkins stock. While the two drug chains were being acquired, petitioner started the liquidation of its own stores, a process that was completed under c. XI of the Bankruptcy Act. The disposition of those stores involved the rejection of numerous leases and the creation of claims of landlords against petitioner. The arrangement proposed by petitioner under c. XI would extend its unsecured obligations and provide for a 20 per cent payment on confirmation of the plan and 20 per cent annually for 4 years thereafter. The claims listed were the $1,310,000 debt to Stineway and $525,000 unsecured claims, exclusive of claims by landlords. We were advised on oral argument that, during the course of the c. XI proceedings, it was decided that this offer was not feasible, and that the unsecured creditors are now offered the equivalent of 40 per cent of their claims in full satisfaction. Much of the argument has been devoted to the meaning of Securities and Exchange Commission v. United States Realty & Improvement Co.,. In that case, we held that relief was not properly sought under c. XI, but that c. X offered the appropriate relief. That was a case of a debtor with publicly owned debentures, publicly owned mortgage certificates, and publicly owned stock. An arrangement was proposed that would leave the debentures and stock unaffected and extend the certificates and reduce the interest. It was argued in that case, as it has been in the instant one, that c. X affords the relief for corporations whose securities are publicly owned, while c. XI is available to debtors whose stock is closely held; that c. X is designed for the large corporations, c. XI for the smaller ones; that it is the character of the debtor that determines whether c. X or c. XI affords the appropriate remedy. We did not adopt that distinction in the United States Realty case. Rather, we emphasized the need to determine on the facts of the case whether the formulation of a plan under the control of the debtor, as provided by c. XI, or the formulation of a plan under the auspices of disinterested trustees, as assured by c. X and the other protective provisions of that chapter, would better serve "the public and private interests concerned including those of the debtor." 310 U.S. at. The United States Realty case presented a rather simple problem. There, one class of creditors was being asked to make sacrifices, while the position of the stockholders remained unimpaired (id.,,), contrary to the teachings of Case v. Los Angeles Lumber Products Co.,. Moreover, the history of the company raised a serious question "whether any fair and equitable arrangement in the best interest of creditors" could be effected "without some rearrangement of its capital structure." Id.,. For those reasons, c. X was held to offer the appropriate relief. The character of the debtor is not the controlling consideration in a choice between c. X and c. XI. Nor is the nature of the capital structure. It may well be that, in most cases where the debtor's securities are publicly held, c. X will afford the more appropriate remedy. But that is not necessarily so. A large company with publicly held securities may have as much need for a simple composition of unsecured debts as a smaller company. And there is no reason we can see why c. XI may not serve that end. The essential difference is not between the small company and the large company, but between the needs to be served. Readjustment of all or a part of the debts of an insolvent company without sacrifice by the stockholders may violate the fundamental principle of a fair and equitable plan, see Case v. Los Angeles Lumber Products Co., supra, as the United States Realty Co. case emphasizes. Readjustment of the debt structure of a company, without more, may be inadequate unless there is also an accounting by the management for misdeeds which caused the debacle. Readjustment of the debts may be a minor problem compared with the need for new management. Without a new management, today's readjustment may be a temporary moratorium before a major collapse. These are typical instances where c. X affords a more adequate remedy than c. XI. The appointment of a disinterested trustee, § 156, his broad powers of investigation, § 167, the role of the trustee in preparing a plan, § 169, the duty of the Securities and Exchange Commission to render an advisory report on the plan, § 172, the requirement that the plan be "fair and equitable, and feasible," §§ 174, 221, the power to include the subsidiaries, Stineway and Ford Hopkins, in the reorganization of petitioner, § 129 -- these are controls which c. X gives to the entire community of interest in the company being reorganized, and which are lacking under c. XI. These controls are essential both where a complicated debt structure must be readjusted and where a sound discretion indicates either that there must be an accounting from the management or that a new management is necessary. Those conditions only illustrate the need for c. X. There may be others equally compelling. The history of this debtor indicates not fraud, but either an improvident overextension or a business that has been out of step with modern trends. One corporate reorganization has already been suffered. Heavy short-term loans hang ominously over the company, and it has been converted from an operating company to a holding company, with the shares of the subsidiaries pledged to creditors. It is argued that only a short moratorium is needed. There are, however, fears that a short moratorium may be merely a prelude to new disasters, that what the company needs is a fundamental reorganization of its capital structure, so that its limited cash resources will not be dissipated in an effort to meet the demands for debt reduction. A question as to what is "fair and equitable" between creditors and stockholders may eventually be reached in the reorganization. But the paramount issue at present concerns what is "feasible." A "feasible" plan within the meaning of c. X, §§ 174, 221, might mean, first, a merger of the subsidiaries with the holding company, and, second, a funding of the unsecured debt and a realignment of debt and stock so as to give a balanced capital structure. The old business has been liquidated, and the new one launched with heavy borrowings on a short-term basis. If the new one is to succeed, it may well need a more thoroughgoing capital readjustment than is possible under c. XI. That was the view of two lower courts. We could reverse them only if their exercise of discretion transcended the allowable bounds. We cannot say that it does. Rather, we think that the lower courts took a fair reading of c. X and the functions it serves and reasonably concluded that this business needed a more pervasive reorganization than is available under c. XI. Affirmed.

Petitioner instituted proceedings under Chapter XI of the Bankruptcy Act, alleging inability to pay its debts as they matured. It had been converted from an operating company to a holding company with the shares of the subsidiaries pledged to creditors; and it had heavy short-term loans. It had no publicly held debts, but had over 2,000,000 shares of common stock listed on the American Stock Exchange and held by over 7,000 shareholders. A shareholder owning 3,000 shares, and the Securities and Exchange Commission, moved that the proceedings be dismissed unless the petition be amended to comply with Chapter X of the Bankruptcy Act. Held: in deciding that proceedings under Chapter X, rather than Chapter XI, were appropriate, the discretion exercised by the District Court and the Court of Appeals did not transcend allowable bounds, and their judgment is affirmed. . (a) In determining whether Chapter X or Chapter XI affords the appropriate remedy, the question is whether, on the facts of the case, the formulation of a plan under the auspices of disinterested trustees, as assured by Chapter X and the other protective provisions of that Chapter, would better serve the public and private interests concerned, including those of the debtor, than the simpler arrangement under Chapter XI. . (b) The essential difference in the choice between Chapter X and Chapter XI is not between the small company and the large company, nor in the nature of the capital structure, but between the needs to be served. . (c) The record in this case supports the view of the two lower courts that petitioner may need a more pervasive reorganization than is possible under Chapter XI. . 222 F.2d 234 affirmed.

1955_42

https://www.oyez.org/cases/1955/42

PER CURIAM. Petitioner Gibson recovered judgment in a personal injuries action against the Lockheed Company in a United States District Court. The Court of Appeals for the Fifth Circuit reversed and remanded for a new trial on the ground that four instructions requested by Lockheed and refused by the trial court should have been given. 217 F.2d 730. We granted certiorari, 349 U.S. 943, to consider the following questions: "(1) Whether Lockheed's objection to the trial court's refusal to give its requested instructions complied with Rule 51 of the Federal Rules of Civil Procedure." "(2) Whether the refusal of the trial court to charge as requested by respondent Lockheed was prejudicial error requiring reversal." A thorough consideration of the record convinces us that the charge as given by the trial court was both complete and correct. Cf. District of Columbia v. Woodbury,,. There was no error in refusing the requested instructions. We consider this to be a case where, in the exercise of our supervisory powers over the lower federal courts, the judgment of the Court of Appeals should be reversed in the interests of justice, and that of the District Court reinstated. Accordingly, we find it unnecessary to consider the question presented as to Rule 51. Reversed.

1. In this case, in which petitioner recovered a judgment against respondent in a personal injuries action in a Federal District Court, the instructions given to the jury by the trial court were complete and correct, and there was no error in refusing the additional instructions requested by respondent. . 2. In the exercise of the supervisory powers of this Court over the lower federal court, the judgment of the Court of Appeals, reversing the judgment of the District Court and remanding the case for a new trial, is reversed in the interest of justice, and the judgment of the District Court is reinstated. P.. 217 F.2d 730 reversed.

1955_460

https://www.oyez.org/cases/1955/460

MR. JUSTICE FRANKFURTER delivered the opinion of the Court. This case involves the construction and constitutional validity of the Act of September 7, 1949, 63 Stat. 686, now codified in 18 U.S.C. §§ 4244-4248, "To provide for the care and custody of insane persons charged with or convicted of offenses against the United States, and for other purposes." Section 4244 provides a procedure for determining mental incompetency during the period "after arrest and prior to the imposition of sentence or prior to the expiration of any period of probation." Section 4245 sets up a similar procedure for persons in prison believed to have been mentally incompetent at the time of their trial when the issue was not raised or determined before or during trial. Section 4246 states that, whenever the trial court shall determine, under §§ 4244 and 4245, that an accused is or was mentally incompetent, the court may commit the accused to the custody of the Attorney General until the accused is mentally competent to stand trial or until the pending charges against him are disposed of according to law. Section 4246 further provides that, if the court, after hearing as provided in the preceding §§ 4244 and 4245, finds that the conditions specified in § 4247 exist, the commitment shall be governed by § 4248. Section 4247 states that, when a prisoner's sentence is about to expire and the prison board of examiners finds him insane and a probable danger to the officers, property, or other interests of the United States, then the court shall hold a hearing, and, if it determines that those conditions exist, it may commit the prisoner to the custody of the Attorney General. Under § 4248, the commitment shall run until sanity is restored, or until the prisoner's condition is so improved that he will not endanger the officers, property, or other interests of the United States, or until suitable arrangements are made for the care of the prisoner by his State of residence -- reserving to the prisoner his right to establish his eligibility to release by writ of habeas corpus. Petitioner, a resident of Cleveland, Ohio, was indicted on November 20, 1952, by a grand jury of the Western District of Missouri on two counts, for robbery from a United States Post Office in Kansas City, Missouri, and for felonious assault there on a postal employee. Under Rule 20 of the Federal Rules of Criminal Procedure, petitioner signed a waiver of trial in the Western District of Missouri and was transferred to the Eastern Division of the Northern District of Ohio. Acting on the suggestion of appointed counsel, the district judge ordered petitioner examined by a psychiatrist. After a hearing in which the examining psychiatrist testified that it was doubtful that petitioner, because of his mental condition, could have fully understood the significance of the waiver he signed, the District Court, on February 2, 1953, remanded the case to the District Court for the Western District of Missouri for disposition. That court ordered the accused delivered to the United States Medical Center for Federal Prisoners at Springfield, Missouri, for the purpose of ascertaining his mental condition. On April 15, 1953, the Chief of the Psychiatric Service at the Medical Center filed his report concluding that the accused was legally insane in that he was unable to choose between right and wrong and could not, by reason of his mental condition, adequately cooperate with counsel in his own defense. Petitioner was then transferred to jail, but, on November 16, 1953, the District Court entered an order returning him to the Medical Center for determination whether he was acutely or chronically insane. The report of the Neuropsychiatric Staff of the Medical Center, filed February 1, 1954, indicated that petitioner was "psychotic and incompetent," that "it is unlikely that this subject will regain his sanity in the near future," and recommended that "consideration be given to transferring this subject to a state hospital in his state of residence." The District Court, on the following day, ordered a further hearing under § 4246 to "resolve the power to commit defendant as mentally defective under the conditions specified in Section 4247. . . ," and, for that purpose, requested the Director and Board of Examiners of the Medical Center to certify whether, in their judgment, the defendant, if released, would "probably endanger the safety of the officers, the property, or other interests of the United States, and that suitable arrangements for the custody and care of the [defendant] are not otherwise available." The report of the Board, dated February 4, 1954, concluded that the accused remained "psychotic and incompetent," and stated that, "at the present time, there appears to be little likelihood of his recovering to the extent that he might be considered competent in the near future." In reply to the request of the District Court, "[t]he Board agreed that this subject might be considered potentially dangerous to the extent that if released he might conceivably persist in criminal activities of the type with which he is presently charged. In considering this man's mental illness, the Board finds that he does not hold any fixed delusions concerning wanting to harm any person or group of persons, either officials of the government or otherwise, so that, in this respect, he probably would not constitute a danger to the safety of officers, property, or other interests of the United States. . . . The Board further recommends that this subject be considered a suitable candidate for state hospital care if suitable arrangements can be made." In May, 1954, petitioner was transferred to the custody of the State of Ohio, where he was again examined by the psychiatrist who had made the examination when petitioner was transferred to the District Court for the Northern District of Ohio in 1952. This time, the psychiatrist found that petitioner "is now in a state of remission equivalent to a recovery. He is not now insane in the legal sense." Petitioner was then released by the Ohio authorities. Petitioner was rearrested in Ohio under the original indictment, which was still pending, and, on June 16, 1954, removed to the Western District of Missouri. On June 18, counsel appointed for petitioner moved the court to appoint at least one qualified psychiatrist to inquire into petitioner's mental competency and to hold a hearing for that purpose. Two psychiatrists were appointed, and were directed to report to the court. Petitioner was also recommitted to the United States Medical Center for Federal Prisoners at Springfield, Missouri, for further examination. The hearing on petitioner's sanity was held on July 15. The two psychiatrists appointed by the court testified that, in their belief, petitioner was sane. The first three reports of the Medical Center were received in evidence, along with a fourth, a report of the Neuropsychiatric Staff of the Medical Center at Springfield, dated July 8, 1954. This latest report concluded "that the subject remains legally insane by reason of a major mental disorder which would prevent him from having a proper understanding of the proceeding pending against him and which also impairs his ability to properly assist in his own defense." The staff further concluded "that this subject's prognosis for recovery appears to be poor, and that he will probably require indefinite hospitalization to insure his own safety and that of society. The staff does not consider the subject to be potentially dangerous except to the extent that, if released, he might persist in engaging in criminal activities similar to those with which he is presently charged." The Chief of the Psychiatric Service at the Medical Center testified at this hearing to the same effect. The District Court, in its order of July 30, found that the accused was insane and so mentally incompetent that he could not stand trial; that, if released, he would probably endanger the safety of the officers, property, or other interests of the United States; and that no suitable arrangements for custody and care, other than commitment to the custody of the Attorney General, were available. Petitioner was therefore committed to the custody of the Attorney General until his sanity should be restored or his mental condition so improved that, if released, he would not endanger the safety of the officers, property, or other interests of the United States or until suitable arrangements could be made for the custody and care of defendant by Ohio, the State of his residence. 125 F. Supp. 777, 778. Petitioner appealed from this judgment, and the Court of Appeals for the Eighth Circuit, its seven circuit judges sitting en banc, affirmed, one judge dissenting. 219 F.2d 376. Because of the important issue of federal power raised by the case, and because of conflicting views in the Courts of Appeals, compare Higgins v. United States, 205 F.2d 650, and Wells v. Attorney General, 201 F.2d 556, with the decision of the Court of Appeals for the Eighth Circuit in this case, we granted certiorari. 350 U.S. 821. A detailed history of the legislation is set forth in the opinion of the Court of Appeals. 219 F.2d at 380-384. It is sufficient to note here that the bill was proposed by the Judicial Conference of the United States after long study by a conspicuously able committee, followed by consultation with federal district and circuit judges. The statute deals comprehensively with those persons charged with federal crime who are insane or mentally incompetent to stand trial. It provides a procedure for determination of such insanity or mental incompetence, and further provides for commitment of those found to be insane or mentally incompetent. Petitioner's assertion that the statute deals only with the problem of temporary mental disorder is not supported by the language of the statute, and the report of the Committee of the Judicial Conference clearly indicates that the statute was designed to deal with mental disability which seems more than temporary: "If the accused's mental disability appears not to be a transitory condition, but in all likelihood he will, because of his insanity, never be brought to trial, it would seem that as a general rule the federal government should not assume responsibility for his hospitalization merely because he has been accused (but not convicted) of a federal crime. Normally such a person should be turned over to the state of his domicile to be confined in a state mental hospital if hospitalization is called for. " "But there may be cases where the accused's domicile cannot be satisfactorily established, and where no state will assume responsibility for his care. The federal government may then be faced with the practical situation that it has lawful custody of a person whom it is not safe to let at large. In a recent case in the District of Massachusetts, United States v. Torrez [unreported], a Filipino was brought into the district and indicted for murder on the high seas. After notice of hearing at which alienists for the government and for the defendant testified, the judge found that the defendant was at present insane, and unable rationally to aid in the conduct of his defense. Obviously, in such case, there should be authority in the court to cause the confinement of the accused in a mental hospital." The District Court pursued the appropriate procedure in holding a hearing to determine the existence of the conditions specified in § 4247 once it determined that the accused's mental incompetence seemed more than temporary. Although the language of the statute and the report of the Committee of the Judicial Conference demonstrate that the statute deals generally with the situations both of temporary and more than temporary insanity, one could infer from the reports on the bill by the Committee, by the Judicial Conference itself, and by the committees of both Houses of Congress that the specific commitment under § 4248 was designed only for prisoners whose sentences are about to expire. But this is a case for applying the canon of construction of the wag who said, when the legislative history is doubtful, go to the statute. The second sentence of § 4246 clearly makes commitment under § 4248 applicable to persons found mentally incompetent under § 4244 who meet the conditions specified in § 4247. We reach then the narrow constitutional issue raised by the order of commitment in the circumstances of this case. The petitioner came legally into the custody of the United States. The power that put him into such custody -- the power to prosecute for federal offenses -- is not exhausted. Its assertion in the form of the pending indictment persists. The District Court has found that the accused is mentally incompetent to stand trial at the present time, and that, if released, he would probably endanger the officers, property, or other interests of the United States -- and these findings are adequately supported. In these circumstances, the District Court has entered an order retaining and restraining petitioner, while in his present condition, with habeas corpus always available when circumstances warrant. This commitment, and therefore the legislation authorizing commitment in the context of this case, involve an assertion of authority, duly guarded, auxiliary to incontestable national power. As such, it is plainly within congressional power under the Necessary and Proper Clause. Art. I, § 8, cl. 18. The fact that, at present, there may be little likelihood of recovery does not defeat federal power to make this initial commitment of the petitioner. We cannot say that federal authority to prosecute has now been irretrievably frustrated. The record shows that two court-appointed psychiatrists found petitioner sane and competent for trial. While the District Court did not accept their conclusion, their testimony illustrates the uncertainty of diagnosis in this field and the tentativeness of professional judgment. The only certain thing that can be said about the present state of knowledge and therapy regarding mental disease is that science has not reached finality of judgment, even about a situation as unpromising as petitioner's, at least as indicated by the report of the United States Medical Center at Springfield. Certainly, denial of constitutional power of commitment to Congress in dealing with a situation like this ought not to rest on dogmatic adherence to one view or another on controversial psychiatric issues. We decide no more than the situation before us presents, and equally do not imply an opinion on situations not now before us. The judgment of the Court of Appeals is Affirmed.

Acting under 18 U.S. C. §§ 4244-4248, a Federal District Court held a hearing on the sanity of petitioner, who had been indicted for robbery of a post office and felonious assault on a postal employee and had been found by authorities of a medical center for federal prisoners to be insane and unlikely to recover in the near future. After considering conflicting testimony and reports of psychiatrists, the Court found that petitioner was insane and so mentally incompetent that he could not stand trial; that, if released, he probably would endanger the safety of the officers, property, or other interests of the United States; and that no suitable arrangements for his custody and care, other than commitment to the custody of the Attorney General, were available. The Court therefore committed petitioner to the custody of the Attorney General until his sanity should be restored or his mental condition so improved that, if released, he would not endanger the safety of the officers, property, or other interests of the United States, or until suitable arrangements could be made for his custody and care by the State of his residence. Held: the District Court's action is sustained. . (a) The statute deals not only with problems of temporary mental disorder, but also with mental disability which seems more than temporary. . (b) As here construed, the statute is within the power of Congress under the Necessary and Proper Clause, Art. I, § 8, cl. 18. . 219 F.2d 376 affirmed.

1955_95

https://www.oyez.org/cases/1955/95

MR. JUSTICE BLACK announced the judgment of the Court and an opinion in which THE CHIEF JUSTICE, MR. JUSTICE DOUGLAS, and MR. JUSTICE CLARK join. Illinois law provides that "Writs of error in all criminal cases are writs of right and shall be issued of course."

Illinois law gives every person convicted in a criminal trial a right of review by writ of error; but a full direct appellate review can be had only by furnishing the appellate court with a bill of exceptions or report of the trial proceedings, certified by the trial judge, and it is sometimes impossible to prepare such documents without a stenographic transcript of the trial proceedings, which are furnished free only to indigent defendants sentenced to death. Convicted in an Illinois state court of armed robbery, petitioners moved in the trial court that a certified copy of the entire record, including a stenographic transcript of the proceedings, be furnished to them without cost. They alleged that they were without funds to pay for such documents, and that failure of the court to provide them would violate the Due Process and Equal Protection Clauses of the Fourteenth Amendment. Their motion was denied. They then filed a petition under the Illinois Post-Conviction Hearing Act, under which only questions arising under the State or Federal Constitution may be raised. They alleged that there were manifest nonconstitutional errors in the trial which entitled them to have their convictions set aside on appeal, that the only impediment to full appellate review was their lack of funds to buy a transcript, and that refusal to afford full appellate review solely because of their poverty was a denial of due process and equal protection. This petition was dismissed, and the Illinois Supreme Court affirmed, solely on the ground that the petition raised no substantial state or federal constitutional question. Held: Petitioners' constitutional rights were violated, the judgment of the Illinois Supreme Court is vacated, and the cause is remanded to that Court for further action affording petitioners adequate and effective appellate review. . Judgment vacated, and cause remanded.

1955_231

https://www.oyez.org/cases/1955/231

MR. JUSTICE CLARK delivered the opinion of the Court. Petitioners, eight families of Navajo Indians, seek damages under the Federal Tort Claims Act for the destruction of their horses by agents of the Federal Government. The District Court allowed damages of $100,000 and enjoined the Government and its agents from further interference with petitioners. The Court of Appeals for the Tenth Circuit reversed, 220 F.2d 666, on the ground that the Utah abandoned horse statute, Utah Code Ann., 1653, 47-2, was properly invoked by the government agents. We do not agree with the Court of Appeals. Petitioners are wards of the Government. They have lived from time immemorial in stone and timber hogans on public land in San Juan County, Utah. This bleak area in the southeastern corner of the State is directly north of the Navajo Indian Reservation. While some Indian families from the reservation come into the area to graze their livestock, petitioners claim to have always lived there the year round. They are herdsmen, and, for generations, they have grazed their livestock on this land. They are a simple and primitive people. Their living is derived entirely from their animals, from the little corn they are able to grow in family plots, and the wild game and pine nuts that the land itself affords. The District Court found that horses, as petitioners' beasts of burden and only means of transportation, were essential to their existence. In 1934, the Government enacted the Taylor Grazing Act, 48 Stat. 1269, 43 U.S.C. § 315, which provided for the regulation and use of these public lands. Grazing permits were issued to white livestock operators, and, for a number of years, these permittees grazed their livestock in common with petitioners, who continued in peaceable occupation and use of the land they claimed as their ancestral home. Limited forage made disputes between the stockmen and the Indians inevitable, and, about 1950, both the Government and the white livestock operators filed suits to remove the Indians from this land. In addition to legal proceedings, another method was employed by the government agents. Beginning in September, 1952, and continuing until sometime after the present suit was filed in the District Court, the Department of Interior's range manager vigorously prosecuted a campaign to round up and destroy petitioners' horses. This action was taken pursuant to the Utah abandoned horse statute, Utah Code Ann., 1953, 47-2, which provides that the Board of County Commissioners may authorize the elimination of "abandoned" horses on the open range. An "abandoned" horse is defined as one running at large on the open range which is either not branded or, if branded, one on which the tax for the preceding year has not been paid. During the roundup, a total of 115 horses and 38 burros belonging to petitioners were taken and sold or destroyed. Some horses were sold locally. Some were shot, and their carcasses left on the range. Most of the animals, however, were trucked some 350 miles away to Provo, Utah, where they were sold to a horse-meat plant or a glue factory. The total amount derived from such sales, about $1,700, has been retained by the District Advisory Board composed of local stockmen. No part of it has been paid or offered to petitioners. There is considerable evidence in the record to show that the Utah abandoned horse statute was applied discriminatorily against the Indians. In one instance, the assistant range manager watched from a bluff while petitioner Hosteen Sakezzie released his horses from their corral. Later, a short distance away, the same government agent supervised a roundup of these horses and drove them 35 miles through the night to another corral from which they were loaded into trucks for the horse-meat plant. Sakezzie and three other Indians trailed the horses to the entrucking point, but were not allowed to reclaim them. On another occasion, five horses taken during the roundup which belonged to white stockmen were returned to their owners on the payment of a nominal $2.50 a head, but petitioner Little Wagon was told that, to reclaim his horses, the charge would be $60 a head, an amount known to be far above his means. For the most part, these and other facts found by the District Court were unchallenged in the Court of Appeals, and are unchallenged here. The Court of Appeals did not reach the question of liability under the Federal Tort Claims Act, since it concluded that the government agents' actions were authorized by the Utah abandoned horse statute. We cannot dispose of this case so easily. The Taylor Grazing Act seeks to provide the most beneficial use of the public range, and to protect grazing rights in the districts it creates. Chournos v. United States, 193 F.2d 321. Section 2 of the Act, 48 Stat. 1270, 43 U.S.C. § 315a, provides that the Secretary of the Interior shall "make such rules and regulations . . . and do any and all things necessary to accomplish the purposes of this Act." Pursuant to this authorization, the Secretary has issued the Federal Range Code, 43 CFR § 161.1 et seq. Unauthorized grazing on the federal range and the removal of trespassing livestock is expressly provided for by § 161.11(b) of this Code: "(b) Unlawful grazing on Federal range; removal of livestock; impoundment. Whenever the charge consists of unlawfully grazing livestock on the Federal range, the notice served on the alleged violator . . . will order the alleged violator to remove the livestock or to cause them to be removed immediately or within such reasonable time as may be specified. If the alleged violator fails to comply with the notice, the range manager may proceed to exercise the proprietary right of the United States in the Federal range, under local impoundment law and procedure, if practicable; otherwise, he may refer the matter through the usual channels for appropriate legal action by the United States against the violator." Whenever the charge consists of unlawfully grazing livestock, this section requires that written notice, as provided by § 161.11(a), together with an order to remove the livestock, be served on the alleged violator. Only "if the alleged violator fails to comply with the notice" may the range manager proceed under local impoundment law and procedure. It is clear that both the written notice and failure to comply are express conditions precedent to the employment of local procedures. The Code is, of course, the law of the range, and the activities of federal agents are controlled by its provisions. They are required to follow the procedures there established. The Court of Appeals held that there was no inconsistency between the federal regulation and the state statute, because the regulation pertained to individual owners, while the statute was aimed at "abandoned" horses running loose on the range. We cannot agree. As we read it, the Utah statute is directed not to horses abandoned in the sense that they are ownerless, or that their owners cannot be located, but rather to horses considered "abandoned" under an express statutory definition. As applied to horses "at large upon the open range," this definition depends only on branding and payment of prior tax assessment, without any consideration of whether the horses are owned by someone, and, if so, whether such owner is known or can be located. As the Court of Appeals itself recognized: "The dictionary definition of the term abandoned' has no application." 220 F.2d at 672. Furthermore, the record is replete with evidence that, in this case, the government agents actually did know that the horses belonged to petitioners, and had not been abandoned. The District Court found that, "said agents knew beyond any possible doubt to whom said horses belonged"; that "the said agents and employees of defendant knew these brands to be the brands used by plaintiffs as well as they knew that the horses belonged to plaintiffs;" and concluded that the horses "were used daily in the performance of the work of their owners, the plaintiffs, and this was well known by defendant's said agents and employees." In the face of these findings, not disturbed by the Court of Appeals, it cannot be contended that the government agents were unable to comply with the specific provision for notice which regulated their actions. Nor has the Government contended that there was an attempt at any time to comply with the notice provisions of the Federal Range Code. For these reasons, we hold that the Utah abandoned horse statute was not properly invoked. The circumstances of this case were specifically provided for by § 161.11(b) of the Federal Range Code, and the government agents failed to comply with the terms of that section, because the requisite notice was not given. But, having concluded that there was no statutory authority, we are faced with the question whether the Government is liable under the Federal Tort Claims Act for wrongful and tortious acts of its employees committed in an attempt to enforce a federal statute which they administer. We believe there is such liability in the circumstances of this case. Section 1346[b] of Title 28, United States Code authorizes suits against the Government for "loss of property . . . caused by the negligent or wrongful act . . . of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act . . . occurred." It is clear that the federal agents here were acting within the scope of their employment under both state and federal law. Under the law of Utah, an employer is liable to third persons for the willful torts of his employees if the acts are committed in furtherance of the employer's interests or if the use of force could have been contemplated in the employment. Cf. Barney v. Jewel Tea Co., 104 Utah 292, 139 P.2d 878. Both of these conditions obtained here. The federal agents were attempting to enforce the federal range law, and such enforcement must contemplate at least the force used in removal of stock from the range. The fact that the agents did not have actual authority for the procedure they employed does not affect liability. There is an area, albeit a narrow one, in which a government agent, like a private agent, can act beyond his actual authority and yet within the scope of his employment. We note also that § 1346(b) provides for liability for "wrongful," as well as "negligent," acts. In an earlier case, the Court has pointed out that the addition of this word was intended to include situations like this, involving "trespasses' which might not be considered strictly negligent." Dalehite v. United States,,. Nor does 28 U.S.C. § 2680 bar liability here. This section provides that: "The provisions of this chapter and section 1346(b) of this title shall not apply to --" "(a) Any claim based upon an act or omission of an employee of the Government, exercising due care, in the execution of a statute or regulation, whether or not such statute or regulation be valid, or based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused." The first portion of section (a) cannot apply here, since the government agents were not exercising due care in their enforcement of the federal law. "Due care" implies at least some minimal concern for the rights of others. Here, the agents proceeded with complete disregard for the property rights of the petitioners. Nor can the second portion of (a) exempt the Government from liability. We are here not concerned with any problem of a "discretionary function" under the Act, see Dalehite v. United States, supra. These acts were wrongful trespasses not involving discretion on the part of the agents, and they do give rise to a claim compensable under the Federal Tort Claims Act. The District Court awarded damages in the lump sum of $100,000, the amount sought by petitioners jointly. Apparently this award was based on the value of the horses, consequential damages for deprivation of use, and for "mental pain and suffering." Under the Federal Tort Claims Act, damages are determined by the law of the State where the tortious act was committed, 28 U.S.C. § 1346(b), subject to the limitations that the United States shall not be liable for "interest prior to judgment or for punitive damages." 28 U.S.C. § 2674. But it is necessary in any case that the findings of damages be made with sufficient particularity so that they may be reviewed. Here, the District Court merely awarded the amount prayed for in the complaint. There was no attempt to allot any particular sum to any of the 30 plaintiffs, who owned varying numbers of horses and burros. There can be no apportionment of the award among the petitioners unless it be assumed that the horses were valued equally, the burros equally, and some assumption is made as to the consequential damages and pain and suffering of each petitioner. These assumptions cannot be made in the absence of pertinent findings, and the findings here are totally inadequate for review. The case must be remanded to the District Court for the appropriate findings in this regard. Since the District Court did not possess the power to enjoin the United States, neither can it enjoin the individual agents of the United States over whom it never acquired personal jurisdiction. That part of the Court of Appeals judgment dissolving the injunction is affirmed. The remainder of the judgment is reversed and remanded to the District Court for proceedings not inconsistent with this opinion. Reversed and remanded.

Petitioners, Navajo Indians living in southeastern Utah, sued under the Federal Tort Claims Act to recover for the confiscation and destruction by federal agents of their horses, which were grazing on public lands of the United States. The Government defended on the ground that the federal agents were acting pursuant to the Utah abandoned horse statute. The trial court awarded petitioners jointly a lump-sum judgment for $100,000 and enjoined the Government and its agents from further interference with petitioners. Held: on the record in this case, petitioners are entitled to a judgment for damages, which must be apportioned among them; but they are not entitled to an injunction. . (a) The trial was not conducted so improperly as to vitiate the trial court's findings of fact. P. 177, note 3 (b) Under the Taylor Grazing Act and the Federal Range Code issued thereunder, government agents may invoke local impoundment laws only after complying with § 161.11(a) and (b) of the Federal Range Code. Since the federal agents did not give petitioners the written notice required by the Federal Range Code, there was not such compliance here, and they acted without statutory authorization. . (c) In attempting to enforce a federal statute which they administer, the federal agents were acting within the scope of their employment, and the Government is liable under the Federal Tort Claims Act for their wrongful and tortious acts. . (d) The exceptions set forth in 28 U.S.C. § 2680 do not bar recovery, because the federal agents were not "exercising due care" and were not performing a "discretionary function or duty" within the meaning of that Section. P.. (e) Under the Federal Tort Claims Act, any findings of damages must be made with sufficient particularity so that they may be reviewed. The findings in this case and the award of damages in a lump sum to petitioners jointly did not meet this requirement, and the case must be remanded to the District Court for appropriate findings in this regard. P.. (f) The District Court had no power to enjoin the United States or its individual agents over whom that Court never acquired personal jurisdiction. P.. 220 F.2d 666 reversed and remanded.

1955_8

https://www.oyez.org/cases/1955/8

MR. JUSTICE FRANKFURTER delivered the opinion of the Court. Petitioners brought suit in the United States District Court for the Southern District of Mississippi, seeking recovery under the Federal Tort Claims Act, 28 U.S.C. § 1346(b), for damages alleged to have been caused by the negligence of the Coast Guard in the operation of a lighthouse light. They alleged that, on October 1, 1951, the tug Navajo, owned by petitioner Indian Towing Company, was towing Barge AS-16, chartered by petitioner Upper Mississippi Towing Corporation; that the barge was loaded with a cargo of triple super phosphate, consigned to petitioner Minnesota Farm Bureau Service Company and insured by petitioner United Firemen's Insurance Company; that the tug Navajo went aground on Chandeleur Island, and, as a result thereof, sea water wetted and damaged the cargo to the extent of $62,659.70; that the consignee refused to accept the cargo; that petitioners Indian Towing Company and Upper Mississippi Towing Corporation therefore became responsible for the loss of the cargo; and that the loss was paid by petitioner United Firemen's Insurance Company under loan receipts. The complaint further stated that the grounding of the Navajo was due solely to the failure of the light on Chandeleur Island, which, in turn, was caused by the negligence of the Coast Guard. The specific acts of negligence relied on were the failure of the responsible Coast Guard personnel to check the battery and sun relay system which operated the light; the failure of the Chief Petty Officer who checked the lighthouse on September 7, 1951, to make a proper examination of the connections which were "out in the weather;" the failure to check the light between September 7 and October 1, 1951; and the failure to repair the light or give warning that the light was not operating. Petitioners also alleged that there was a loose connection which could have been discovered upon proper inspection. On motion of the respondent, the case was transferred to the United States District Court for the Eastern District of Louisiana, New Orleans Division. Respondent then moved to dismiss on the ground that it has not consented to be sued "in the manner in which this suit is brought," in that petitioners' only relief was under the Suits in Admiralty Act, 41 Stat. 525, or the Public Vessels Act, 43 Stat. 1112. This motion was granted, and the Court of Appeals for the Fifth Circuit affirmed per curiam. 211 F.2d 886. Because the case presented an important aspect of the still undetermined extent of the Government's liability under the Federal Tort Claims Act, we granted certiorari, 348 U.S. 810. The judgment of the Court of Appeals was affirmed by an equally divided Court, 349 U.S. 902, but a petition for rehearing was granted, the earlier judgment in this Court vacated, and the case restored to the docket for reargument before the full Bench. 349 U.S. 926. The relevant provisions of the Federal Tort Claims Act are 28 U.S.C. §§ 1346(b), 2674, and 2680(a): § 1346(b). ". . . [T]he district courts . . . shall have exclusive jurisdiction of civil actions on claims against the United States, for money damages, accruing on and after January 1, 1945, for injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred." § 2674. "The United States shall be liable . . . in the same manner and to the same extent as a private individual under like circumstances, but shall not be liable for interest prior to judgment or for punitive damages." "* * * * " § 2680. "The provisions of this chapter and section 1346(b) of this title shall not apply to --" "(a) Any claim based upon an act or omission of an employee of the Government, exercising due care, in the execution of a statute or regulation, whether or not such statute or regulation be valid, or based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused." The question is one of liability for negligence at what this Court has characterized the "operational level" of governmental activity. Dalehite v. United States,,. The Government concedes that the exception of § 2680 relieving from liability for negligent "exercise of judgment" (which is the way the Government paraphrases a "discretionary function" in § 2680(a)) is not involved here, and it does not deny that the Federal Tort Claims Act does provide for liability in some situations on the "operational level" of its activity. But the Government contends that the language of § 2674 (and the implications of § 2680) imposing liability "in the same manner and to the same extent as a private individual under like circumstances . . . " must be read as excluding liability in the performance of activities which private persons do not perform. Thus, there would be no liability for negligent performance of "uniquely governmental functions." The Government reads that statute as if it imposed liability to the same extent as would be imposed on a private individual "under the same circumstances." But the statutory language is "under like circumstances," and it is hornbook tort law that one who undertakes to warn the public of danger, and thereby induces reliance, must perform his "good Samaritan" task in a careful manner. Furthermore, the Government in effect reads the statute as imposing liability in the same manner as if it were a municipal corporation, and not as if it were a private person, and it would thus push the courts into the "nongovernmental"-"governmental" quagmire that has long plagued the law of municipal corporations. A comparative study of the cases in the forty-eight States will disclose an irreconcilable conflict. More than that, the decisions in each of the States are disharmonious, and disclose the inevitable chaos when courts try to apply a rule of law that is inherently unsound. The fact of the matter is that the theory whereby municipalities are made amenable to liability is an endeavor, however awkward and contradictory, to escape from the basic historical doctrine of sovereign immunity. The Federal Tort Claims Act cuts the ground from under that doctrine; it is not self-defeating by covertly embedding the casuistries of municipal liability for torts. While the Government disavows a blanket exemption from liability for all official conduct furthering the "uniquely governmental" activity in any way, it does claim that there can be no recovery based on the negligent performance of the activity itself, the so-called "end objective" of the particular governmental activity. Let us suppose that the Chief Petty Officer going in a Coast Guard car to inspect the light on Chandeleur Island first negligently ran over a pedestrian; later, while he was inspecting the light, he negligently tripped over a wire and injured someone else; he then forgot to inspect an outside connection, and that night the patently defective connection broke and the light failed, causing a ship to go aground and its cargo of triple super phosphate to get wet; finally the Chief Petty Officer on his way out of the lighthouse touched a key to an uninsulated wire to see that it was carrying current, and the spark he produced caused a fire which sank a nearby barge carrying triple super phosphate. Under the Government's theory, some of these acts of negligence would be actionable, and some would not. But is there a rational ground, one that would carry conviction to minds not in the grip of technical obscurities, why there should be any difference in result? The acts were different in time and place, but all were done in furtherance of the officer's task of inspecting the lighthouse and in furtherance of the Coast Guard's task in operating a light on Chandeleur Island. Moreover, if the United States were to permit the operation of private lighthouses -- not at all inconceivable -- the Government's basis of differentiation would be gone, and the negligence charged in this case would be actionable. Yet there would be no change in the character of the Government's activity in the places where it operated a lighthouse, and we would be attributing bizarre motives to Congress were we to hold that it was predicating liability on such a completely fortuitous circumstance -- the presence of identical private activity. While the area of liability is circumscribed by certain provisions of the Federal Tort Claims Act, see 28 U.S.C. § 2680, all Government activity is inescapably "uniquely governmental" in that it is performed by the Government. In a case in which the Federal Crop Insurance Corporation, a wholly Government-owned enterprise, was sought to be held liable on a crop insurance policy on the theory that a private insurance company would be liable in the same situation, this Court stated: "Government is not partly public or partly private, depending upon the governmental pedigree of the type of a particular activity or the manner in which the Government conducts it." Federal Crop Insurance Corp. v. Merrill,,. On the other hand, it is hard to think of any governmental activity on the "operational level," our present concern, which is "uniquely governmental," in the sense that its kind has not at one time or another been, or could not conceivably be, privately performed. There is nothing in the Tort Claims Act which shows that Congress intended to draw distinctions so finespun and capricious as to be almost incapable of being held in the mind for adequate formulation. The statute was the product of nearly thirty years of congressional consideration, and was drawn with numerous substantive limitations and administrative safeguards. (For substantive limitations, see § 2680(a)-(m). For administrative safeguards, see § 2401(b) (statute of limitations); § 2402 (denial of trial by jury); § 2672 (administrative adjudgment of claims of $1,000 or less); § 2673 (reports to Congress); § 2674 (no liability for punitive damages or for interest prior to judgment); § 2675 (disposition by federal agency as prerequisite to suit when claim is filed); § 2677 (compromise); § 2679 (exclusiveness of remedy).) The language of the statute does not support the Government's argument. Loose general statements in the legislative history to which the Government points seem directed mainly toward the "discretionary function" exemption of § 2680, and are not persuasive. The broad and just purpose which the statute was designed to effect was to compensate the victims of negligence in the conduct of governmental activities in circumstances like unto those in which a private person would be liable, and not to leave just treatment to the caprice and legislative burden of individual private laws. Of course, when dealing with a statute subjecting the Government to liability for potentially great sums of money, this Court must not promote profligacy by careless construction. Neither should it, as a self-constituted guardian of the Treasury, import immunity back into a statute designed to limit it. The Coast Guard need not undertake the lighthouse service. But once it exercised its discretion to operate a light on Chandeleur Island and engendered reliance on the guidance afforded by the light, it was obligated to use due care to make certain that the light was kept in good working order, and, if the light did become extinguished, then the Coast Guard was further obligated to use due care to discover this fact and to repair the light or give warning that it was not functioning. If the Coast Guard failed in its duty and damage was thereby caused to petitioners, the United States is liable under the Tort Claims Act. The Court of Appeals for the Fifth Circuit considered Feres v. United States,, and Dalehite v. United States,, controlling. Neither case is applicable. Feres held only that "the Government is not liable under the Federal Tort Claims Act for injuries to servicemen where the injuries arise out of or are in the course of activity incident to service. Without exception, the relationship of military personnel to the Government has been governed exclusively by federal law." 340 U.S. at. And see Brooks v. United States,. The differences between this case and Dalehite need not be labored. The governing factors in Dalehite sufficiently emerge from the opinion in that case. The judgment of the Court of Appeals is reversed, and the case is remanded to the District Court for further proceedings. Reversed and remanded.

If the Coast Guard is negligent in the operation of a lighthouse and damage is caused thereby, the United States is liable under the Tort Claims Act. . (a) The language of 28 U.S.C. § 2674, imposing liability "in the same manner and to the same extent as a private individual under like circumstances," is not to be read as excluding liability for negligent conduct in the operation of an enterprise in which private persons are not engaged. . (b) The Tort Claims Act does not impliedly incorporate the distinction between "governmental" and "nongovernmental" functions which has caused confusion in the law of municipal liability for torts. . (c) Once the Coast Guard has exercised its discretion to operate a lighthouse at a certain place, it is obligated to use due care to make certain that the light is kept in good working order, and, if the light becomes extinguished, the Coast Guard is further obligated to use due care to discover this fact and to repair the light or give warning that it is not functioning. P.. (d) Feres v. United States,, and Dalehite v. United States,, distinguished. P.. 211 F.2d 886 reversed and remanded.

1955_82

https://www.oyez.org/cases/1955/82

MR. JUSTICE BURTON delivered the opinion of the Court. The State of New York imposes a highway use tax upon motor carriers operating heavy vehicles on its public highways. Many such vehicles are purchased and operated under conditional sales agreements, and certain conditional vendors here question the extent to which the State may subordinate the vendors' security interests to the State's lien for taxes owed by the carrier. The vendors question the constitutionality of any grant of priority to the State's lien, over their rights in particular trucks, insofar as the lien is made applicable to taxes based upon the carrier's operation of other trucks within the State, whether before or during the time that the carrier has operated the particular trucks within the State. The vendors object likewise to any priority for the lien as applied to taxes assessed against the carrier after the vendors have repossessed the particular trucks, even though the taxes are based upon the carrier's operations on the State's highways before such repossession. For the reasons hereafter stated, we sustain the State's priority in each instance. International Harvester Credit Corporation, a Delaware corporation, and Brockway Motor Company, Inc., a New York corporation, as plaintiffs (now appellants), with the members of the State Tax Commission of New York as defendants (now appellees), submitted this controversy to the Supreme Court of the State of New York, Appellate Division, Third Department, on stipulated facts, pursuant to § 546 of the Civil Practice Act of New York. Appellants sought a declaratory judgment that the liens asserted by the State were not superior to the conditional vendors' interests in certain trucks and that Article 21 of the Tax Law was unconstitutional insofar as it prescribed the priorities to which they objected. Appellants also asked that the bonds filed by them to secure payment of the taxes be canceled and returned. With one judge not voting, the Appellate Division decided in favor of appellees, sustaining generally the State's liens and priorities. 284 App.Div. 604, 132 N.Y.S.2d 511. On appeal, taken as a matter of right, that judgment was affirmed by the Court of Appeals of New York, with one judge dissenting. 308 N.Y. 731, 124 N.E.2d 339. On appeal to this Court under 28 U.S.C. § 1257(2), we noted probable jurisdiction. 350 U.S. 813. The stipulated facts may be summarized as follows: from January 1, 1952, through February, 1954, Eastern Cartage and Leasing Co., Inc., here called the "carrier," was a domestic corporation owning at least 15 motor vehicles. As a motor carrier, it operated these vehicles over the public highways of the State of New York subject to the highway use tax imposed by Article 21 of the Tax Law, supra. That tax was imposed upon the "carrier" or "owner," and those terms did not include the conditional vendor of trucks operated by the motor carrier. It was payable with the monthly returns. In recognition of the administrative difficulties involved in enforcing and collecting this tax, in contrast to a flat rate tax or one measured by gross receipts, the statute prescribed extensive remedies, as well as penalties, civil and criminal (see § 512 of the Tax Law), to protect the interest of the State. The provisions for the State's lien covering the points at issue are as follows: "§ 506. Payment of tax" "* * * *" "The fees, taxes, penalties, and interest accruing under this article shall constitute a lien upon all motor vehicles and vehicular units of such carrier. The lien shall attach at the time of operation of any motor vehicle or vehicular unit of such carrier within this state and shall remain effective until the fees, taxes, penalties and interest are paid, or the motor vehicle or vehicular unit is sold for the payment thereof. Such liens shall be paramount to all prior liens or encumbrances of any character and to the rights of any holder of the legal title in or to any such motor vehicle or vehicular unit." McKinney's N.Y.Laws, Tax Law. From January 1, 1952, through February, 1954, the carrier incurred, and failed to pay, highway use taxes of $3,158.77, plus penalties and interest of $539.27 through April 21, 1954. The taxes carried interest at 1% per month. While neither appellant knew anything of these delinquencies until the State asserted them in April, 1954, it is also true that neither appellant had inquired of the carrier or of the State as to their possible existence. In February and March, 1953, while the carrier was operating under the Highway Use Tax Act, International Harvester Company, a foreign corporation doing business in New York State, sold two tractors to the carrier for $8,253 each. In each such transaction, the carrier executed and delivered to the vendor a conditional sales agreement for $6,541. The agreements were assigned by the vendor to the International Harvester Credit Corporation, one of the appellants herein, and were properly filed in the office of the Clerk of the Town of Rotterdam, Schenectady County, New York. Each truck was operated by the carrier on the public highways of New York State, and remained in the carrier's possession and control until repossessed January 26, 1954. The carrier was then delinquent under its sales agreements to the extent of $4,578.79 on each truck, and the vendor bought them in at public sale. It resold one to a purchaser in New York and the other to a purchaser in Massachusetts. Comparable facts relate to the truck sold the carrier by appellant Brockway Motor Company. Its sales price was $7,257; the conditional sales agreement was for $6,757. The repossession took place March 26, 1954, when $5,625 was owed to the vendor. The record shows no disposal of the truck. April 21, 1954, the State asserted its lien on each truck for the entire amount of the highway use tax delinquencies of the carrier, totaling $3,698.04. There is no dispute as to the amount of the tax due to the State, nor of the claim that such sum is due from the carrier. There also is no controversy as to the validity of the State's lien against the respective trucks for such part of the tax as is measured by the operation of each on the State's highways. The issue, accordingly, has been narrowed by the parties to the validity of the subordination of the rights of the respective conditional vendors of these trucks to the State's lien for any part of the carrier's delinquent taxes that exceeds the sum determined by the operation of the trucks on the State's highways. To the extent of such excess, the vendors claim that the statutory lien deprives them of property without due process of law in violation of the Fourteenth Amendment to the Federal Constitution. Separate factual considerations are presented by the State's lien (1) for the taxes measured by the carrier's operation of trucks other than the three here in question, and (2) for the taxes measured by the carrier's operation of trucks before its first operation of the respective three trucks in question. The principle which supports the State's priority of lien is, however, the same in both instances. That principle supports also the priority of the State's lien as dating from the time of the carrier's first operation of the respective three trucks within the State. This holds good even though no assessment of the tax was made by the State until after the respective trucks had been repossessed by their conditional vendors. The State's claim of priority for its lien depends in each instance upon its constitutional right to enforce the collection of all taxes due it from the motor carrier for the latter's use of the highways of New York under a statute giving ample notice of the tax and of the provisions for its collection. There is no doubt that the State may impose and enforce a lien covering all taxes owed to it by a carrier for the privilege of using the State's highways where such lien applies to vehicles owned by the carrier free and clear of encumbrances. The lien for such taxes may be enforced against any or all of such trucks regardless of whether the taxes accrued from the carrier's operation of one or the other of such trucks, or even whether they accrued from the carrier's use of the highways before its acquisition and operation of any of the particular trucks subjected to the lien. Likewise, the lien unquestionably could attach to the trucks as of the time of their first use by the carrier within the State. See United States v. Alabama,,. Such liens are simple illustrations of the State's exercise of its prerogative right to impose a statutory lien for delinquent taxes upon the taxpayer's property. See Marshall v. New York,,. A State is entitled to wide discretion in such matters. The controversy arises here because, for the present purposes, the State treats the three trucks now before us in the same manner as it does the carrier's unencumbered trucks. The vendors, relying upon their conditional sales agreements, deny this right. The State does not dispute the validity of those agreements. The State, however, treats them as security interests, rather than as absolute interests. The State emphasizes the action of the vendors in yielding control of the trucks to the carrier, thus enabling the carrier to operate them on the State's highways. The burden placed on the highways has been precisely the same as though the carrier had held unencumbered title to the trucks. Looking at the situation from another point of view, New York has an unquestionable right to regulate the use of conditional sales agreements within the State. The prescribed priority of its highway tax liens over the rights of conditional vendors may be regarded, therefore, as in the nature of a supplement to the New York Uniform Conditional Sales Act. McKinney's N.Y.Laws, c. 41, Personal Property Law, Art. 4. New York subjects each carrier to a reasonably computed tax for the use of its highways, and, in order to collect that tax, places a statutory lien upon all motor vehicles operated by the carrier within the State. The carrier here was the beneficial owner and operator of the three trucks during the time it had possession of them. The conditional sales agreements provided the vendors with security for payment of the purchase price of the trucks. As long as the carrier kept up its payments, the possession and control of the trucks were in the carrier, and its use of them on the highways had the same effect on those highways as though the trucks had been paid for in full. The enforcement of this lien rests upon principles known to the law in other connections. A landlord's lien for unpaid rent long has been enforceable against personal property found on the premises in the possession of the tenant, even though the legal title to such personal property may be in a third party who has allowed the tenant to have possession and beneficial use of it. Spencer v. M'Gowen, 13 Wend. (N.Y.) 256. The highway use tax is not assessed on the conditional vendor or on the vendor's trucks as such. It is a tax assessed on the carrier, and the lien for its collection is imposed on the trucks in the carrier's possession which have been operated by it on New York's highways. The State asserts no personal liability on the part of either of the appellants. The State's claim is limited to its lien as set forth in a statute which was in effect more than a year before the respective appellants sold their trucks to the carrier. While it is not a condition of the validity of the State's lien, it is obvious that vendors of trucks, as well as carriers, derive substantial benefits from the State's costly construction and maintenance of its highways for heavy traffic. The reasonableness of the lien is thereby emphasized. Cases condemning attempts by States to compute one person's tax by reference to the income or activities of another are not persuasive here. The tax here is on the carrier, and it is computed with reference to the carrier's own use of the highways. This statutory lien does not destroy the efficacy of conditional sales financing. Practically, it suggests that the conditional vendors secure assurance from their carrier customers that the latters' highway use taxes are not in arrears. While the State would not, at common law, have a lien to the extent here asserted, that is far from saying that the lien, when imposed by statute, is arbitrary or unreasonable, and therefore lacking in due process. Justice Cardozo said for this Court in Burnet v. Wells,,: "The controversy is one as to the boundaries of legislative power. It must be dealt with in a large way, as questions of due process always are, not narrowly or pedantically, in slavery to forms or phrases." "Taxation is not so much concerned with the refinements of title as it is with actual command over the property taxed -- the actual benefit for which the tax is paid." "Corliss v. Bowers, supra [281 U.S. 376], p.. Cf. 288 U. S. Guggenheim, supra [288 U.S. 280], p.. Refinements of title have at times supplied the rule when the question has been one of construction, and nothing more -- a question as to the meaning of a taxing act to be read in favor of the taxpayer. Refinements of title are without controlling force when a statute, unmistakable in meaning, is assailed by a taxpayer as overpassing the bounds of reason, an exercise by the lawmakers of arbitrary power. In such circumstances, the question is no longer whether the concept of ownership reflected in the statute is to be squared with the concept embodied more or less vaguely in common law traditions. The question is whether it is one that an enlightened legislator might act upon without affront to justice. Even administrative convenience, the practical necessities of an efficient system of taxation, will have heed and recognition within reasonable limits." (Emphasis supplied.) There is little doubt that, if this tax on the carrier were required to be computed at a flat rate, or measured by the gross receipts of the carrier from its use of the State's highways, that the liens here asserted on all vehicles in the carrier's fleet of trucks (although subject to conditional sales) would be valid as a reasonable means of enforcing such an unallocable tax. The State has no less a constitutional right to prescribe and enforce its lien where, as here, the tax on the carrier is allocable because computed in close proportion to the actual burden placed on the highways by the respective trucks operated by the carrier. In either case, the tax is owed by the carrier, and the need for an effective lien to enforce it is all the more necessary where, as here, the tax cannot be computed or readily collected in advance. The judgment of the Court of Appeals of the New York, accordingly, is Affirmed

New York State imposes a highway use tax, computed by the weight-distance principle, upon motor carriers operating heavy vehicles on the State's highways. The tax owed by a carrier is a statutory lien upon all motor vehicles operated by the carrier within the State, and the lien is paramount to all prior liens or encumbrances. Vendors of particular trucks, who sold them to the carrier under conditional sales agreements more than a year after the statute became effective, challenged application of the statutory tax lien, in some circumstances, as a deprivation of property without due process of law in violation of the Fourteenth Amendment to the Federal Constitution. Held: 1. As applied to taxes based upon the carrier's operation of other trucks within the State, whether before or during the time that the carrier operated the particular trucks within the State, the State's priority of lien is constitutional. . 2. As applied to taxes assessed against the carrier after the vendors have repossessed the particular trucks, but which were based upon the carrier's operations on the State's highways before such repossession, the State's priority of lien is constitutional. . 308 N.Y. 731, 124 N.E.2d 339, affirmed.

1955_503

https://www.oyez.org/cases/1955/503

MR. JUSTICE REED delivered the opinion of the Court. Petitioner brought this habeas corpus proceeding to test the validity of the denial of his application under §§ 244(a)(5) and 244(c) of the Immigration and Nationality Act of 1952, 66 Stat. 215, 216, 8 U.S.C. §§ 1254(a)(5) and 1254(c), for discretionary suspension of deportation. He contends that the denial of his application was unlawful because based on confidential undisclosed information. The District Court denied the writ, holding, so far as pertinent here, that, "after complying with all the essentials of due process of law in the deportation hearing and in the hearing to determine eligibility for suspension of deportation, [the Attorney General may] consider confidential information outside the record in formulating his discretionary decision. " The Court of Appeals affirmed, concluding, inter alia, that petitioner was not "denied due process of law in the consideration of his application for suspension of deportation because of the use of this confidential information." 222 F.2d 820, 820-821, rehearing denied, 224 F.2d 957. We granted certiorari, 350 U.S. 931, to consider the validity of 8 CFR, Rev.1952, § 244.3, the Attorney General's regulation which provides: "§ 244.3 Use of confidential information. In the case of an alien qualified for . . . suspension of deportation under section . . . 244 of the Immigration and Nationality Act the determination as to whether the application for . . . suspension of deportation shall be granted or denied (whether such determination is made initially or on appeal) may be predicated upon confidential information without the disclosure thereof to the applicant, if in the opinion of the officer or the Board making the determination the disclosure of such information would be prejudicial to the public interest, safety, or security." Following a hearing, the fairness of which is unchallenged, petitioner was ordered deported in 1952 pursuant to 8 U.S.C. (1946 ed., Supp. V) § 137-3. That section provided for the deportation of any alien "who was at the time of entering the United States, or has been at any time thereafter," a member of the Communist Party of the United States. Petitioner, a citizen of Great Britain, last entered the United States in 1921. At the deportation hearing, he admitted having been a voluntary member of the Communist Party from 1935 through 1940. He attacked the validity of the deportation order in the courts below on the ground that there is "no lawful power . . . under the Constitution or laws of the United States" to deport one who has "at no time violated any condition imposed at the time of his entry." But that point has been abandoned, and, in this Court, petitioner in effect concedes that he is deportable. See Galvan v. Press,; Harisiades v. Shaughnessy,. In 1953, upon motion of petitioner, the deportation order was withdrawn for the purpose of allowing petitioner to seek discretionary relief from the Attorney General under § 244(a)(5) of the Act. The application for suspension of deportation was filed and a hearing thereon was held before a special inquiry officer of the Immigration and Naturalization Service. The special inquiry officer found petitioner to be qualified for suspension of deportation -- that is, found that petitioner met the statutory prerequisites to the favorable exercise of the discretionary relief. But the special inquiry officer decided the case for suspension did not "warrant favorable action" in view of certain "confidential information." The Board of Immigration Appeals dismissed an appeal, basing its decision "[u]pon a full consideration of the evidence of record and in light of the confidential information available." Thus, the Board in considering the appeal reviewed the undisclosed information as well as the evidence on the open record. Petitioner then commenced the present habeas corpus action. As previously noted, § 244(a)(5) of the Act provides that the Attorney General "may in his discretion" suspend deportation of any deportable alien who meets certain statutory requirements relating to moral character, hardship, and period of residence within the United States. If the Attorney General does suspend deportation under that provision, he must file, pursuant to § 244(c), "a complete and detailed statement of the facts and pertinent provisions of law in the" case with Congress, giving "the reasons for such suspension." So far as pertinent here, deportation finally cancels only if Congress affirmatively approves the suspension by a favorable concurrent resolution within a specified period of time. There is no express statutory grant of any right to a hearing on an application to the Attorney General for discretionary suspension of deportation. For purposes of effectuating these statutory provisions, the Attorney General adopted regulations delegating his authority under § 244 of the Act to special inquiry officers; giving the alien the right to apply to suspension during a deportation hearing; putting the burden on the applicant to establish the statutory requirements for eligibility for suspension; allowing the alien applicant to submit any evidence in support of his application; requiring the special inquiry officer to present evidence bearing on the applicant's eligibility for relief; and requiring a "written decision" with "a discussion of the evidence relating to the alien's eligibility for such relief and the reasons for granting or denying such application." The Attorney General also promulgated the regulation under attack here, 8 CFR, Rev.1952, § 244.3, see , supra, providing for the use by special inquiry officers and the Board of Immigration Appeals of confidential information in ruling upon suspension applications if disclosure of the information would be prejudicial to the public interest, safety or security. We note that petitioner does not suggest that he did not receive a full and fair hearing on evidence of record with respect to his statutory eligibility for suspension of deportation. In fact, petitioner recognizes that the special inquiry officer found in his favor on all issues relating to eligibility for the discretionary relief, and that those findings were adopted by the Board of Immigration Appeals. This favorably disposed of petitioner's eligibility for consideration for suspension of deportation -- the first step in the suspension procedure. Thus, we have here the case of an admittedly deportable alien who has been ordered deported following an unchallenged hearing, and who has been accorded another full and fair hearing on the issues respecting his statutory qualifications for discretionary suspension of deportation. It is urged upon the Court that the confidential information regulation is invalid because inconsistent with § 244 of the Act. In support of this claim, petitioner argues that § 244 implicitly requires the Attorney General to give a hearing on applications for suspension of deportation. It is then said that this statutory right is nullified and rendered illusory by the challenged regulation, and that therefore the regulation is invalid. But there is nothing in the language of § 244 of the Act upon which to base a belief that the Attorney General is required to give a hearing with all the evidence spread upon an open record with respect to the considerations which may bear upon his grant or denial of an application for suspension to an alien eligible for that relief. Assuming that the statute implicitly requires a hearing on an open record as to the specified statutory prerequisites to favorable action, there is no claim here of a denial of such a hearing on those issues. Moreover, though we assume a statutory right to a full hearing on those issues, it does not follow that such a right exists on the ultimate decision -- the exercise of discretion to suspend deportation. Eligibility for the relief here involved is governed by specific statutory standards which provide a right to a ruling on an applicant's eligibility. However, Congress did not provide statutory standards for determining who, among qualified applicants for suspension, should receive the ultimate relief. That determination is left to the sound discretion of the Attorney General. The statute says that, as to qualified deportable aliens, the Attorney General "may, in his discretion" suspend deportation. It does not restrict the considerations which may be relied upon or the procedure by which the discretion should be exercised. Although such aliens have been given a right to a discretionary determination on an application for suspension, cf. Accardi v. Shaughnessy,, a grant thereof is manifestly not a matter of right under any circumstances, but rather is in all cases a matter of grace. Like probation or suspension of criminal sentence, it "comes as an act of grace", Escoe v. Zerbst,,, and "cannot be demanded as a right," Berman v. United States,,. And this unfettered discretion of the Attorney General with respect to suspension of deportation is analogous to the Board of Parole's powers to release federal prisoners on parole. Even if we assume that Congress has given to qualified applicants for suspension of deportation a right to offer evidence to the Attorney General in support of their applications, the similarity between the discretionary powers vested in the Attorney General by § 244(a) of the Act, on the one hand, and judicial probation power and executive parole power, on the other hand, leads to a conclusion that § 244 gives no right to the kind of a hearing on a suspension application which contemplates full disclosure of the considerations entering into a decision. Clearly there is no statutory right to that kind of a hearing on a request for a grant of probation after criminal conviction in the federal courts. Nor is there such a right with respect to an application for parole. Since, as we hold, the Attorney General's discretion is not limited by the suggested hearing requirement, the challenged regulation cannot be said to be inconsistent with § 244(a) of the Act. Petitioner says that a hearing requirement, with a consequent disclosure of all considerations going into a decision, is made implicit by § 244(c), if not by § 244(a). Section 244(c), it will be recalled, requires the Attorney General to file with Congress "a complete and detailed statement of the facts" as to cases in which suspension is granted, "with reasons for such suspension." This statutory mandate does not, however, order such a report on cases in which suspension is denied. Section 244(c) actually emphasizes the fact that suspension is not a matter of right. Congress was interested in limiting grants of this relief to the minimum. It evidenced an interest only in the reasons relied upon by the Attorney General for granting an application, so that it could have an opportunity to accept or reject favorable administrative decisions. This in no way suggests that the applicant is to be apprised of the reasons for a denial of his request for suspension. Petitioner also points to § 235(c) of the Act, 8 U.S.C. § 1225(c), which specifically authorizes the Attorney General to determine under some circumstances that an alien is excludable "on the basis of information of a confidential nature." It is argued from this that, had Congress intended to permit the use of confidential information in rulings upon applications for suspension of deportation, it would have expressly so provided in language as specific as that used in § 235(c). The difficulty with this argument is that § 235(c) is an exception to an express statutory mandate under § 236(a) of the Act, 8 U.S.C. § 1226(a), that determinations of admissibility be "based only on the evidence produced at the inquiry." No such express mandate exists with respect to suspension of deportation, and therefore no specific provision for the use of confidential information was needed if normally contemplated by the broad grant of discretionary power to the Attorney General. It is next argued that, even if the confidential information regulation is not inconsistent with § 244(a), it nevertheless should be held invalid. Emphasizing that Congress did not, in terms, authorize such a procedure, petitioner contends that the Act should be construed to provide a right to a hearing because only such a construction would be consistent with the "tradition and principles of free government." On its face, this is an attractive argument. Petitioner urges that, in view of the severity of the result flowing from a denial of suspension of deportation, we should interpret the statute by resolving all doubts in the applicant's favor. Cf. United States v. Minker,,. But we must adopt the plain meaning of a statute, however severe the consequences. Cf. Galvan v. Press,,. As we have already stated, suspension of deportation is not given to deportable aliens as a right, but, by congressional direction, it is dispensed according to the unfettered discretion of the Attorney General. In the face of such a combination of factors, we are constrained to construe the statute as permitting decisions based upon matters outside the administrative record, at least when such action would be reasonable. It may be that § 244(a) cannot be interpreted as allowing a decision based on undisclosed information in every case involving a deportable alien qualified for suspension. Thus, it could be argued that, where there is no compelling reason to refuse to disclose the basis of a denial of an application, the statute does not contemplate arbitrary secrecy. However, the regulation under attack here limits the use of confidential information to instances where, in the opinion of the special inquiry officer or the Board of Immigration Appeals, "the disclosure . . . would be prejudicial to the public interest, safety, or security." If the statute permits any withholding of information from the alien, manifestly this is a reasonable class of cases in which to exercise that power. Our conclusion in this case is strongly supported by prior decisions of this Court. In both Knauff v. Shaughnessy,, and Shaughnessy v. Mezei,, we upheld a regulation of the Attorney General calling for the denial of a hearing in exclusion cases where the Attorney General determined that an alien was excludable on the basis of confidential information, and where, as here, the disclosure of that information would be prejudicial to the public interest. And again, as here, the statutes involved in those cases did not expressly authorize the use of such information in making the administrative ruling. It is true that a resident alien in a deportation proceeding has constitutional protections unavailable to a nonresident alien seeking entry into the United States, and that those protections may militate against construing an ambiguous statute as authorizing the use of confidential information in a deportation proceeding. Cf. Kwong Hai Chew v. Colding,. But the issue involved here under § 244(a) is not whether an alien is deportable, but whether, as a deportable alien who is qualified for suspension of deportation, he should be granted such suspension. In view of the gratuitous nature of the relief, the use of confidential information in a suspension proceeding is more clearly within statutory authority than were the regulations involved in the Knauff and Mezei cases. Concluding that the challenged regulation is not inconsistent with the Act, we must look to petitioner's claim that the use of undisclosed confidential information is unlawful because inconsistent with related regulations governing suspension of deportation procedures. As previously noted, an application for suspension is considered as part of the "hearing" to determine deportability. 8 CFR, Rev.1952, §§ 242.53(c) and 242.54(d); and see 8 CFR, Rev.1952, § 242.5. The alien is entitled to "submit any evidence in support of his application which he believes should be considered by the special inquiry officer." 8 CFR, Rev.1952, § 242.54(d). The hearing to determine deportability, during which the suspension application is considered, is to be a "fair and impartial hearing." 8 CFR, Rev.1952, § 242.53(b). And a decision of the special inquiry officer on the request for suspension must contain "the reasons for granting or denying such application." 8 CFR, Rev.1952, § 242.61(a). We conclude that, although undisclosed information was used as a basis for denying suspension of deportation, none of the above-mentioned regulations was transgressed. While an applicant for suspension is, by regulation, entitled to "submit any evidence in support of his application," that is merely a provision permitting an evidentiary plea to the discretion of those who are to make the decision. In this respect it is not unlike the "statement" and the opportunity to present "information in mitigation of punishment" to which a convicted defendant is entitled under Rule 32(a) of the Federal Rules of Criminal Procedure before criminal sentence is imposed. And the situation is not different because the matter of suspension of deportation is taken up in the "fair and impartial" deportation "hearing." Assuming that such a "hearing" normally precludes the use of undisclosed information, the "hearing" here involved necessarily contemplates the use of confidential matter in some circumstances. We must read the body of regulations governing suspension procedures so as to give effect, if possible, to all of its provisions. Cf. Lawson v. Suwannee Fruit & S.S Co.,. This same rationale leads us to conclude that the requirement of a decision containing "reasons" is fully complied with by a statement to the effect that the application has been denied on the basis of confidential information, the disclosure of which would be prejudicial to the public interest, safety or security. Section 244.3 says that such information may be used "without the disclosure thereof to the applicant." Reading the provision for a statement of the "reasons" for a decision in the light of § 244.3, it follows that express reliance on confidential information constitutes a statement of the "reasons" for a denial of suspension within the meaning of § 242.61(a). If "reasons" must be disclosed but confidential information need not be, the former mandate, which certainly comprehends the latter provision, must be satisfied by an express invocation of the latter provision. Congress has provided a general plan dealing with the deportation of those aliens who have not obtained citizenship although admitted to residence. Since it could not readily make exception for cases of unusual hardship or extenuating circumstances, those matters were left to the consideration and discretion of the Attorney General. We hold that, in this case, the Attorney General has properly exercised his powers under the suspension statute and we affirm the judgment below. It is so ordered.

An alien whose deportation had been ordered because admittedly, after entry, he had been a member of the Communist Party from 1935 through 1940 applied for suspension of his deportation under § 244 of the Immigration and Nationality Act of 1952, which authorizes the Attorney General, "in his discretion," to suspend deportation of any deportable alien who meets certain statutory requirements relating to moral character, hardship, and period of residence in the United States. After administrative hearings not expressly required by statute but authorized by regulations of the Attorney General, a special inquiry officer found that the alien met the statutory prerequisites for the favorable exercise of discretionary relief, but denied relief because of confidential information not disclosed to the alien. The use of such confidential information without disclosure thereof to the applicant was expressly authorized by the regulations if "the disclosure of such information would be .prejudicial to the public interest, safety, or security." Held: the Attorney General has properly exercised his discretionary powers under the statute in this case, and denial of the application is sustained. . (a) Under his rulemaking authority and as a matter of administrative convenience, the Attorney General validly delegated his authority to special inquiry officers with review by the Board of Immigration Appeals. P. 351, n 8. (b) The regulation permitting consideration of confidential information not disclosed to the applicant is not inconsistent with § 244(a). . (c) Suspension of deportation is not a matter of right, but a matter of grace, like probation, parole, or suspension of sentence, and the applicant is not entitled to the kind of a hearing which contemplates full disclosure of the considerations entering into an exercise of the Attorney General's discretion. . (d) Section 244 (c), which requires the Attorney General to file with Congress "a complete and detailed statement of the facts" regarding cases in which suspension is granted, with "the reasons for such suspension," is inapplicable to cases in which suspension is denied, and it affords no basis for a conclusion that an applicant must be apprised of reasons for a denial of his request for suspension. P.. (e) Section 235 (c), which specifically authorizes the Attorney General to determine, in some circumstances, that an alien is excludable "on the basis of information of a confidential nature," does not, by implication, prevent the use of confidential information in rulings upon applications for suspension of deportation. . (f) Though it is contended that, in construing the statute, all doubts should be resolved in the applicant's favor, because the use of such confidential information is inconsistent with the "tradition and principles of free government," and denial of suspension may lead to severe results, this Court must adopt the plain meaning of this statute. . (g) As here construed, § 244 is constitutional. P. 357, n 21. (h) The regulation permits the use of undisclosed confidential information only when disclosure "would be prejudicial to the public interest, safety, or security," and this is a reasonable class of cases in which to exercise that power. P.. (i) Since the Board of Immigration Appeals, the District Court, and the Court of Appeals concluded, in effect, that the special inquiry officer found that disclosure of the confidential information in this case would have been contrary to the public interest, safety or security, this Court accepts that finding, and nothing more is required by the regulation. P. 358, n 22. (j) In view of the gratuitous nature of the relief, the use of confidential information in a suspension of deportation proceeding is more clearly within statutory authority than the regulations sustained in Knauff v. Shaughnessy,, and Shaughnessy v. Mezei,. . (k) The use of undisclosed confidential information as a basis for denying suspension of deportation did not transgress any of the related regulations governing suspension of deportation proceedings. . 222 F.2d 820, 224 F.2d 957, affirmed.

1955_643

https://www.oyez.org/cases/1955/643

MR. JUSTICE REED delivered the opinion of the Court. These two cases concern the prosecution of three defendants for violations of the provisions of the Universal Military Training and Service Act. 50 U.S.C.App. § 451 et seq. We must determine the proper venue for the trial of these crimes. Defendants Johnston and Sokol resided in the Western Judicial District of Pennsylvania and registered there with the local draft boards. Both were classified 1-O (conscientious objectors) and both were ordered to report to the boards for assignment of civilian work in lieu of induction. They were instructed to report to separate state hospitals situated in the Eastern Judicial District of Pennsylvania. They reported to the boards, but personally refused to comply with the instructions. They were indicted in the Eastern District of Pennsylvania, and the indictments were dismissed for lack of jurisdiction on the ground that venue could only be in the Western District. 131 F. Supp. 955. The Court of Appeals for the Third Circuit reversed, and remanded the case for trial. That court reasoned that venue was where the defendants failed to report. 227 F.2d 745. Defendant Patteson, likewise classified 1-O, was ordered to report to his local board in Oklahoma for similar assignment. He, too, reported to the board, and there personally refused to comply with instructions to report at the Topeka, Kansas, State Hospital. After indictment in Kansas, the Kansas District Court ordered the case transferred to Oklahoma under Rule 21(b), Fed.Rules Crim.Proc. The Oklahoma court retransferred the case to Kansas, as it thought the venue was there. The Kansas court thereupon dismissed the indictment on the ground that the venue was in Oklahoma. United States v. Patteson, 132 F. Supp. 67. The judgment was affirmed by the Court of Appeals for the Tenth Circuit. 229 F.2d 257. Each registrant received an order, the pertinent parts of which follow: "SELECTIVE SERVICE SYSTEM" "ORDER TO REPORT FOR CIVILIAN WORK" AND STATEMENT OF EMPLOYER "You are ordered to report to the local board named above at ___ m. on the ___ day of _____, 195_, where you will be given instructions to proceed to the place of employment." "You are ordered to report for employment pursuant to the instructions of the local board, to remain in employment for twenty-four (24) consecutive months or until such time as you are released or transferred by proper authority." "You will be instructed as to your duties at the place of employment." "Failure to report at the hour and on the day named in this order, or to proceed to the place of employment pursuant to instructions or to remain in this employment the specified time will constitute a violation of the Universal Military Training and Service Act, as amended, which is punishable by fine or imprisonment or both." ____________________________ (Clerk or Member of the Local Board) "* * * *" "STATEMENT OF EMPLOYER" "* * * *" "Failed to report" ____________________________ Personal Director None of the registrants entered the district of his indictment after receiving his orders. The indictment in each case charges the registrant, a conscientious objector, with violation of § 12(a) of the Act. In the Johnston indictment, the pertinent language is: ". . . did knowingly neglect to perform a duty imposed upon him by the provision of said Act in that he failed and refused to obey an order of Local Board 87, New Castle, Pennsylvania, directing him to report for employment at Norristown State Hospital, Norristown, Pennsylvania, and to remain employed there for twenty-four consecutive months in violation of Title 50 U.S.C.Appx., Sections 456 and 462, as amended." In the Sokol case it is: ". . . did knowingly neglect to perform a duty . . . in that he failed to report to the Philadelphia State Hospital, . . . for assignment to perform civilian work contributing to the maintenance of the national health, safety or interest, in lieu of induction; in violation of Title 50, Appx. Secs. 456(j) and 462." In the Patteson case it is: ". . . did knowingly and willfully refuse, neglect and fail to report at the Topeka State Hospital at the time and place so designated in said order." The question at issue in these three cases is fairly presented by the registrants Johnston and Sokol in their petition for certiorari. It reads thus: "Where each petitioner resided in the Western District of Pennsylvania, the Selective Service Local board of each was located in the Western District of Pennsylvania, the orders to perform work were issued in the Western District of Pennsylvania, and each petitioner did not go beyond his local board in the Western District of Pennsylvania and at all times refused to leave the Western District of Pennsylvania and did not proceed to the Eastern District of Pennsylvania, were the offenses committed in the Western District of Pennsylvania and not in the Eastern District and, therefore, does it violate rights guaranteed by the Sixth Amendment to the Constitution to indict and prosecute each petitioner in the Eastern District of Pennsylvania?" Our analysis of the law and the facts in these cases convinces us that the venue of these violations of the orders lies in the district where the civilian work was to be performed, that is, for Patteson in Kansas, and the Eastern District of Pennsylvania for Johnston and Sokol. We are led to this conclusion by the general rule that, where the crime charged is a failure to do a legally required act, the place fixed for its performance fixes the situs of the crime. The possibility that registrants might be ordered to report to points remote from the situs of draft boards neither allows nor requires judicial changes in the law of venue. No showing of any arbitrary action appears in these cases. Article III of the Constitution and the Sixth Amendment fix venue "in the State" and "district wherein the crime shall have been committed." The venue of trial is thereby predetermined, but those provisions do not furnish guidance for determination of the place of the crime. That place is determined by the acts of the accused that violate a statute. This requirement of venue states the public policy that fixes the situs of the trial in the vicinage of the crime, rather than the residence of the accused. Cf. United States v. Anderson,,. A variation from that rule for convenience of the prosecution or the accused is not justified. The result would be delay and confusion. This rule was followed in United States v. Johnson,, relied on by the registrants, where a maker and shipper of dentures mailed in Illinois was charged in Delaware, the State of receipt by a consignee, with violating the law by "use" of the mails "for the purpose of sending or bringing into" a State such dentures. Id. at. This Court, by interpretation of the statute, restricted prosecution of the shipper to the State of the shipment, saying: "It is a reasonable, and not a strained, construction to read the statute to mean that the crime of the sender is complete when he uses the mails in Chicago, and the crime of the unlicensed dentist in California or Florida or Delaware, who orders the dentures from Chicago, is committed in the State into which he brings the dentures. As a result, the trial of the sender is restricted to Illinois, and that of the unlicensed dentist to Delaware or Florida or California." Id. at. Venue for these prosecutions lies where, under § 12(a), supra, the registrants did "knowingly fail or neglect or refuse to perform any duty required of him under or in the execution of this title, or rules, regulations, or directions made pursuant to this title. . . ." These registrants were made subject to § 12(a) by § 6(j), which declares that a conscientious objector who fails or neglects to obey an order of his local board shall be deemed to have "failed or neglected to perform a duty required of him" by § 12. The orders set out above, p., could only be the basis of one conviction, but they directed the registrant to perform two duties. The first is to report to the local board. This was done by each registrant. The second is to report for employment and to remain there in employment for 24 consecutive months. The "instructions to proceed" given by the board, and the statement that "failure . . . to proceed to the place of employment pursuant to instructions" would constitute a crime, are for the registrant's information. They did not create another duty. This appears emphatically from the characterization in the explanatory paragraph that failure to report or proceed to the place of employment would be a violation of orders. The crimes charged arise from failure to complete the second duty -- report for employment. Accordingly venue must lie where the failure occurred. See cases cited above, note 5 It will be noted that the indictments set out the place of the alleged crimes in the terms of the orders, and give jurisdiction for trial in the Eastern District of Pennsylvania and the District of Kansas. In each instance, the charge is failure to perform a "duty" in that the registrant failed "to report" to the respective hospitals. Thus, the indictments, based on the charged violation of the order, follow, as we see it, the requirements of law for trial in the State and district where the crime was committed. We affirm the Court of Appeals for the Third Circuit in No. 643, Johnston and Sokol, and reverse the Court of Appeals for the Tenth Circuit in No. 704, the Patteson case. No. 643, Affirmed. No. 704, Reversed.

These registrants under the Universal Military Training and Service Act were classified as conscientious objectors and were ordered by their local draft boards to report for civilian work at state hospitals located in judicial districts other than those in which they resided and were registered and where their orders were issued. They refused to report for work at the places designated, and each was indicted for a violation of § 12(a) of the Act. Held: the venue for their trials was in the judicial districts where the civilian work was to be performed, not in the judicial districts in which they resided and where their orders were issued. . (a) The general rule is that, where the crime charged is a failure to do a legally required act, the place fixed for its performance determines the situs of the crime. P.. (b) The possibility that registrants might be ordered to report to points remote from the situs of draft boards neither allows nor requires judicial changes in the law of venue. P.. (c) The venue requirements of Article III of the Constitution and the Sixth Amendment state the public policy that fixes the situs of a trial in the vicinage of the crime, rather than where the accused is a resident, and a variation from that rule for the convenience of the prosecution or the accused is not justified. . 227 F.2d 745 affirmed. 229 F.2d 257 reversed.

1955_33

https://www.oyez.org/cases/1955/33

MR. JUSTICE MINTON delivered the opinion of the Court. Respondent railroad has, since 1937, engaged in hauling, between Boston, Massachusetts, and other points in New England, loaded trailers of the type ordinarily hauled over the highways by motor carriers. This operation is popularly known as "piggy-backing." Trailers to be shipped from Boston are delivered to respondent's freight yard by employees of the motor carriers. There, they are detached from the tractors and driven by special devices onto respondent's flatcars by employees of New England Transportation Co., a motor carrier, which is a subsidiary of respondent. The trailers are secured to the flatcars by respondent's employees. Petitioners are the local teamsters union, one of its officers, and two of its business agents. The union, by virtue of collective bargaining agreements, represents a large number of drivers and helpers of certain motor carriers which are engaged in over-the-road hauling of freight between Boston and other points in New England. Respondent's "piggy-backing" operations have steadily increased over the years, with a resulting loss of work for truck drivers. The union sought, without success, in 1946, and again in 1949, an agreement by the motor carriers to cease shipping trailers by "piggy-back." Having failed in these and subsequent negotiations to dissuade the trucking companies from participating in "piggy-backing," petitioner union assigned petitioners Norton and McCarthy, business agents of the union, to patrol the entrance to respondent's Yard 5, where trailers are delivered for "piggy-back" operations. On July 11, 12, and 14, 1952, Norton and McCarthy stopped a number of truck-drawn trailers owned by carriers with whom petitioner union had collective bargaining agreements and persuaded the drivers to refrain from delivering the trailers to respondent. Employees of New England Transportation Co. were persuaded by Norton and McCarthy not to load previously delivered trailers onto respondent's flatcars. Respondent filed suit in the Superior Court of Suffolk County, Massachusetts, seeking permanently to enjoin petitioner's conduct and, in addition, damages in the sum of $100,000. In its amended complaint, respondent alleged, among other things: ". . . the individual respondents and the respondent union prevented the loading of trailers on flat cars and enforced a boycott against petitioner and a withholding of patronage and services by motor truck carriers and shippers." "* * * *" "The petitioner is informed and believes that the object of the acts committed by the respondents on July 11, 12, and 14, 1952, as set forth in paragraphs '8' and '9' of this complaint, was to force or require the petitioner to cease handling and transportation the products of various shippers and motor carriers who employ petitioner's flat car service." "* * * *" "The said acts were and are intended to compel shippers and motor truck carriers to assign work to members of the respondent union, and to thereby commit an unfair labor practice in violation of the National Labor Relations Act; and " "The said acts were intended to and did, in fact, result in an unlawful secondary boycott in violation of the laws of the Commonwealth of Massachusetts, and of Section 8(b)(4)(A) of the National Labor Relations Act; . . . " After hearing, a permanent injunction was granted and, on appeal, the Supreme Judicial Court of Massachusetts affirmed. New York, N.H. & H. R. Co. v. Jenkins, 331 Mass. 720, 122 N.E.2d 759. We granted certiorari to determine whether the state court had jurisdiction to enjoin the petitioners' conduct or whether its jurisdiction had been preempted by the authority vested in the National Labor Relations Board. 348 U.S. 969. Resolution of this question depends upon (1) whether respondent, as a railroad subject to the Railway Labor Act, may avail itself of the processes of the NLRB, and, (2) if respondent may do so, was it required, in the circumstances of this case, to seek relief from that tribunal, rather than from the state courts. The Massachusetts court, although recognizing the principle that state courts ordinarily lack authority to enjoin alleged unfair labor practices affecting interstate commerce, determined that it had jurisdiction in this controversy to restrain petitioners' conduct because the Labor Management Relations Act's definition of "employer," as interpreted by the NLRB, cast doubt upon respondent's ability to obtain relief under that Act. The Act, in its definition of an "employer," expressly excludes anyone subject to the Railway Labor Act. 61 Stat. 137,, 29 U.S.C. § 152(2). It is, of course, true that employer-employee relationships of railroads such as respondent are governed by the Railway Labor Act, which was passed before either the National Labor Relations Act or the Labor Management Relations Act. Neither of the latter Acts was intended to tread upon the ground covered by the Railway Labor Act. It is clear that neither railroads nor their employees may carry their grievances with one another to the NLRB for resolution. But it does not follow from this that a railroad is precluded from seeking the aid of the Board in circumstances unrelated to its employer-employee relations. Respondent itself has maintained throughout the entire course of this litigation that there is no labor dispute with its employees. The Massachusetts court found that petitioner union was in no way concerned with respondent's labor policy, nor was there any claim that the union interfered in any manner whatsoever with the railroad employees. The NLRB is empowered to issue complaints whenever "it is charged" that any person subject to the Act is engaged in any proscribed unfair labor practice. § 10(b). Under the Board's Rules and Regulations, such a charge may be filed by "any person." We think it clear that Congress, in excluding "any person subject to the Railway Labor Act" from the statutory definition of "employer," carved out of the Labor Management Relations Act the railroads' employer-employee relationships, which were, and are, governed by the Railway Labor Act. But we do not think that, by so doing, Congress intended to divest the NLRB of jurisdiction over controversies otherwise within its competence solely because a railroad is the complaining party. Furthermore, since railroads are not excluded from the Act's definition of "person," they are entitled to Board protection from the kind of unfair labor practice proscribed by § 8(b)(4)(A). This interpretation permits the harmonious effectuation of three distinct congressional objectives: (1) to provide orderly and peaceful procedures for protecting the rights of employers, employees, and the public in labor disputes so as to promote the full, free flow of commerce, as expressed in § 1(b) of the Labor Management Relations Act; (2) to maintain the traditional separate treatment of employer-employee relationships of railroads subject to the Railway Labor Act; and (3) to minimize "diversities and conflicts likely to result from a variety of local procedures and attitudes toward labor controversies." Garner v. Teamsters Union,,. Respondent contends, however, that even if railroads may seek the aid of the NLRB, it was not required to do so in this case, because petitioners' conduct was neither protected by § 7 nor prohibited by § 8(b)(4) of the Labor Management Relations Act. As we noted earlier, respondent's amended complaint alleged violations of the Act. Whether the Act was violated or whether, as respondent now claims, it was not, is, of course, a question for the Board to determine. Even if petitioners' conduct is not prohibited by § 8 of the Act, it may come within the protection of § 7, in which case the State was not free to enjoin the conduct. In any event, the Board's jurisdiction in the circumstances of this case is clearly settled by this Court's recent decision in Weber v. Anheuser-Busch, Inc.,,: "But where the moving party itself alleges unfair labor practices, where the facts reasonably bring the controversy within the sections prohibiting these practices, and where the conduct, if not prohibited by the federal Act, may be reasonably deemed to come within the protection afforded by that Act, the state court must decline jurisdiction in deference to the tribunal which Congress has selected for determining such issues in the first instance." We therefore hold that the question presented by the facts in this case brings it within the jurisdiction of the NLRB, whose jurisdiction is exclusive, and the respondent railroad may seek any remedy it may have before said Board. The judgment is Reversed.

An interstate railroad which engaged in hauling loaded truck-trailers "piggy-back" brought an action in a state court to enjoin a labor union from conduct which interfered with such operation and which allegedly violated the Labor Management Relations Act. Employees of motor carriers with which the union had collective bargaining agreements had been persuaded by agents of the union to refrain from delivering loaded trailers to the railroad for "piggybacking." The union was not concerned in any way with the railroad's labor policy, nor was there any claim that the union interfered in any manner with the railroad's employees. Held: the case is within the exclusive jurisdiction of the National Labor Relations Board, the railroad may seek any remedy it may have before said Board under the Labor Management Relations Act, and the state court had no authority to enjoin the union's conduct. . (a) A railroad subject to the Railway Labor Act is not precluded from seeking the aid of the National Labor Relations Board in circumstances unrelated to the railroad's relations with its own employees. . (b) The question whether there was a violation of the Labor Management Relations Act is for the National Labor Relations Board to determine. P.. (c) Even if the union's conduct is not prohibited by § 8 of the Labor Management Relations Act, it may come within the protection of § 7, in which case the State is not free to enjoin the conduct. P.. (d) Weber v. Anheuer-Busch, Inc.,, followed. P.. 331 Mass. 720,122 N.E.2d 759, reversed.

1955_19

https://www.oyez.org/cases/1955/19

MR. JUSTICE BURTON delivered the opinion of the Court. This case presents two principal questions: (1) whether, in the collective bargaining contract before us, the union's undertaking "to refrain from engaging in any strike or work stoppage during the term of this agreement" waives not only the employees' right to strike for economic benefits, but also their right to strike solely against unfair labor practices of their employers, and (2) whether § 8(d) of the National Labor Relations Act, as amended, deprives individuals of their status as employees if, within the waiting period prescribed by § 8(d)(4), they engage in a strike solely against unfair labor practices of their employers. For the reasons hereafter stated, we answer each in the negative. Mastro Plastics Corp. and French-American Reeds Manufacturing Co., Inc., petitioners herein, are New York corporations which, in 1949 and 1950, were engaged in interstate commerce, manufacturing, selling and distributing plastic articles, including reeds and other accessories for musical instruments. They operated in the City of New York within the same plant, under the same management, and with the same employees. For collective bargaining, their employees were represented by Local 22045, American Federation of Labor, or by Local 3127, United Brotherhood of Carpenters and Joiners of America, AFL. These locals occupied the same office and used the services of the same representatives. During the period in question, the right of representation of petitioners' employees was transferred back and forth between them for reasons not material here. Accordingly, they are referred to in this opinion as the "Carpenters." In August 1950, Local 65 of the Wholesale and Warehouse Workers Union began a campaign among petitioners' employees in an effort to become their collective bargaining representative. Petitioners bitterly opposed the movement, believing Local 65 to be Communist-controlled. Feeling that the Carpenters were too weak to cope successfully with Local 65, petitioners asked the Carpenters to transfer their bargaining rights to Local 318, International Brotherhood of Pulp, Sulphite and Paper Mill Workers, AFL. When the Carpenters declined to do so, petitioners selected a committee of employees to visit 318, obtain membership cards, and seek members for that union. The cards were distributed during working hours, and petitioners paid their employees for time spent in the campaign, including attendance at a meeting of 318. Petitioners' officers and supervisors instructed employees to sign these cards and indicated that those refusing to do so would be "out." September 28, Local 65 filed with the National Labor Relations Board its petition for certification as bargaining representative. October 24, Local 318 intervened in the representation proceedings and asked that it be certified. However, many employees revoked their applications for membership in 318 and reaffirmed their adherence to the Carpenters. This was followed on October 31 by the Carpenters' refusal to consent to an election on the ground that petitioners had unlawfully assisted 318 in the campaign. November 10, 1950, a crisis developed when the president of petitioners summarily discharged Frank Ciccone, an employee of over four years' standing, because of the latter's activity in support of the Carpenters and his opposition to 318. We accept the finding of the National Labor Relations Board that petitioners "discriminatorily discharged, and thereafter refused to reinstate, Frank Ciccone because of his organizational activities in support of the . . . [Carpenters]. This discharge at once precipitated the strike which is before us, and which the Board found" "was clearly caused and prolonged by the cumulative effects of the [petitioners'] unfair labor practices culminating in the discriminatory discharge of Ciccone. There was no disorder, but the plant was virtually shut down until December 11, and it was March 9, 1951, before the Carpenters, on behalf of petitioners' employees, made an unconditional request to return to work. Petitioners ignored that request, and neither Ciccone nor any of the other 76 striking employees has been reinstated." While the strike against petitioners' unfair labor practices continued, the collective bargaining contract between petitioners and the Carpenters approached its expiration date of November 30, 1950, and, apart from the above-described organizational controversy, the Carpenters had taken timely steps to secure modification of their agreement. October 10, they had delivered to petitioners a notice (dated September 29, 1950) "requesting modification" of the contract. They thus had started the statutory negotiating period running as prescribed by the above-mentioned § 8(d). The Carpenters met several times with petitioners and pressed their demands for changes in the contract, but the expiration date passed without any agreement's being reached. In January, 1951, the Carpenters initiated the present proceedings before the National Labor Relations Board by charging petitioners with unfair labor practices. Acting on those charges, the Board's general counsel filed a complaint alleging petitioners' support of Local 318 and discharge of numerous employees, including Ciccone, as violations of § 8(a)(1), (2) and (3) of the Act. Petitioners admitted that they had discharged the employees in question and had not rehired them. They denied, however, that in so doing, they had committed any unfair labor practices. Their first affirmative defense was that the waiver of the right to strike, expressed by their employees in their collective bargaining contract, applied to strikes not only for economic benefits, but to any and all strikes by such employees, including strikes directed solely against unfair labor practices of the employer. Petitioners' other principal defense was that the existing strike began during the statutory waiting period initiated by the employees' request for modification of the contract and that, by virtue of § 8(d) of the Act, the strikers had lost their status as employees. That defense turned upon petitioners' interpretation of § 8(d), applying it not only to strikes for economic benefits, but to any and all strikes occurring during the waiting period, including strikes solely against unfair labor practices of the employer. The trial examiner made findings of fact sustaining the complaint, and recommended that petitioners be ordered to cease and desist from the interference complained of and be required to offer to Ciccone and the 76 other discharged employees full reinstatement, together with back pay for Ciccone from November 10, 1950, and for the other employees from March 9, 1951. See 103 N.L.R.B. 511, 526-563. With minor modifications, the Board adopted the examiner's findings and conclusions and issued the recommended order. 103 N.L.R.B. 511. The chairman and one member dissented in part. The Court of Appeals, with one judge dissenting in part, accepted the Board's findings of fact and conclusions of law and enforced the Board's order. 214 F.2d 462. Since then, the Court of Appeals for the Seventh Circuit has reached a similar conclusion. Labor Board v. Wagner Iron Works , 220 F.2d 126. Because of the importance of the issues in industrial relations and in the interpretation of the National Labor Relations Act, as amended, we granted certiorari. 348 U.S. 910. Apart from the issues raised by petitioners' affirmative defenses, the proceedings reflect a flagrant example of interference by the employers with the expressly protected right of their employees to select their own bargaining representative. The findings disclose vigorous efforts by the employers to influence and even to coerce their employees to abandon the Carpenters as their bargaining representatives and to substitute Local 318. Accordingly, unless petitioners sustain at least one of their affirmative defenses, they must suffer the consequences of their unfair labor practices violating § 8(a)(1), (2) or (3) of the Act, as amended. In the absence of some contractual or statutory provision to the contrary, petitioners' unfair labor practices provide adequate ground for the orderly strike that occurred here. Under those circumstances, the striking employees do not lose their status, and are entitled to reinstatement with back pay, even if replacements for them have been made. Failure of the Board to enjoin petitioners' illegal conduct or failure of the Board to sustain the right to strike against that conduct would seriously undermine the primary objectives of the Labor Act. See Labor Board v. International Rice Milling Co.,,. While we assume that the employees, by explicit contractual provision, could have waived their right to strike against such unfair labor practices, and that Congress, by explicit statutory provision, could have deprived strikers, under the circumstances of this case, of their status as employees, the questions before us are whether or not such a waiver was made by the Carpenters in their 1949-1950 contract and whether or not such a deprivation of status was enacted by Congress in § 8(d) of the Act, as amended in 1947. I. Does the collective bargaining contract waive the employees' right to strike against the unfair labor practices committed by their employers? The answer turns upon the proper interpretation of the particular contract before us. Like other contracts, it must be read as a whole, and in the light of the law relating to it when made. ". . . we have two declared congressional policies which it is our responsibility to try to reconcile. The one seeks to preserve a competitive business economy, the other to preserve the rights of labor to organize to better its conditions through the agency of collective bargaining. We must determine here how far Congress intended activities under one of these policies to neutralize the results envisioned by the other." Allen Bradley Co. v. Local Union No. 3,,. This contract was made in the light of that declared policy. A similar dual purpose is emphasized as follows in § 1 of the National Labor Relations Act, as amended: "It is hereby declared to be the policy of the United States to eliminate the causes of certain substantial obstructions to the free flow of commerce and to mitigate and eliminate these obstructions when they have occurred by encouraging the practice and procedure of collective bargaining and by protecting the exercise by workers of full freedom of association, self-organization, and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment or other mutual aid or protection." 61 Stat. 137, 29 U.S.C. § 151. See also the declaration of policy in § 1(b) of the Labor Management Relations Act, 1947, 61 Stat. 136, 29 U.S.C. § 141(b). The two policies are complementary. They depend for their foundation upon assurance of "full freedom of association." Only after that is assured can the parties turn to effective negotiation as a means of maintaining "the normal flow of commerce and . . . the full production of articles and commodities. . . ." 61 Stat. 136, 129 U.S.C. § 141(b). On the premise of fair representation, collective bargaining contracts frequently have included certain waivers of the employees' right to strike and of the employers' right to lockout to enforce their respective economic demands during the term of those contracts. Provided the selection of the bargaining representative remains free, such waivers contribute to the normal flow of commerce and to the maintenance of regular production schedules. Individuals violating such clauses appropriately lose their status as employees. The waiver in the contract before us, upon which petitioners rely, is as follows: "5. The Union agrees that during the term of this agreement, there shall be no interference of any kind with the operations of the employers, or any interruptions or slackening of production of work by any of its members. The Union further agrees to refrain from engaging in any strike or work stoppage during the term of this agreement." That clause expresses concern for the continued operation of the plant, and has a natural application to strikes and work stoppages involving the subject matter of the contract. Conceding that the words "in any strike or work stoppage during the [one-year] term of this agreement," if read in complete isolation, may include all strikes and work stoppages of every nature, yet the trial examiner, the Board, and the Court of Appeals agree that those words do not have that scope when read in their context and in the light of the law under which the contract was made. This unanimity of interpretation is entitled to much weight. Petitioners argue that the words "any strike" leave no room for interpretation, and necessarily include all strikes, even those against unlawful practices destructive of the foundation on which collective bargaining must rest. We disagree. We believe that the contract, taken as a whole, deals solely with the economic relationship between the employers and their employees. It is a typical collective bargaining contract dealing with terms of employment and the normal operations of the plant. It is for one year, and assumes the existence of a lawfully designated bargaining representative. Its strike and lockout clauses are natural adjuncts of an operating policy aimed at avoiding interruptions of production prompted by efforts to change existing economic relationships. The main function of arbitration under the contract is to provide a mechanism for avoiding similar stoppages due to disputes over the meaning and application of the various contractual provisions. To adopt petitioners' all-inclusive interpretation of the clause is quite a different matter. That interpretation would eliminate, for the whole year, the employees' right to strike, even if petitioners, by coercion, ousted the employees' lawful bargaining representative and, by threats of discharge, caused the employees to sign membership cards in a new union. Whatever may be said of the legality of such a waiver when explicitly stated, there is no adequate basis for implying its existence without a more compelling expression of it than appears in § 5 of this contract. There has been no court decision called to our attention which has held that the employees' right to strike against unfair labor practices has been waived by language such as that which is before us. On the other hand, prior to such contract, such language had been held by the Board to apply appropriately to economic strikes with consequent loss of employee status. It is suggested that § 13 of the Act, as amended, precludes reliance by the Board upon the Act for support of its interpretation of the strike waiver clause. That section provides that "Nothing in this Act, except as specifically provided for herein, shall be construed so as either to interfere with or impede or diminish in any way the right to strike, or to affect the limitations or qualifications on that right." 61 Stat. 151, 29 U.S.C. § 163. On the basis of the above language, petitioners claim that, because the contract waiver clause prohibits all strikes of every nature, nothing in the Act may be construed to affect the "limitations or qualifications" which the contract thus places on that right. Such a claim assumes the point at issue. The Board relies upon the context of the contract and upon the language of the clause itself, rather than upon the statute, to define the kind of strike that is waived. As a matter of fact, the initial provision in § 13 that nothing in the Act "shall be construed so as either to interfere with or impede or diminish in any way the right to strike" adds emphasis to the Board's insistence upon preserving the employees' right to strike to protect their freedom of concerted action. Inasmuch as strikes against unfair labor practices are not anywhere specifically excepted from lawful strikes, § 13 adds emphasis to the congressional recognition of their propriety. For the reasons stated above and those given by the Board and the court below, we conclude that the contract did not waive the employees' right to strike solely against the unfair labor practices of their employers. II. Does § 8(d) of the National Labor Relations Act, as amended, deprive individuals of their status as employees if, within the waiting period prescribed by § 8(d)(4), they engage in a strike solely against unfair labor practices of their employers? Here again, the background is the dual purpose of the Act (1) to protect the right of employees to be free to take concerted action as provided in §§ 7 and 8(a), and (2) to substitute collective bargaining for economic warfare in securing satisfactory wages, hours of work and employment conditions. Section 8(d) seeks to bring about the termination and modification of collective bargaining agreements without interrupting the flow of commerce or the production of goods, while §§ 7 and 8(a) seek to insure freedom of concerted action by employees at all times. The language in § 8(d) especially relied upon by petitioners is as follows: "Any employee who engages in a strike within the sixty-day period specified in this subsection shall lose his status as an employee of the employer engaged in the particular labor dispute, for the purposes of sections 8, 9, and 10 of this Act, as amended. . . ." 61 Stat. 143, 29 U.S.C. § 158(d). Petitioners contend that the above words must be so read that employees who engage in any strike, regardless of its purpose, within the 60-day waiting period, thereby lose their status as employees. That interpretation would deprive Ciccone and his fellow strikers of their rights to reinstatement, and would require the reversal of the judgment of the Court of Appeals. If the above words are read in complete isolation from their context in the Act, such an interpretation is possible. However, "In expounding a statute, we must not be guided by a single sentence or member of a sentence, but look to the provisions of the whole law, and to its object and policy." United States v. Boisdore's Heirs, 8 How. 113,. See also Peck v. Jenness, 7 How. 612,; Duparquet Huat & Moneuse Co. v. Evans,, and United States v. American Trucking Ass'ns,,. Reading the clause in conjunction with the rest of § 8, the Board points out that "the sixty-day period" referred to is the period mentioned in paragraph (4) of § 8(d). That paragraph requires the party giving notice of a desire to "terminate or modify" such a contract, as part of its obligation to bargain under § 8(a)(5) or § 8(b)(3), to continue "in full force and effect, without resorting to strike or lockout, all the terms and conditions of the existing contract for a period of sixty days after such notice is given or until the expiration date of such contract, whichever occurs later." Section 8(d) thus seeks, during this natural renegotiation period, to relieve the parties from the economic pressure of a strike or lockout in relation to the subjects of negotiation. The final clause of § 8(d) also warns employees that, if they join a proscribed strike, they shall thereby lose their status as employees and, consequently, their right to reinstatement. The Board reasons that the words which provide the key to a proper interpretation of § 8(d) with respect to this problem are "termination or modification." Since the Board expressly found that the instant strike was not to terminate or modify the contract, but was designed instead to protest the unfair labor practices of petitioners, the loss of status provision of § 8(d) is not applicable. We sustain that interpretation. Petitioners' construction would produce incongruous results. It concedes that, prior to the 60-day negotiating period, employees have a right to strike against unfair labor practices designed to oust the employees' bargaining representative, yet petitioners' interpretation of § 8(d) means that, if the employees give the 60-day notice of their desire to modify the contract, they are penalized for exercising that right to strike. This would deprive them of their most effective weapon at a time when their need for it is obvious. Although the employees' request to modify the contract would demonstrate their need for the services of their freely chosen representative, petitioners' interpretation would have the incongruous effect of cutting off the employees' freedom to strike against unfair labor practices aimed at that representative. This would relegate the employees to filing charges under a procedure too slow to be effective. The result would unduly favor the employers, and handicap the employees during negotiation periods contrary to the purpose of the Act. There also is inherent inequity in any interpretation that penalizes one party to a contract for conduct induced solely by the unlawful conduct of the other, thus giving advantage to the wrongdoer. Petitioners contend that, unless the loss of status clause is applicable to unfair labor practice strikes, as well as to economic strikes, it adds nothing to the existing law relating to loss of status. Assuming that to be so, the clause is justifiable as a clarification of the law and as a warning to employees against engaging in economic strikes during the statutory waiting period. Moreover, in the face of the affirmative emphasis that is placed by the Act upon freedom of concerted action and freedom of choice of representatives, any limitation on the employees' right to strike against violations of §§ 7 and 8(a), protecting those freedoms, must be more explicit and clear than it is here in order to restrict them at the very time they may be most needed. There is sufficient ambiguity here to permit consideration of relevant legislative history. While such history provides no conclusive answer, it is consistent with the view taken by the Board and by the Courts of Appeals for the Second and Seventh Circuits. Senator Ball, who was a manager for the 1947 amendments in the Senate and one of the conferees on the bill, stated that § 8(d) made mandatory what was already good practice and was aimed at preventing such interruptions of production as the "quickie strikes" occasionally used to gain economic advantages. "The provision in the National Labor Relations Act defining collective bargaining, and providing bargaining, and providing that, where a contract between a union and an employer is in existence, fulfilling the obligation on both sides to protect [bargain] collectively means giving at least 60 days' notice of the termination of the contract, or of the desire for any change in it, is another provision aimed primarily at protecting the public, as well as the employee, who have been the victims of 'quickie' strikes. I do not think that is taking away any rights of labor . . . ; it is simply saying that they should all follow the sound, fair, and sane procedure which a majority of the good ones now follow." 93 Cong.Rec. 5014. One minority report suggested a fear that § 8(d) would be applicable to unfair practice strikes. The suggestion, however, was not even made the subject of comment by the majority reports or in the debates. An unsuccessful minority cannot put words into the mouths of the majority and thus, indirectly, amend a bill. The record shows that the supporters of the bill were aware of the established practice which distinguished between the effect on employees of engaging in economic strikes and that of engaging in unfair practice strikes. If Congress had wanted to modify that practice, it could readily have done so by specific provision. Congress cannot fairly be held to have made such an intrusion on employees' rights, as petitioners claim, without some more explicit expression of its purpose to do so than appears here. Finally, petitioners seek support for their interpretation of § 8(d) from the fact that its last clause makes a cross-reference to §§ 8, 9 and 10 of the Act. Such reference does not expand the scope of § 8(d). It merely makes it clear that, if § 8(d) is violated by the employees to whom it applies, then they lose their status as employees for the purposes of §§ 8, 9 and 10. As neither the collective bargaining contract nor § 8(d) of the National Labor Relations Act, as amended, stands in the way, the judgment of the Court of Appeals is Affirmed.

1. In the collective bargaining contract here involved, the union's undertaking "to refrain from engaging in any strike or work stoppage during the term of this agreement" did not waive the employees' right to strike solely in protest against unfair labor practices of their employers. . (a) The words "any strike" do not exclude all room for interpretation or necessarily include all strikes, even those against unlawful practices destructive of the foundation upon which collective bargaining must rest. . (b) Section 13 of the National Labor Relations Act, as amended, providing that "Nothing in this Act, except as specifically provided for herein, shall be construed so as either to interfere with or impede or diminish in any way the right to strike, or to affect the limitations or qualifications on that right," does not preclude reliance upon the Act for support of this interpretation of the strike waiver clause. . 2. In the circumstances of this case, including the express finding of the National Labor Relations Board that the purpose of the strike here involved was not to "terminate or modify" the existing collective bargaining contract, but was solely to protest against the employers' unfair labor practices designed to oust the employees' bargaining representative, held that § 8(d) of the National Labor Relations Act, as amended, did not deprive the individual strikers of their status as employees, even though they struck within the 60-day waiting period prescribed by § 8(d)(4) following the union's written notice of its desire to modify its existing contract with the employers. . (a) Since the 60-day waiting period prescribed by § 8(d)(4) begins to run upon the giving of notice of a desire to "terminate or modify" an existing contract and its purpose is to relieve the parties during the renegotiation period from the economic pressure of a strike or lockout in relation to the subjects of the negotiations, the provision that any employee who engages in a strike during such waiting period shall lose his status as an employee should be construed as referring to strikes relating to the subjects of the negotiations, and not to strikes designed solely to protest against unfair labor practices of the employers. Pp.-. (b) A different construction would produce incongruous results. . (c) Much more explicit language would be needed to deprive employees of their right to strike in protest against violations of §§ 7 and 8 (a), which protect their freedom of concerted action and freedom of choice of representatives. P.. (d) While the relevant legislative history provides no conclusive answer to the problem of interpretation here involved, it is consistent with the conclusion here reached. . (e) The cross-references to §§ 8, 9 and 10 of the Act in the loss of status clause do not require a different result. P.. 214 F.2d 462, affirmed.

1955_32

https://www.oyez.org/cases/1955/32

MR. JUSTICE CLARK delivered the opinion of the Court. Louisiana requires that objections to a grand jury be raised before the expiration of the third judicial day following the end of the grand jury's term or before trial, whichever is earlier. In these cases, we are asked to decide whether this statute as applied violates the Fourteenth Amendment. The three petitioners, all Negroes sentenced to death for aggravated rape, make no attack on the composition of the petit jury nor on the fairness of their trials, but challenge the composition of the grand juries which indicted them on the ground that there was a systematic exclusion of Negroes from the panels. No hearing was held on these allegations, because the lower courts found that the question had been waived. In each case, the Supreme Court of Louisiana affirmed, 225 La. 1040, 74 So. 2d 207, and 226 La. 201, 75 So. 2d 333, and we granted certiorari, 348 U.S. 936 and 348 U.S. 950, because of the importance of the issues involved. Grand juries in Orleans Parish are impaneled in September and March to serve for six months. Since § 202 of the Louisiana Criminal Code, as interpreted, requires a defendant to object to the grand jury before three judicial days after its term, the time to raise such objections may vary from a minimum of three days -- if the defendant is indicted on the last day of the term -- to a much longer period if he is indicted during the term. Section 284 of the Louisiana Code of Criminal Procedure provides that, in any case, such objections must be made before arraignment. We do not find that this requirement, on its face, raises an insuperable barrier to one making claim to federal rights. The test is whether the defendant has had "a reasonable opportunity to have the issue as to the claimed right heard and determined' by the State court." Parker v. Illinois,,; Davis v. Wechsler,; Central Union Tel. Co. v. Edwardsville,; Paterno v. Lyons,. See Carter v. Texas,. In Avery v. Alabama,, this Court held that a lapse of three days between the appointment of counsel and the date of trial was not of itself a denial of due process. In Louisiana, a motion to quash is a short, simple document, easily prepared in a single afternoon. In the light of Avery, a three-day minimum for such a motion is not unreasonable. Wilson v. Louisiana, 320 U.S. 714. But, in the circumstances of a particular case, the application of such a rule may not give a reasonable opportunity to raise the federal question. See Reece v. Georgia, ante, p.. Accordingly, we pass to a consideration of the facts in each of these cases. No. 32. John Michel. -- Michel was indicted by the grand jury on February 19, 1953, and was presented to the court for arraignment on February 23. He appeared without counsel, and the arraignment was continued for one week. During that week, the trial judge talked with Mr. Schreiber, a former assistant district attorney with wide experience in local criminal practice. He asked Mr. Schreiber whether he would take the case if private counsel was not retained. The judge indicated that if Mr. Schreiber accepted, additional counsel would be appointed. The term of the grand jury which indicted Michel expired March 2, 1953. On that same date, Michel appeared again for arraignment without counsel. Mr. Schreiber was also present in court on other business, and the trial judge then appointed him counsel for Michel. Whereupon Mr. Schreiber asked the court to give him an opportunity to look it over and continue the matter for one week. No mention of co-counsel was made, and the continuance was granted. Thereafter, on March 5, Mr. Schreiber received a formal notice of his appointment, which, though not required by Louisiana law, appears at times to have been served in appointment cases. On March 6, Mr. Fust was appointed co-counsel. The motion to quash the indictment was filed on March 9 -- four days after Mr. Schreiber received the formal notice of appointment, and five judicial days (7 calendar days) after the expiration of the term of the grand jury. The State demurred on the ground that it came too late. The determination of a single question of fact is decisive in this case: the precise date of appointment of counsel for Michel. It is contended that Mr. Schreiber was not appointed as counsel until March 5, the date of his formal notice; that he was not aware that he was to be chief counsel until after Mr. Fust told him on the 7th of his appointment to "assist" Mr. Schreiber; and that, even if he assumed that he was appointed on March 2, he was unfamiliar with the case and thought the week's continuance held open for that period all of petitioner's rights. The record, however, shows without contradiction that Mr. Schreiber was appointed in open court, in the presence of petitioner, on March 2. The trial judge so found, and the Supreme Court of Louisiana explicitly upheld this finding. While such findings are not conclusive on this Court, Rogers v. Alabama,, they are entitled to great weight, Fay v. New York,,. On a question of state practice with which we are unfamiliar, we will not ordinarily overturn the findings of two courts on the mere assertion of counsel that he did not consider himself appointed on the date of record. Since we find that counsel, a lawyer experienced in state criminal practice, had adequate time to file the motion after his appointment, we hold that the application of § 202 in this case was not unreasonable. No. 36. Poret and Labat. -- These co-defendants were also convicted of rape and sentenced to death. Neither made any attack on the composition of the petit jury, but both filed motions to quash their indictments claiming discrimination in the selection of the grand jury panel. The facts in each case will be considered separately. Poret. -- Shortly after the crime was committed, Poret eluded police officers and fled the State of Louisiana. He was indicted on December 11, 1950, but he was not arrested, and nothing was known of his whereabouts until late 1951, when Louisiana authorities discovered that he was in prison in Tennessee. That State refused to release him until he had served his term. Louisiana filed a detainer against him, and he was returned to New Orleans on October 3, 1952. At his arraignment on October 27, 1952, he was assisted by counsel of his own selection. He pleaded not guilty to the indictment, and was granted additional time to file a motion for severance. On November 7, after denial of his motion for severance, he moved -- for the first time -- to quash the indictment because of systematic exclusion of Negroes from the grand jury. After a hearing at which it was determined that Poret was a fugitive from justice, this motion was denied by the trial court on the ground that it was filed more than a year and a half too late. Under § 202, the time for filing had expired in March, 1951, and the trial court held that the provisions of § 202 would not be "suspended or nullified for the benefit of a fugitive from justice who, by his own conduct" was unable to assert his right. The holding was affirmed on this ground by the Supreme Court of Louisiana. It is beyond question that, under the Due Process Clause of the Fourteenth Amendment, Louisiana may attach reasonable time limitations to the assertion of federal constitutional rights. More particularly, the State may require prompt assertion of the right to challenge discriminatory practices in the makeup of a grand jury. The problem here is whether such a limitation may be avoided by Poret simply on the showing that he was a fugitive from prosecution throughout the entire period provided him. Petitioner argues that he has had no opportunity to make his challenge to the grand jury, since the time allowed him by § 202 had expired before he was returned to Louisiana. But the record shows that he was not sentenced in Tennessee until five months after that period had expired, and nothing appears to have intervened during this period except his own voluntary flight. Thus, Poret's claim is, in effect, that a flight which itself is a violation of federal law, 18 U.S.C. § 1073, is converted into a federal immunity from the operation of a valid state rule. We do not believe that the mere fugitive status existing here excuses a failure to resort to Louisiana's established statutory procedure available to all who wish to assert claimed constitutional rights. This is not to say that the act of fleeing and becoming a fugitive deprives one of federal rights. We hold only that due regard for the fair as well as effective administration of criminal justice gives the State a legitimate interest in requiring reasonable attacks on its inquisitorial process, and that the present case is not one in which this interest must bow to essential considerations of fairness to individual defendants. But it is said that Poret had no lawyer, either before he fled the State or during the 87-day period from his indictment to the expiration of his time to file under § 202. However, during all of this time, he remained a fugitive, and there is no showing that he could not have filed in time had he not elected to flee. In fact, in each of the other cases before us, the court appointed counsel in ample time for those petitioners to raise their claims. We cannot assume that Poret would not have received like treatment if he had been unable to select counsel of his own choice. We therefore conclude that Poret, by his own action, failed to avail himself of Louisiana's adequate remedies. "No procedural principle is more familiar to this Court than that a constitutional right may be forfeited in criminal as well as civil cases by the failure to make timely assertion of the right. . . ." Yakus v. United States,,. Even in federal felony cases, where, unlike state prosecutions, indictment by a grand jury is a matter of right, this Court has strictly circumscribed the time within which motions addressed to the composition of the grand jury may be made. Fed.Rules Crim.Proc., 12(b)(3). Likewise the Congress has denied the benefit of such important federal procedural rules as the Statute of Limitations to "any person fleeing from justice." 18 U.S.C. § 3290. Poret's case affords a perfect illustration of the necessity for prompt determination of claims such as he raises here. Five years have now elapsed since the crime was committed, and the delay has been largely caused by Poret's own actions. Even if available, and memory permitted, the victim and chief witness would be reluctant to retell the sordid story of her unfortunate experience. Poret's conviction by a petit jury whose composition he did not attack has been affirmed by Louisiana's highest court, and no constitutional challenge is made here to the fairness of that trial. Furthermore, it may be added that, after being returned to Louisiana on October 3, and employing his personal lawyer on October 26, Poret still did not file his motion to quash until November 7. At this time, he had already been arraigned, and had filed other motions which implied a waiver of his objections to the grand jury. Rather than asserting his federal claim at the first opportunity, he delayed the filing of his motion until 12 days after his selection of counsel. This is four times the period we upheld in Michel. We therefore find no violation of due process in denying this motion as out of time. Labat. -- Edgar Labat was Poret's codefendant. He was apprehended the evening of the crime, and implicated Poret. Labat was indicted December 11, 1950, and arraigned on January 3, 1951, and he pleaded not guilty. On January 5, the court appointed Mr. E. I. Mahoney as counsel for petitioner. Thereafter, the status of the case remained unchanged for more than a year. The next entry is dated January 29, 1952, when Mr. Mahoney asked leave to withdraw. Mr. Gill was thereafter employed, and, on June 12, 1952, moved for a continuance. After a hearing, the motion was granted and the case was again continued. In October, the codefendant Poret was returned to the State. Labat filed his motion to quash the indictment on November 7. The term of the grand jury that indicted Labat had expired in March, 1951. Petitioner now contends that he was denied effective representation of counsel. Powell v. Alabama,. Mr. Mahoney had a reasonable time in which to file his motion to quash, but did not do so. It was stated on oral argument that he was 76 or 77 years old when he took the case, and was ill in bed during several months of the year. The trial court and the Supreme Court of Louisiana held that the facts did not show a lack of effective counsel. As in No. 32, Michel's case, we accept these findings. There is little support for the opposite conclusion in the record. Mr. Mahoney was a well known criminal lawyer with nearly fifty years' experience at the bar. There is no evidence of incompetence. The mere fact that a timely motion to quash was not filed does not overcome the presumption of effectiveness. United States ex rel. Feeley v. Ragen, 166 F.2d 976. The delay might be considered sound trial strategy, particularly since the codefendant could not be found. We cannot infer lack of effective counsel from this circumstance alone. Such an inference would vitiate state rules of procedure designed to require preliminary objections to be disposed of before trial. At argument, petitioners for the first time raised the contention that the requirements of § 202 had been applied by the district attorney only when Negro defendants attempted to attack the composition of the grand jury. They cited two cases in which the district attorney has failed to file demurrers to such motions and the indictments were quashed after the time set out in the statute. The present district attorney, who had been in office some eighteen months but was not serving at the time of these prosecutions, stated that it was his policy to apply § 202 whenever possible. Petitioners' contention was not raised below, and we do not believe it has been properly put in issue, Pennsylvania R. Co. v. Illinois Brick Co.,,. If such an allegation had been presented and preserved, and found support in the record, we might have a very different case here. See Rogers v. Alabama,. For the reasons stated, the judgments of the Supreme Court of Louisiana are Affirmed. *

1. Louisiana law requires that objections to a grand jury be raised before the expiration of the third judicial day following the end of the grand jury's term or before trial, whichever is earlier. After expiration of the time allowed, these three Negro petitioners moved to quash their indictments on the ground that there was systematic exclusion of Negroes from the grand juries which indicted them. Their motions were denied, and each was convicted of a capital offense. Held: in the circumstances of these cases, application of the rule to these petitioners did not violate the Fourteenth Amendment. . 2. Michel was indicted on February 19 and presented for arraignment on February 23. He appeared without counsel, and arraignment was continued for one week. The record shows that counsel was appointed for him on March 2, the date the grand jury term expired. Counsel contended that he did not consider himself appointed until March 5, when he received written notice from the court. The motion to quash, not filed until March 9, was denied as being out of time. Held: the finding of the lower courts that counsel was appointed March 2 is sustained. Since the appointed counsel, a lawyer experienced in state criminal practice, had adequate time to file the motion after his appointment, application of the rule was not unreasonable. Pp. 350 U.S. 95-96. 3. Poret fled from the State shortly after the crime was committed, and remained outside the State until long after the time for filing a motion to quash his indictment had expired. After returning to the State on October 3 and retaining counsel on October 26, he did not file his motion to quash until November 7 -- after he had been arraigned and had filed other motions which implied a waiver of his objections to the grand jury. Held: Louisiana's rule requiring timely objections to the composition of a grand jury need not be suspended for the benefit of one who, by his own action, fails to avail himself of the state remedy; and there was no violation of due process in denying the motion as out of time. . 4. Labat was indicted December 11, 1950, and arraigned on January 3, 1951. On January 5, 1951, the court appointed competent counsel for him, and the term of the grand jury that had indicted him did not expire until March, 1951. In January, 1952, court-appointed counsel withdrew from the case and another counsel was appointed, but motion to quash the indictment was not made until November 7, 1952. Held: inadequacy of counsel will not be presumed from failure to file a pretrial motion where the matter was within counsel's discretion and there were valid reasons for not filing. In the circumstances of this case, there was no violation of due process in denying the motion as out of time. . 225 La. 1040, 74 So. 2d 207, and 226 La. 201, 75 So. 2d 333, affirmed.

1955_255

https://www.oyez.org/cases/1955/255

MR. JUSTICE FRANKFURTER delivered the opinion of the Court. This case involves an interpretation of § 23(a)(1)(A) of the Internal Revenue Code of 1939, as amended 26 U.S.C. § 23(a)(1)(A), providing for the deduction from gross income, in computing net income, of all the "ordinary and necessary expenses paid or incurred . . . in carrying on any trade or business. . . ." The Commissioner determined a deficiency in petitioner's excess profits tax for 1945; petitioner sought a redetermination of its liability in the Tax Court, which made the following findings of fact. In April, 1924, petitioner leased land in New York City for 21 years, with an option to renew the lease for two further 21-year periods. In accordance with the terms of the lease, it erected a 22-story loft building at a cost of $3,000,000. The lease, as amended in 1935, provided for an annual rental of $118,840. Title to the building was in petitioner, but, at the eventual termination of the lease, it would vest, without payment, in the lessor at the lessor's option. The lessor could also require petitioner to remove the building at that time. Petitioner had the obligation, in case of destruction of the building, to rebuild at its own cost. During the first 21-year period of the lease, petitioner fully depreciated the entire $3,000,000 cost of the building. In April, 1945, it exercised its option to renew the lease until April, 1966. In May, 1945, petitioner entered into an agreement with the owner whereby it purchased the fee and obtained release from the obligations of the renewed lease. The price paid was $2,100,000. The Tax Court also found that the value of the land, as unimproved, was $660,000 when purchased by petitioner in 1945. The principal issues raised by petitioner relate to its attempt to deduct $1,440,000 -- the difference between the purchase price under the May, 1945, agreement and the 1945 value of the unimproved land -- as an ordinary and necessary expense of doing business. The Tax Court held that the difference could not be so deducted, that the difference could not be amortized over the remaining term of the cancelled lease, and that no annual depreciation could be taken because the cost of the building had already been fully depreciated and the purchase price could not be separated into purchase price for building and purchase price for land. 21 T.C. 817. Six of the judges of the Tax Court dissented on the ground that "[s]ome part of the purchase price should be allocated to the additional rights in the building acquired in the purchase. . . ." 21 T.C. at 826. On petition for review, the Court of Appeals for the Second Circuit reversed and remanded. It affirmed the refusal to permit a deduction under § 23(a), but reversed the holding that no amount could be added to the asset value of the building for purposes of depreciation. Rejecting petitioner's argument that it should be allowed to amortize the $1,440,000 over the unexpired term of the cancelled lease, it accepted petitioner's alternative argument that depreciation over the remaining useful life of the building should be allowed. Stating that, "[o]n the present state of the record, we cannot determine how much of the $2,100,000 purchase price is properly to be allocated to the land and how much to the building," it remanded the case to the Tax Court to fix the respective values. 221 F.2d 322, 324. Petitioner sought a writ of certiorari to review the disallowance of its claim for a deduction as a business expense or, alternatively, as amortization over the remaining period of the lease. The Government did not seek review of the allowance of depreciation of that portion of the purchase price allocable to the building over its remaining economic life. Because of the apparent conflict between the decision of the Court of Appeals for the Second Circuit in this case and the decision of the Court of Appeals for the Sixth Circuit in Cleveland Allerton Hotel, Inc. v. Commissioner, 166 F.2d 805, we granted certiorari limited to the questions set forth in the margin. Under the terms of the lease, petitioner had a 21-year lease on the land, with an option to renew, and similar rights in the building which it had constructed. Petitioner introduced evidence to show that the rent it was paying under the lease was greatly in excess of the fair rental value of the land as vacant, unimproved land. Petitioner contends that it already owned the building, and that therefore the purchase agreement was entered into for the purpose of avoiding the excessive rentals of the lease. This transaction, it asserts, involved a current business expenditure, and the $1,440,000 in excess of the vacant land value represents what it was willing to pay to avoid this onerous lease. Petitioner's claim that it "owned" the building is based on a loose and misleading use of "owned." The only way petitioner could continue to use the building after termination of the initial period of the lease was by renewing the lease, and the lease also circumscribed its control over the building. It could make use of the building for the remainder of its economic life, but only on payment of the stated rent. Petitioner's evidence with respect to the rental value of the land as unimproved is irrelevant. It was using the land as improved by the building; it was paying rent for the land as improved by the building. Petitioner tendered no evidence that it was paying excessive rent for what it was actually leasing. A complementary feature of the purchase of the lessor's interests in the land and building was the elimination of the obligation to pay rent on the improved land. The purchase price presumably reflected this situation. Whatever possible merit petitioner's contention might have were there proof of excessive purchase price can await such a case. The purchase price paid by petitioner represents the cost of acquiring the complete fee to the land and the building, and no deduction as an ordinary and necessary business expense can be taken. Petitioner claims that, even if it cannot get a deduction as an ordinary and necessary business expense under § 23(a) or as a loss under § 23(f), it should be allowed to amortize the excess of the payment of $2,100,000 above the determined land value of $660,000 over the 21-year remaining term of the extinguished lease. What petitioner acquired in this transaction, however, were both rights with respect to the land and rights with respect to the building. The Tax Court has not yet fixed that amount of the purchase price which is allocable to the acquisition of rights in the land and that which is allocable to the acquisition of rights in the building. These rights are assets with useful lives having no reference to the term of the lease. Successive steps of securing or renewing a lease and then purchasing the reversion should not result in amortization over the term of the lease when the purchase of the whole fee at one time would result in depreciation over the useful life of the asset, if the asset acquired were a wasting asset. Under petitioner's contention, if the purchase had been consummated in 1944, before the first term of the lease had expired, the whole amount of the purchase price not allocable to the land would be amortized in one year. But it should make no difference whether the lease is about to expire or has just been renewed. In the one case, the value of the reversion is enhanced and the value of the right to receive the rent fixed by the lease is depressed because the lease is near an end. In the other case, the value of the reversion is depressed and the value of the right to receive the fixed rent is enhanced because the lease has many years to run. But, although there might possibly be some difference in bargaining power between the two situations, the sum total of the rights purchased is the same in each case. Petitioner has acquired two assets -- land and a building -- whose use it will have for the remainder of their useful lives, and petitioner therefore cannot amortize the cost allocable to the acquisition of the wasting asset over the term of the extinguished lease. Accordingly, we affirm the judgment of the Court of Appeals for the Second Circuit, leaving to the Tax Court the allocation still to be made. Affirmed.

In April, 1924, petitioner leased land in New York City for 21 years, with an option to renew the lease for two further 21-year periods. In accordance with the terms of the lease, it erected a 22-story loft building at a cost of $3,000,000. The lease, as amended in 1935, provided for an annual rental of $118,840. Title to the building was in petitioner, but, at the eventual termination of the lease, it would vest, without payment, in the lessor at the lessor's option. During the first 21-year period of the lease, petitioner fully depreciated the entire $3,000,000 cost of the building. In April, 1945, it exercised its option to renew the lease until April, 1966. In May, 1945, it purchased the fee and obtained release from the obligations of the renewed lease at a price of $2,100,000. When purchased by petitioner, the value of the land, as unimproved, was $660,000. Held: 1. Under § 23(a)(1)(A) of the Internal Revenue Code of 1939, the purchase price paid by petitioner represents the cost of acquiring the complete fee to the land and the building, both capital assets, and no deduction as an ordinary and necessary business expense can be taken. . 2. Petitioner is not entitled to amortize, over the remaining term of the extinguished lease, that portion of the excess of the payment of $2,100,000 above the determined land value of $660,000 which is allocable to the acquisition of rights in the building. . 3. The judgment of the Court of Appeals in this case is affirmed, leaving to the Tax Court the allocation still to be made. P.. 211 F.2d 322 affirmed.

1955_278

https://www.oyez.org/cases/1955/278

MR. JUSTICE DOUGLAS delivered the opinion of the Court. These are actions brought by the Secretary of Labor under § 17 of the Fair Labor Standards Act, 52 Stat. 1060, 63 Stat. 910, 29 U.S.C. § 201 et seq., to enjoin respondents from violating the minimum wage, § 6, and recordkeeping provisions, § 11, of the Act. The employees concerned work in tobacco-bulking plants operated by respondents in Quincy, Florida, which has a population in excess of 2,500. Respondents claim these employees are exempt from the Act. The District Court ruled against the respondents. 114 F. Supp. 865. The Court of Appeals reversed. 221 F.2d 406. We granted certiorari, 350 U.S. 859, because of the importance of the problems presented and of the apparent conflicts between the decision below and Tobin v. Traders Compress Co., 199 F.2d 8, and Maneja v. Waialua Agricultural Co.,. The processing operations involve U.S. Type 62 Sumatra tobacco, a leaf tobacco used exclusively for cigar wrappers. This type of tobacco requires special cultivation. It is grown in fields that are completely enclosed and covered with cheesecloth shade. The leaves of the plant are picked in stages, as each matures. The leaves are taken immediately to a tobacco barn, located on the farm, where they are strung on sticks and dried by heat. Before the drying process is completed, the leaves are allowed to absorb moisture. Then they are dried again. There is some fermentation at this stage. But the treatment in the tobacco barns is essentially a drying operation during which the moisture content is reduced to between 10% and 25%. At the end of the drying operation, the leaves are packed in boxes and taken from the farm to a bulking plant for further processing. At the bulking plant, the leaves are placed in piles, known as "bulks," aggregating from 3,500 to 4,500 pounds of tobacco. This is the "sweating" or fermentation process, which requires carefully controlled regulation of temperature and humidity. Proper heat control includes, among other things, breaking up the bulk, redistributing the tobacco, and adding water. Proper fermentation or aging requires the bulk to be reconstructed several times. The bulking process lasts from four to eight months, after which the tobacco is baled. The bulking process requires a large amount of equipment, including a steam-heated plant, platforms, thermometers, bulk covers, baling boxes and presses, baling mats, and packing, sorting and grading tables. The bulking process substantially changes the physical properties and chemical content of the tobacco, improving the color, increasing combustibility, and eliminating the rawness and harshness of the freshly cured leaf. The overwhelming majority of farmers in the region in litigation in this case have their tobacco processed by others. In that region, there are 300 farmers who grow this type of tobacco. Of these, only 9 maintain and operate bulking plants, and only 5 maintain and operate bulking plants processing tobacco grown only by themselves. It appears that bulking cannot be economically done by the ordinary small farmer growing less than 100 acres. Of the 300 farmers in the present group, 80% grow less than 25 acres per year, while the majority grow from 1 1/2 to 10 acres a year. Respondent Budd grows no tobacco itself, and confines its operations to processing the tobacco grown on 263 acres by 52 farmers. Budd employs about 108 workers for bulking, sorting, grading, and baling tobacco. Respondent King Edward processes in the bulking plant involved in this litigation only tobacco produced on farms operated by it. (It has two other bulking plants that process tobacco purchased from other growers.) The bulking plant involved here is about 13 miles from King Edward's farms. A majority of the 120 employees in the bulking plant also work on King Edward's farms. May has its own bulking plant, and processes there only the tobacco which it grows on its own farms. This plant is about 10 miles from the farms. The employees, who work the farms, work in the bulking plant, being transported back and forth by May. Seventy are employed in the bulking plant. Area of Production. -- Section 13(a) of the Act creates several exemptions from the minimum wage and maximum hours provisions of the Act. One of those exemptions contained in § 13(a)(10) includes: "any individual employed within the area of production (as defined by the Administrator), engaged in handling, packing, storing, ginning, compressing, pasteurizing, drying, preparing in their raw or natural state, or canning of agricultural or horticultural commodities for market, or in making cheese or butter or other dairy products." The Administrator's definition of "area of production" provides that a plant is within the "area of production" if it is located (1) "in the open country or in a rural community," which is defined as not including "any city, town or urban place of 2,500 or greater population," and (2) within a specified mileage distance from the source of 95% of its commodities. The Court of Appeals, following its earlier decisions in Jenkins v. Durkin, 208 F.2d 941, and Lovvorn v. Miller, 215 F.2d 601, held that the regulation was invalid. It concluded that, once "geographic lines of the area of production have been established, the act makes the exemption effective within that area," and that any qualification by reason of size of the town where the establishment is located is invalid. 215 F.2d at 603. For that conclusion, the Court of Appeals found comfort in Addison v. Holly Hill Fruit Products, Inc.,. Holly Hill involved one of the alternative definitions of "area of production." That alternative defined "area of production" in geographic terms, and then added another standard -- whether the employee was in an establishment having no more than seven employees. We held that ". . . Congress did not leave it to the Administrator to decide whether within geographic bounds defined by him the Act further permits discrimination between establishment and establishment based upon the number of employees." Id. at. We said that the phrase "area of production" had "plain geographic implications" with which the size of a plant within the area was not consistent. Id. at. That definition, therefore, was struck down. But its alternative, substantially the one that is involved here, was not passed upon. In fact, we reserved decision in Holly Hill as to whether the population criterion, now presented for decision, was valid. Id. at. We think the present regulation is a valid definition of "area of production." We think it valid by the standard we used in Holly Hill. In that case, we said that ". . . 'area' calls for delimitation of territory in relation to the complicated economic factors that operate between agricultural labor conditions and the labor market of enterprises concerned with agricultural commodities and more or less near their production." Id. at. The aim of Congress was to exempt employees "employed in agriculture," § 13(a)(6), and those engaged in agricultural enterprises in the "area of production," § 13(a)(10). That meant drawing a line between agricultural enterprises operating under rural agricultural conditions and those subject to urban industrial conditions. An individual working in an agricultural packing plant on the edge of Los Angeles is in a strikingly different environment from one doing the same work in a small town in the heart of Kansas. Nearness to a large city has relation to the problem of the Administrator in making his definition. For the proximity of the plant to a metropolitan center, like the size of the town where the plant is located, may make the decisive difference between an agricultural and an urban environment. Likewise, nearness of the plant to its supplies cannot be considered an irrelevancy. For "area" is understandable in terms of nearness and fairness. Distance is an important factor in any formula which seeks to treat more or less as a unity labor on farms and labor in agricultural enterprises in the "area of production." No definition of "area of production" could produce complete equality, for the variables are too numerous. The Administrator fulfills his role when he makes a reasoned definition. See Gray v. Powell,,. On no phase of this problem can we say that the Administrator proceeded capriciously or by the use of inadmissible standards. Experts might disagree over the desirability of one formula rather than another. It is enough for us that the expert stayed within the allowable limits. We think he did here, and that the definition of "area of production" under § 13(a)(10) is a valid one. Agriculture. -- The Court of Appeals held that the employees in the bulking plants of King Edward and May were exempt under § 13(a)(6), which covers "any employee employed in agriculture." It relied on the broad definition of "agriculture" contained in § 3(f) of the Act, which provides, in relevant part, that the term "includes farming in all its branches and among other things includes . . . any practices (including any forestry or lumbering operations) performed by a farmer or on a farm as an incident to or in conjunction with such farming operations, including preparation for market, delivery to . . . market or to carriers for transportation to market." The work in the bulking plants, the court ruled, was "preparation for market" within the meaning of § 3(f). The exemption of § 13(a)(6), read with § 3(f), covers large operators as well as small ones, as we recently said in Maneja v. Waialua Agricultural Co., supra, at. It also includes "extraordinary methods" of agriculture, as well as the more conventional ones. Id. at. The question in the Waialua case was whether sugar milling was included in the agriculture exemption of § 13(a)(6). We said that it was necessary to look to all the facts surrounding the process to determine whether that process was incident to farming. Id. at. We held that sugar milling was not, even when done by the grower. We think like considerations indicate that, in this case, the agriculture operation does not extend through the bulking plants, but ends, as the District Court ruled, with the delivery of the tobacco at the receiving platform of the bulking plant. That is the "delivery . . . to market" within the meaning of § 3(f) of the Act. It is true that King Edward and May are farmers, and process in their bulking plants only the tobacco they raise. It is also true that many employees who work their farms also work in their bulking plants. These are heavily stressed as indicia that bring the bulking plants into the agriculture exemption. But there are two other factors which, in our view, tip the scales the other way. First, tobacco farmers do not ordinarily perform the bulking operation. As already mentioned, of the 300 farmers who grow this type of tobacco in this area, only 9 maintain and operate their own bulking plants. The remaining farmers have their crops processed by others. The bulking operation is, for the most part, divorced from the cultivation of tobacco and from the drying operation in the tobacco barns on the farm. The bulking process, for the most part, is a separate processing stage. Second, the bulking operation is a process which changes the natural state of the freshly cured tobacco as significantly as milling changes sugar cane. As indicated above, the bulking process changes and improves the leaf in many ways, and turns it into an industrial product. What we said in Waialua concerning sugar milling is apt here: a process that results in such important changes is "more akin to manufacturing than to agriculture." 349 U.S. at. The judgments of the Court of Appeals are reversed, and those of the District Court affirmed. It is so ordered.

The Secretary of Labor sued under § 17 of the Fair Labor Standards Act to enjoin respondents from violating the minimum wage and recordkeeping provisions of the Act with respect to employees working in their tobacco bulking plants in Quincy, Florida, which has a population in excess of of 2,500. The bulking process takes from 4 to 8 months, requires a large amount of equipment, and substantially changes the physical properties and chemical content of the tobacco. Most farmers in the region have their tobacco processed by others. Two of the respondents process only tobacco grown on their own farms, and the third processes only tobacco grown by others. Held: respondents are not exempted by § 13(a)(10) or § 13(a)(6) from the minimum wage and recordkeeping provisions of the Act. . (a) The Administrator's definition of "area of production," within the meaning of § 13(a)(10), as including only plants located "in the open country or in a rural community . . . not including any city, town or urban place of 2,500 or greater population" and within a specified mileage distance from the source of 95% of its commodities, is sustained. . (b) Even when done by the grower, the bulking process is not "preparation for market," within the meaning of § 3(f), and therefore not within the agricultural exemption of § 13(a)(6). . 221 F.2d 406 reversed. 114 F. Supp. 865 affirmed.

1955_39

https://www.oyez.org/cases/1955/39

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court. This case, like Steiner v. Mitchell, ante, p., raises an issue of coverage under the Fair Labor Standards Act, as amended by the Portal-to-Portal Act of 1947, with respect to work performed before or after the direct or productive labor for which the worker is primarily paid. The District Court denied to the Secretary of Labor an injunction to enforce compliance with the Act, and the Court of Appeals for the Ninth Circuit affirmed. 216 F.2d 618. The court below recognized a conflict with Steiner, and, although holding that Section 4 controls the situation here, determined, contrary to the holding in the Steiner case, that "the terms 'preliminary' or 'postliminary' cannot be interpreted so as to exclude [from the exemptions from the Act] all activity 'indispensable to the performance of productive work.' To do so would deny effect to the intended meaning of the Portal-to-Portal Act. " We granted certiorari to resolve this conflict. 349 U.S. 914. In Steiner, for reasons therein set forth, we concluded that, after the enforcement date of the Portal-to-Portal Act, activities performed either before or after the regular work shift, on or off the production line, are compensable under the portal-to-portal provisions of the Fair Labor Standards Act if those activities are an integral and indispensable part of the principal activities for which covered workmen are employed, and are not specifically excluded by Section 4(a)(1). The only question to be determined in this case is whether the knife-sharpening activities of the employees of respondent King Packing Co. are within this classification. Respondent is an interstate meat packer engaged in slaughtering, butchering, dressing, and distributing meat and meat products. It employs at its packing plant about 75 persons, of whom about one-third are knifemen, whose compensation rights are involved in this litigation. The knifemen perform various butchering operations, 12 or 14 of them working in the killing room and the others in the cutting room. Various knives and three types of electric saws are used in the butchering operations. Some of the knives are furnished by the knifemen under the terms of their employment. These are the boning, the shaving, the legging, and the skinning or siding knives. The saws and the more expensive loin pulling, ham skinning, shoulder trimming, and sparerib knives are furnished by respondent. All of the knives, as well as the saws, must be "razor sharp" for the proper performance of the work. Respondent's production manager and one of the knifemen testified a dull knife would slow down production, which is conducted on an assembly line basis, affect the appearance of the meat as well as the quality of the hides, cause waste, and make for accidents; "that a knife, to be of any practical value in a knife job, has to be . . . sharp." Though the entire cost of keeping the saws in proper condition is borne by respondent, the knifemen are required to sharpen their own knives outside the scheduled shift of eight hours, and, for this activity, they are not compensated. The sharpening of these knives is done either before or after the work shift or during the lunch hour in a room equipped by respondent with an emery wheel and grindstone. A knifeman ordinarily sharpens from two to four knives a day. At the time a man is hired for, or promoted to, a knife job, it is understood that he will be required to sharpen knives. He is expected to perform that task as well as other tasks connected with the job. The knifemen are paid by the hour and, excluding the knife-sharpening time in controversy, they work eight hours a day, five days a week. We believe the facts clearly demonstrate that the knife sharpening activities of these workmen are an integral part of, and indispensable to, the various butchering activities for which they were principally employed, and that they must be compensated for by respondent in compliance with the Fair Labor Standards Act, as amended by the Portal-to-Portal Act, and as construed by us today in Steiner v. Mitchell. Because the decision of the court below, resting solely upon an erroneous reading of Section 4, is not in accordance with our construction, the judgment must be reversed and remanded for proceedings not inconsistent herewith. Reversed and remanded.

Knifemen employed in butchering and trimming meat in respondent's meatpacking plant spend time each workday in sharpening the knives which they use in their work. Such knife sharpening is necessary for the proper performance of the work, and respondent requires it to be done outside the scheduled eight-hour shift of these employees, and provides a room and equipment for its accomplishment. Held: this activity is a "principal," rather than a "preliminary" or "postliminary," activity, within the meaning of § 4(a)(2) of the Portal-to-Portal Act, and it is compensable under the Fair Labor Standards Act. Steiner v. Mitchell, ante, p.. . 216 F.2d 618 reversed and remanded.

1955_56

https://www.oyez.org/cases/1955/56

PER CURIAM. The United States filed a libel in the District Court for the Eastern District of Louisiana, under §§ 3116 and 3321 of the Internal Revenue Code of 1939, 53 Stat. 362, 401, for the forfeiture of an automobile which had been used to transport nontax-paid whiskey. Petitioner, a finance company which had accepted an assignment of a conditional sales contract when the automobile was purchased, sought remission of the forfeiture to the extent of its interest under 18 U.S.C. § 3617. That section provides that, in a forfeiture proceeding, the District Court "shall have exclusive jurisdiction to remit" the forfeiture, but that the court "shall not allow" remission unless the finance company (1) acquired its interest in good faith; (2) had no reason to believe that the automobile would be used in violation of the liquor laws; and (3), "was informed in answer to [its] inquiry, at the headquarters of the sheriff, chief of police, principal Federal internal revenue officer engaged in the enforcement of the liquor laws, or other principal local or Federal law enforcement officer of the locality . . . that [the purchaser] had no . . . record or reputation [for violating laws of the United States or of any State relating to liquor]." It is conceded that petitioner satisfied the first two requirements. As to the third, petitioner made a timely inquiry regarding the purchaser of the automobile to the state office of the Federal Alcohol and Tobacco Unit, from which it received the following reply: "No record or reputation as a liquor law violator as of [the date of the inquiry]. This office does not keep a complete file of State and local arrests or prosecutions, and has no knowledge of the subject's reputation among State and local officers." It is conceded that the inquiry was made to an appropriate office, and that, if the substance of the reply satisfied the statute, no further inquiries were required by the statute. The issue is whether the substance of the reply was adequate. The reply received by petitioner was a form reply designed by the Internal Revenue Service expressly for the purpose of satisfying this statutory requirement. It had for years been accepted as compliance with the statute in administrative remissions and in forfeiture proceedings in other district courts. Nevertheless, the District Court denied remission on the ground that the reply did not satisfy the statute in that it expressly disclaimed any knowledge of the purchaser's record or reputation for state liquor law violations. 121 F. Supp. 265. The Court of Appeals for the Fifth Circuit affirmed, 218 F.2d 702, with one judge dissenting upon rehearing, 220 F.2d 279. We think the courts below misconstrued the reply. The first sentence affirmatively stated that the purchaser had no record or reputation in that office as a "liquor law violator," and that statement was not limited to federal violations. The second sentence did not qualify the negative character of the reply, but merely made clear that that office's knowledge was not unlimited. The District Court also based its decision on the alternative ground that, even if the requirements of the statute were technically met, remission would be denied in the discretion of the court. The sole basis for that holding was that petitioner was "put on notice" by the reply that the purchaser might well have a record as a liquor law violator with the state authorities, and its failure to investigate further disclosed "an indifference on its part which does not commend it to the equitable conscience of this court." We need not decide the extent of the District Court's discretionary power to deny remissions since, in any event, we think there was no occasion for its exercise here. The very purpose of prescribing in detail in the statute the type of inquiry to be made was to avoid uncertainty over the extent of investigation necessary to protect finance companies against forfeitures. That purpose would be frustrated if a duty to investigate further could be grounded solely upon the alleged inadequacy of a reply clearly satisfying the statutory investigation requirements. In limiting the inquiry duty to any one of several offices, Congress must necessarily have contemplated that the records of one office only would be checked. It considered that adequate. The judgment below is reversed and the cause is remanded to the District Court for further proceedings not inconsistent with this opinion. Reversed and remanded.

1. Under 18 U.S.C. § 3617, providing conditions to the remission of forfeitures under liquor laws, the substance of the reply which petitioner finance company received from the Internal Revenue Service regarding the automobile purchaser's reputation as a liquor law violator satisfied that requirement of the statute, though the reply disclaimed knowledge of the purchaser's reputation among state and local officers. Pp. 488-490. 2. Whatever may be the extent of the District Court's discretionary power to deny remission of forfeiture under 18 U.S.C. § 3617, there was no occasion for its exercise in the circumstances of this case. . 218 F.2d 702 reversed and remanded.

1955_250

https://www.oyez.org/cases/1955/250

MR. JUSTICE REED delivered the opinion of the Court. In each of these cases, the employer refused to permit distribution of union literature by nonemployee union organizers on company-owned parking lots. The National Labor Relations Board, in separate and unrelated proceedings, found in each case that it was unreasonably difficult for the union organizer to reach the employees off company property, and held that, in refusing the unions access to parking lots, the employers had unreasonably impeded their employees' right to self organization in violation of § 8(a)(1) of the National Labor Relations Act. Babcock & Wilcox Co., 109 NLRB 485, 494; Ranco, Inc., id., 998, 1007, and Scamprufe, Inc., id., 24, 32. The plant involved in No. 250, Labor Board v. Babcock & Wilcox Co., is a company engaged in the manufacture of tubular products such as boilers and accessories, located on a 100-acre tract about one mile from a community of 21,000 people. Approximately 400 of the 500 employees live in that town, and the remainder live within a 30-mile radius. More than 90 of them drive to work in private automobiles and park on a company lot that adjoins the fenced in plant area. The parking lot is reached only by a driveway 100 yards long which is entirely on company property excepting for a public right-of-way that extends 31 feet from the metal of the highway to the plant's property. Thus, the only public place in the immediate vicinity of the plant area at which leaflets can be effectively distributed to employees is that place where this driveway crosses the public right-of-way. Because of the traffic conditions at that place, the Board found it practically impossible for union organizers to distribute leaflets safely to employees in motors as they enter or leave the lot. The Board noted that the company's policy on such distribution had not discriminated against labor organizations, and that other means of communication, such as the mail and telephones, as well as the homes of the workers, were open to the union. The employer justified its refusal to allow distribution of literature on company property on the ground that it had maintained a consistent policy of refusing access to all kinds of pamphleteering, and that such distribution of leaflets would litter its property. The Board found that the parking lot and the walkway from it to the gatehouse, where employees punched in for work, were the only "safe and practicable" places for distribution of union literature. The Board viewed the place of work as so much more effective a place for communication of information that it held the employer guilty of an unfair labor practice for refusing limited access to company property to union organizers. It therefore ordered the employer to rescind its no-distribution order for the parking lot and walkway, subject to reasonable and nondiscriminating regulations "in the interest of plant efficiency and discipline, but not as to deny access to union representatives for the purpose of effecting such distribution." 109 NLRB at 486. The Board petitioned the Court of Appeals for the Fifth Circuit for enforcement. That court refused enforcement on the ground the statute did not authorize the Board to impose a servitude on the employer's property where no employee was involved. Labor Board v. Babcock & Wilcox Co., 222 F.2d 316. The conditions and circumstances involved in No. 251, Labor Board v. Scamprufe, Inc., and No. 422, Ranco, Inc. v. Labor Board, are not materially different, except that Scamprufe involves a plant employing approximately 200 persons, and, in the Ranco case, it appears that union organizers had a better opportunity to pass out literature off company property. The Board likewise ordered these employers to allow union organizers limited access to company lots. The orders were in substantially similar form as that in the Babcock & Wilcox case. Enforcement of the orders was sought in the Courts of Appeals. The Court of Appeals for the Tenth Circuit, in No. 251, Labor Board v. Scamprufe, Inc., 222 F.2d 858, refused enforcement on the ground that a nonemployee can justify his presence on company property only "as it bears a cogent relationship to the exercise of the employees' guaranteed right of self-organization." These "solicitors were therefore strangers to the right of self-organization, absent a showing of nonaccessibility amounting to a handicap to self-organization." Id. at 861. The Court of Appeals for the Sixth Circuit in No. 422 granted enforcement. Labor Board v. Ranco, Inc., 222 F.2d 543. The per curiam opinion depended upon its decision in Labor Board v. Monarch Tool Co., 210 F.2d 183, a case in which only employees were involved; Labor Board v. Lake Superior Lumber Corporation, 167 F.2d 147, an isolated lumber camp case, and our Republic Aviation Corp. v. Labor Board,. It apparently considered, as held in the Monarch Tool case, supra, at 186, that the attitude of the employer in the Ranco case was an "unreasonable impediment to the freedom of communication essential to the exercise of its employees' rights to self-organization." Because of the conflicting decisions on a recurring phase of enforcement of the National Labor Relations Act, we granted certiorari. 350 U.S. 818, 894. In each of these cases, the Board found that the employer violated § 8(a)(1) of the National Labor Relations Act, 61 Stat. 140, making it an unfair labor practice for an employer to interfere with employees in the exercise of rights guaranteed in § 7 of that Act. The pertinent language of the two sections appears below. These holdings were placed on the Labor Board's determination in LeTourneau Company of Georgia, 54 NLRB 1253. In the LeTourneau case, the Board balanced the conflicting interests of employees to receive information on self-organization on the company's property from fellow employees during nonworking time, with the employer's right to control the use of his property, and found the former more essential in the circumstances of that case. Recognizing that the employer could restrict employees' union activities when necessary to maintain plant discipline or production, the Board said: "Upon all the above considerations, we are convinced, and find, that the respondent, in applying its 'no-distributing' rule to the distribution of union literature by its employees on its parking lots, has placed an unreasonable impediment on the freedom of communication essential to the exercise of its employees' right to self-organization," LeTourneau Company of Georgia, 54 NLRB at 1262. This Court affirmed the Board. Republic Aviation Corp. v. Labor Board,, et seq. The same rule had been earlier and more fully stated in Peyton Packing Co., 49 NLRB 828, 843-844. The Board has applied its reasoning in the LeTourneau case without distinction to situations where the distribution was made, as here, by nonemployees. Carolina Mills, 92 NLRB 1141, 1149, 1168-1169. The fact that our LeTourneau case ruled only as to employees has been noted by the Courts of Appeal in Labor Board v. Lake Superior Lumber Corp., 167 F.2d 147, 150, and Labor Board v. Scamprufe, Inc., 222 F.2d at 860. Cf. Labor Board v. American Furnace Co., 158 F.2d 376, 380. In these present cases, the Board has set out the facts that support its conclusions as to the necessity for allowing nonemployee union organizers to distribute union literature on the company's property. In essence, they are that nonemployee union representatives, if barred, would have to use personal contacts on streets or at home, telephones, letters or advertised meetings to get in touch with the employees. The force of this position in respect to employees isolated from normal contacts has been recognized by this Court and by others. See Republic Aviation Corporation v. Labor Board, supra, at, note 3; Labor Board v. Lake Superior Lumber Corp., supra, at 150. We recognize, too, that the Board has the responsibility of "applying the Act's general prohibitory language in the light of the infinite combinations of events which might be charged as violative of its terms." Labor Board v. Stowe Spinning Co.,,. We are slow to overturn an administrative decision. It is our judgment, however, that an employer may validly post his property against nonemployee distribution of union literature if reasonable efforts by the union through other available channels of communication will enable it to reach the employees with its message and if the employer's notice or order does not discriminate against the union by allowing other distribution. In these circumstances, the employer may not be compelled to allow distribution even under such reasonable regulations as the orders in these cases permit. This is not a problem of always open or always closed doors for union organization on company property. Organization rights are granted to workers by the same authority, the National Government, that preserves property rights. Accommodation between the two must be obtained with as little destruction of one as is consistent with the maintenance of the other. The employer may not affirmatively interfere with organization; the union may not always insist that the employer aid organization. But when the inaccessibility of employees makes ineffective the reasonable attempts by nonemployees to communicate with them through the usual channels, the right to exclude from property has been required to yield to the extent needed to permit communication of information on the right to organize. The determination of the proper adjustments rests with the Board. Its rulings, when reached on findings of fact supported by substantial evidence on the record as a whole, should be sustained by the courts unless its conclusions rest on erroneous legal foundations. Here, the Board failed to make a distinction between rules of law applicable to employees and those applicable to nonemployees. The distinction is one of substance. No restriction may be placed on the employees' right to discuss self-organization among themselves unless the employer can demonstrate that a restriction is necessary to maintain production or discipline. Republic Aviation Corp. v. Labor Board,,. But no such obligation is owed nonemployee organizers. Their access to company property is governed by a different consideration. The right of self-organization depends in some measure on the ability of employees to learn the advantages of self-organization from others. Consequently, if the location of a plant and the living quarters of the employees place the employees beyond the reach of reasonable union efforts to communicate with them, the employer must allow the union to approach his employees on his property. No such conditions are shown in these records. The plants are close to small, well settled communities where a large percentage of the employees live. The usual methods of imparting information are available. See, e.g., note 1 supra. The various instruments of publicity are at hand. Though the quarters of the employees are scattered, they are in reasonable reach. The Act requires only that the employer refrain from interference, discrimination, restraint or coercion in the employees' exercise of their own rights. It does not require that the employer permit the use of its facilities for organization when other means are readily available. Labor Board v. Babcock & Wilcox Co., No. 250, is Affirmed

In the circumstances of these cases, the nondiscriminatory refusal of the employers to permit distribution of union literature by nonemployee union organizers on company-owned parking lots did not unreasonably impede their employees' right to self-organization in violation of § 8(a)(1) of the National Labor Relations Act, because the locations of the plants and of the living quarters of the employees did not place the employees beyond the reach of reasonable efforts of the unions to communicate with them by other means. . (a) An employer may validly post his property against nonemployee distribution of union literature if reasonable efforts by the union through other available channels of communication will enable it to reach the employees with its message and if the employer's notice or order does not discriminate against the union by allowing other distribution. P.. (b) Republic Aviation Corp. v. Labor Board,, distinguished. . (c) The Act requires only that the employer refrain from interference, discrimination, restraint or coercion in the employees' exercise of their own rights. It does not require that the employer permit the use of its facilities for organization when other means are readily available. . 222 F.2d 316, affirmed. 222 F.2d 858, affirmed. 222 F.2d 543, reversed.

1955_79

https://www.oyez.org/cases/1955/79

MR. JUSTICE FRANKFURTER delivered the opinion of the Court. Charging respondent with coercion of its employees and discrimination against pro-union employees, Local 20 of the United Brewery Workers, CIO, instituted proceedings before the National Labor Relations Board for violation of §§ 8(a)(1) and 8(a)(3) of the National Labor Relations Act, as amended, 61 Stat. 136, 140, 65 Stat. 601, 602, which outlaw such unfair labor practices. Pursuant to this charge, a complaint was issued; at the hearing which followed, respondent challenged the jurisdiction of the Board upon the ground that the union had not satisfied the requirements of § 9(h) of the Act. Section 9(h) provides that "no complaint shall be issued pursuant to [an unfair labor practice] charge made by a labor organization . . . unless there is on file with the Board an affidavit executed contemporaneously or within the preceding twelve-month period by each officer of such labor organization and the officers of any national or international labor organization of which it is an affiliate or constituent unit that he is not a member of the Communist Party or affiliated with such party, and that he does not believe in, and is not a member of or supports any organization that believes in or teaches, the overthrow of the United States Government by force or by any illegal or unconstitutional methods." Respondent offered to prove, by evidence of his duties and functions, that Taylor, the Regional Director of the CIO for Kentucky, who admittedly had not filed a non-Communist affidavit, was an "officer" within the meaning of § 9(h). The Board rejected this contention on two grounds: first, "the compliance status of a union . . . is a matter for administrative determination, and not one to be litigated in complaint or representation proceedings." 108 N.L.R.B. 490, 491. Second, "had the Respondent established in a collateral proceeding what it had offered to prove at the hearing herein, we are satisfied, and find, that, under the Board's present 'constitutional' test, such proof would fall short of substantiating the Respondent's contention that Taylor was an officer of the CIO." 108 N.L.R.B. 490, 492-493. On the merits, the Board found that respondent had committed the unfair practices charged. When the Board sought enforcement of its decree, the Court of Appeals for the Sixth Circuit, without passing upon the unfair practices, remanded the case to the Board for determination of the issue tendered by respondent in its claim that Taylor's functions constituted him an "officer." 219 F.2d 441. We granted certiorari because of the importance of the questions raised in the administration of the statute. 350 U.S. 819. These questions are two in number: (1) May an employer, during the course of an unfair labor practice hearing, show that a labor organization has not complied with § 9(h), and thereby establish the Board's want of jurisdiction? (2) Assuming the answer to this question is "yes," is the Board's construction of "officer" in § 9(h) -- viz., "any person occupying a position identified as an office in the constitution of the labor organization" -- proper? 29 CFR, 1955 Supp., § 102.13. * The Court of Appeals answered the first question in the affirmative upon the authority of Labor Board v. Highland Park Manufacturing Co.,. In that case, an employer, defendant in an unfair labor practice suit, challenged the Board's interpretation of "national or international labor organization" in § 9(h). The agency had read this language as not including labor federations, i.e., the AFL or CIO. Therefore, it had not required affidavits from officers of these federations. Highland Park's challenge was rejected by the Board under its then settled policy that the employer could not raise noncompliance with § 9(h) as a bar to a proceeding on an unfair labor practice. The Court of Appeals held to the contrary, 184 F.2d 98, and we affirmed its decision. The Board distinguishes Highland Park by suggesting that, here, the "employer seeks to question only the fact of compliance, as distinguished from the necessity of compliance." The genesis of this distinction comes from the following in Highland Park: "If there were dispute as to whether the CIO had filed the required affidavits or whether documents filed met the statutory requirements and the Board had resolved that question in favor of the labor organizations, a different question would be presented." U.S. 322,. The Board misconceives the significance of the passage. Both Highland Park and this case involve the scope of § 9(h), the meaning to be derived from its language; neither case involves an inquiry into disputed facts, the situation referred to in Highland Park. Acceptance of a differentiation between these cases upon any such theory as that suggested by the Board would make of law too thin a dialectic enterprise. But if the Board's distinction is overly subtle, its reason for attempting a distinction has force, namely, a concern with "the need to expedite the hearing of cases and the resolution of issues on their merits. . . ." 108 N.L.R.B. 490, 491. Much may be said for the claim that an employer should not be permitted to disrupt or delay complaint or representation cases by raising questions respecting § 9(h). But, after Highland Park, the argument comes too late. In any event, whether the impediment to the effectiveness of the administrative process in determining the merits of a charge of unfair labor practice may be serious or negligible by injecting into it the subsidiary issue of compliance with § 9(h) depends upon the scope of the inquiry opened up by the latter issue. This brings us to that question. Our concern specifically is with the appropriate construction of "officers" in § 9(h). The Court of Appeals rejected the Board's "constitutional" rule for determining who is a union "officer" in favor of a so-called "functional" test. Presumably this test would require those members of a union who are effective instruments of its policies to file affidavits as "officers," regardless of the fact that they do not fill the offices designated by their organization's constitution. Neither § 9(h) itself nor its legislative history attempts a definition of "officers." "Officers" is a word of familiar usage, and, "[a]fter all, legislation, when not expressed in technical terms, is addressed to the common run of men, and is therefore to be understood according to the sense of the thing, as the ordinary man has a right to rely on ordinary words addressed to him." Addison v. Holly Hill Fruit Products,,. "Officers" normally means those who hold defined offices. It does not mean the boys in the back room, or other agencies of invisible government, whether in politics or in the trade union movement. A definition of officer as "any person occupying a position identified as an office in the constitution of the labor organization" accords with this lay understanding. 29 CFR, 1955 Supp., § 102.13. But, if the word be deemed to have a peculiar connotation for those intimate with trade union affairs, it is incumbent upon us to give the word its technical meaning, Boston Sand & Gravel Co. v. United States,,, for § 9(h) is an integral part of a statute whose sponsors were familiar with labor organization and labor problems and which was doubtless drawn by specialists in labor relations. If such be the case, then, of course, the Board's expertness comes into play. We should affirm its definition if that definition does not appear too farfetched, Labor Board v. Hearst Publications, Inc.,,. The statute provides some evidence to support the Board, for § 9(f), which requires unions to report specific information to the Secretary of Labor, differentiates between "officers" and "agents" of labor organizations. We conclude that the Board's criterion for determining who are officers both accords with the lay definition of the word and is a reasonable, if, indeed, not a compelling, construction of the statute. Accordingly, the judgment of the Court of Appeals is reversed, and the case is remanded to that court for further proceedings. Reversed and remanded.

A labor union instituted proceedings before the National Labor Relations Board charging an employer with unfair labor practices in violation of §§ 8(a)(1) and 8(a)(3) of the National Labor Relations Act. A complaint based on these charges was issued. At the hearing, the employer challenged the Board's jurisdiction on the ground that the union had not satisfied the requirements of § 9(h), which requires the filing of non-Communist affidavits by all "officers" of the union and of any national or international labor organization of which it is an affiliate, and offered to prove that the Regional Director of the CIO for Kentucky, who had not filed such an affidavit, was an "officer" within the meaning of § 9(h). Held: 1. The Board erred in ruling that, during the course of the unfair labor practice hearing, the employer could not show that the labor organization had not complied with § 9(h), and thereby establish the Board's want of jurisdiction. Labor Board v. Highland Park Manufacturing Co.,. . 2. The Board's construction of the word "officer" in § 9(h) as meaning "any person occupying a position identified as an office in the constitution of the labor organization," and its finding that the Regional Director of the CIO for Kentucky is not such an "officer," are sustained. . 219 F.2d 441, reversed and remanded.

1955_486

https://www.oyez.org/cases/1955/486

MR. JUSTICE BLACK delivered the opinion of the Court. The National Labor Relations Act makes it an unfair labor practice for an employer to refuse to bargain in good faith with the representative of his employees. The question presented by this case is whether the National Labor Relations Board may find that an employer has not bargained in good faith where the employer claims it cannot afford to pay higher wages but refuses requests to produce information substantiating its claim. The dispute here arose when a union representing certain of respondent's employees asked for a wage increase of 10 cents per hour. The company answered that it could not afford to pay such an increase, it was undercapitalized, had never paid dividends, and that an increase of more than 2 1/2 cents per hour would put it out of business. The union asked the company to produce some evidence substantiating these statements, requesting permission to have a certified public accountant examine the company's books, financial data, etc. This request being denied, the union asked that the company submit "full and complete information with respect to its financial standing and profits," insisting that such information was pertinent and essential for the employees to determine whether or not they should continue to press their demand for a wage increase. A union official testified before the trial examiner that "[W]e were wanting anything relating to the Company's position, any records or what have you, books, accounting sheets, cost expenditures, what not, anything to back the Company's position that they were unable to give any more money." The company refused all the requests, relying solely on the statement that "the information . . . is not pertinent to this discussion, and the company declines to give you such information; you have no legal right to such." On the basis of these facts, the National Labor Relations Board found that the company had "failed to bargain in good faith with respect to wages in violation of Section 8(a)(5) of the Act." 110 N.L.R.B. 856. The Board ordered the company to supply the union with such information as would "substantiate the Respondent's position of its economic inability to pay the requested wage increase." The Court of Appeals refused to enforce the Board's order, agreeing with respondent that it could not be held guilty of an unfair labor practice because of its refusal to furnish the information requested by the union. 224 F.2d 869. In Labor Board v. Jacobs Mfg. Co., 196 F.2d 680, the Second Circuit upheld a Board finding of bad faith bargaining based on an employer's refusal to supply financial information under circumstances similar to those here. Because of the conflict and the importance of the question, we granted certiorari. 350 U.S. 922. The company raised no objection to the Board's order on the ground that the scope of information required was too broad or that disclosure would put an undue burden on the company. Its major argument throughout has been that the information requested was irrelevant to the bargaining process, and related to matters exclusively within the province of management. Thus, we lay to one side the suggestion by the company here that the Board's order might be unduly burdensome or injurious to its business. In any event, the Board has heretofore taken the position in cases such as this that "It is sufficient if the information is made available in a manner not so burdensome or time-consuming as to impede the process of bargaining. " And in this case the Board has held substantiation of the company's position requires no more than "reasonable proof." We think that, in determining whether the obligation of good faith bargaining has been met, the Board has a right to consider an employer's refusal to give information about its financial status. While Congress did not compel agreement between employers and bargaining representatives, it did require collective bargaining in the hope that agreements would result. Section 204(a)(1) of the Act admonishes both employers and employees to "exert every reasonable effort to make and maintain agreements concerning rates of pay, hours, and working conditions. . . ." In their effort to reach an agreement here, both the union and the company treated the company's ability to pay increased wages as highly relevant. The ability of an employer to increase wages without injury to his business is a commonly considered factor in wage negotiations. Claims for increased wages have sometimes been abandoned because of an employer's unsatisfactory business condition; employees have even voted to accept wage decreases because of such conditions. Good faith bargaining necessarily requires that claims made by either bargainer should be honest claims. This is true about an asserted inability to pay an increase in wages. If such an argument is important enough to present in the give and take of bargaining, it is important enough to require some sort of proof of its accuracy. And it would certainly not be far-fetched for a trier of fact to reach the conclusion that bargaining lacks good faith when an employer mechanically repeats a claim of inability to pay without making the slightest effort to substantiate the claim. Such has been the holding of the Labor Board since shortly after the passage of the Wagner Act. In Pioneer Pearl Button Co., decided in 1936, where the employer's representative relied on the company's asserted "poof financial condition," the Board said: "He did no more than take refuge in the assertion that the respondent's financial condition was poor; he refused either to prove his statement or to permit independent verification. This is not collective bargaining." 1 N.L.R.B. 837, 842-843. This was the position of the Board when the Taft-Hartley Act was passed in 1947, and has been its position ever since. We agree with the Board that a refusal to attempt to substantiate a claim of inability to pay increased wages may support a finding of a failure to bargain in good faith. The Board concluded that, under the facts and circumstances of this case, the respondent was guilty of an unfair labor practice in failing to bargain in good faith. We see no reason to disturb the findings of the Board. We do not hold, however, that, in every case in which economic inability is raised as an argument against increased wages, it automatically follows that the employees are entitled to substantiating evidence. Each case must turn upon its particular facts. The inquiry must always be whether or not, under the circumstances of the particular case, the statutory obligation to bargain in good faith has been met. Since we conclude that there is support in the record for the conclusion of the Board here that respondent did not bargain in good faith, it was error for the Court of Appeals to set aside the Board's order and deny enforcement. Reversed.

In the circumstances of this case, where the employer claimed that it could not afford to pay higher wages but refused the union's request to produce financial data to substantiate this claim, the National Labor Relations Board was justified in finding that the employer had not bargained in good faith and, therefore, had violated § 8(a)(5) of the National Labor Relations Act. . 224 F.2d 869 reversed.

1955_27

https://www.oyez.org/cases/1955/27

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court. On August 7, 1952, the United States Court of Appeals for the Fifth Circuit entered its decree enforcing in full an order of the National Labor Relations Board issued on June 30, 1950, against respondent herein directing it (1) to cease and desist from refusing to bargain collectively with District Lodge No. 46, International Association of Machinists, a labor union, as the exclusive bargaining agent of all its tool and die makers, machinists, etc., and from discouraging membership in the union; (2) to take affirmative action upon request to bargain collectively with the union as the exclusive representative of respondent's said employees and, if an understanding should be reached, to embody such understanding in a signed agreement; and (3) to post at its plant a notice to be furnished by the Regional Director of the National Labor Relations Board and signed by the officers of respondent agreeing to desist from certain unfair labor practices, and to bargain collectively with the union upon request as required in the order. 197 F.2d 814. Respondent had posted the notice and restored certain employees to their jobs as required by the order, but declined to bargain collectively with the union, although requested by the latter to do so on numerous occasions over a period of seven months, basing its refusal to do so on the ground that the union had lost its alleged majority status by reason of a turnover in personnel. It demanded proof from the union that it represented a majority of the employees then employed in the bargaining unit. The union replied that its majority status had been determined by the Board and by the Court of Appeals in its decree of enforcement. Respondent never bargained collectively with the union, either before or after the decree, contending at all times that the latter did not have majority status, although, in 1948, the employees had designated the union as their bargaining agent and the Board had found that respondent had avoided collective bargaining through its lack of good faith and because of its own unfair labor practices. This finding was not challenged by respondent, and was adopted by the Court of Appeals in its enforcement decree of August 7, 1952. Respondent then filed a petition with the Board on January 27, 1953, requesting an election in the bargaining unit. Because of respondent's failure to remedy its unfair labor practice by good faith bargaining with the union for a reasonable period, the Board sustained its Regional Director's dismissal of the petition. On September 22, 1953, the Board filed its petition in the Court of Appeals, specifically setting forth the conduct of respondent showing its failure and refusal to comply with the court's decree enforcing the Board's order, and asking that respondent be required to show cause why it should not be adjudged in civil contempt. The Board also asked the court to institute a prosecution for criminal contempt against respondent. Respondent answered, claiming compliance with the decree except that, since the decree of the court, it had refused to bargain collectively with the union as the bargaining agent of its employees because, for a long time, the union had not represented its employees as such bargaining agent. The Court of Appeals concluded that no case for a civil contempt order had been made out, and dismissed the proceeding. The court held that, notwithstanding the prior entry of a decree directing respondent to bargain collectively with the union, respondent's compliance with other provisions of the decree entitled it to refuse to bargain collectively, since it had ascertained that, even before the decree, because of a turnover in personnel, the union had lost majority status. The court stated that to hold respondent liable in contempt under these circumstances would do violence to its decree and to the Act, rather than to vindicate them. Because of the importance of the question in the administration of the National Labor Relations Act, we granted certiorari, 348 U.S. 958. Petitioner does not press here its prayer in the court below for an adjudication of criminal contempt. In arriving at its decision purging respondent of contempt, the Court of Appeals stated that respondent had "complied fully with all the provisions" of its enforcement order; that it had "made an offer to bargain with the union"; that the union's alleged loss of majority status was "without fault" on the respondent's part; and that the Board took the position that respondent was required "to bargain indefinitely" notwithstanding the union's loss of majority status. If we had so understood the record, certiorari would not have been granted, but we do not so understand it. We believe the facts are to the contrary in each instance. The original order of the Board found not only that respondent, for a period of four years after notification by the union of its majority status, had refused to bargain with it, but had also used deliberate and flagrant unfair labor practices to deprive the union of its majority status. In its opinion enforcing this cease and desist order, the Court of Appeals stated: "With commendable candor respondent's counsel has stated its position as follows:" " We have controverted the findings of fact of the Board in our Response, but, in all fairness to this Court, we are constrained to admit that there is sufficient evidence, even though disputed, upon which to base the Board's order." 197 F.2d 814. The findings of both the Board and the Court of Appeals are therefore clear that there had been no willingness on respondent's part up to that date, August 7, 1952, to bargain with the union. In its "Answer of the Respondent to the petition of the Board for adjudication in Civil Contempt and other Civil Relief," filed November 12, 1953, respondent alleged: "As shown hereinbefore and hereinafter, Respondent has refused to bargain collectively with the Union because it did not represent a majority of the employees." There is nothing in the record to indicate that this situation has ever changed in the slightest respect, and this in face of the fact that the union has at all times been willing to bargain. Neither does the record indicate that the Board insisted upon respondent's bargaining with the union indefinitely; on the contrary, it demonstrates that the Board has urged here and in the court below that respondent should bargain in good faith only for a reasonable length of time after designation of the union as the bargaining agency. It cannot be said that respondent is "without fault," because the record is clear that at no time has respondent bargained in good faith with the union. It has met with the union but twice since 1948, and on neither of those occasions did it bargain. It has avoided other meetings by evasion and refusal or failure to respond to a request therefor. The sole question necessary for determination here is whether an employer who has been found guilty by the Board of unfair labor practices in refusing to bargain with a union designated as the exclusive representative of its employees and who has been directed to so bargain is, after a decree enforcing the order and without remedying its unfair labor practices, legally justified in refusing to bargain with the union because it contends the union does not in fact have majority status in its plant, or must such employer bargain fairly for a reasonable length of time in accordance with the order to avoid an adjudication in civil contempt. We believe that an employer in such circumstances cannot lawfully refuse to bargain; that he must do so for a reasonable time; and that, for a failure to so bargain, it is the statutory duty of the Court of Appeals, on petition of the Board, to adjudge him in contempt of its enforcement decree. To conclude otherwise would greatly weaken the administration of the National Labor Relations Act. That Act contemplates cooperation between the Board and the Courts of Appeals both at the enforcement and the contempt stages in order to effectuate its purposes. It consigns certain statutory functions to each, and, where the Board has acted properly within its designated sphere, the court is required to grant enforcement of the Board's order. The decree, like the order it enforces, is aimed at the prevention of unfair labor practices, an objective of the Act, and so long as compliance is not forthcoming, that objective is frustrated. It is for this reason that Congress gave the judicial remedy of contempt as the ultimate sanction to secure compliance with Board orders. The granting or withholding of such remedial action is not wholly discretionary with the court. This is true not only under the National Labor Relations Act, but also under general principles of equity jurisprudence. It seems clear to us that, in the light of these principles and the facts of this case, the court below exceeded the allowable limits of its discretion in denying relief to the Board, and that its judgment must be reversed and remanded for proceedings in conformity with this opinion. Reversed and remanded.

The National Labor Relations Board ordered an employer to cease and desist from certain unfair labor practices, to reinstate certain discharged employees with back pay, to bargain collectively with the union, and to post notices stating that it would do so. The employer complied with all of these orders except the order to bargain collectively, claiming that the union no longer represented a majority of its employees. In an enforcement proceeding, the Court of Appeals decreed enforcement, overruling the employer's contention that the union's loss of majority representation of the employees relieved the employer from compliance with the order to bargain collectively. Subsequently, the Board petitioned the Court of Appeals to find the employer in contempt for continued refusal to bargain collectively, but the Court declined to do so on the ground that the union no longer represented a majority of the employees. Held: it was the statutory duty of the Court of Appeals to adjudge the employer in contempt of its enforcement decree, and the Court exceeded the allowable limits of its discretion in declining to do so. . (a) In the circumstances of this case, it was the lawful duty of the employer to bargain collectively with the union for a reasonable time. P.. (b) For failure to so bargain, it was the statutory duty of the Court of Appeals, on petition of the Board, to adjudge the employer in contempt of its enforcement decree. P.. (c) The National Labor Relations Act contemplates cooperation between the Board and the Courts of Appeals, both at the enforcement and the contempt stages in order to effectuate its purposes. P.. (d) The granting or withholding of such remedial action is not wholly discretionary with the Court, and the Court of Appeals exceeded the allowable limits of its discretion in denying relief to the Board. P.. 214 F.2d 481, reversed and remanded.

1955_28

https://www.oyez.org/cases/1955/28

PER CURIAM. We reverse the judgment of the Court of Appeals, 216 F.2d 772, without reaching the constitutional challenge to that court's jurisdiction to review the denial by the trial court of a motion for a new trial on the ground that the verdict was excessive. Even assuming such appellate power to exist under the Seventh Amendment, we find that the Court of Appeals was not justified, on this record, in regarding the denial of a new trial, upon a remittitur of part of the verdict, as an abuse of discretion. For, apart from that question, as we view the evidence, we think that the action of the trial court was not without support in the record, and accordingly that its action should not have been disturbed by the Court of Appeals. We need not consider respondent's contention that only the jurisdictional question was presented by the petition for certiorari, for, in reversing on the above ground, we follow the traditional practice of this Court of refusing to decide constitutional questions when the record discloses other grounds of decision, whether or not they have been properly raised before us by the parties. See Peters v. Hobby,,; Alma Motor Co. v. Timken-Detroit Axle Co.,,,,. Reversed.

1. The District Court's denial of a new trial, upon remittitur of part of the verdict in this case, was not without support in the record, and its action should not have been disturbed by the Court of Appeals. P.. 2. This Court refuses to decide constitutional questions when the record discloses other grounds of decision, whether or not properly raised here by the parties. P.. 216 F.2d 772 reversed.

1955_404

https://www.oyez.org/cases/1955/404

MR. JUSTICE FRANKFURTER delivered the opinion of the Court. This suit was brought by petitioner against respondent county and its treasurer for a declaratory judgment that petitioner was not required to pay certain state and county "personal property" taxes and for an injunction against the levy of such taxes on that property. The controlling facts are not in dispute. Petitioner is a Nebraska corporation organized primarily to provide housing for rent or sale. On January 18, 1951, petitioner entered into a contract with the Secretary of the Air Force to lease 63 acres of land and to build a housing project on Offutt Air Force Base in respondent county in accordance with specifications submitted to the Department of the Air Force and to be approved by the Federal Housing Commissioner. The lease was for 75 years at a rental price of $100 per year. It provided that the "buildings and improvements erected by the Lessee, constituting the aforesaid housing project, shall be and become, as completed, real estate and part of the leased land, and public buildings of the United States, leased to Lessee . . . ," and further provided that, "upon the expiration of this lease, or earlier termination, all improvements made upon the leased premises shall remain the property of the Government without compensation. . . ." Petitioner was to lease all the units of the project to such military and civilian personnel at the Base as were designated by the Commanding Officer, on terms specified in the contract and at a maximum rent approved by the Federal Housing Administration and the Air Force. The Government was to provide fire and police protection to the project on a reimbursable basis. Petitioner had the right to permit public utilities to extend water, gas, sewer, telephone, and electric power lines onto the leased land in order to provide those services. Petitioner agreed to insure the buildings at its own expense, to permit Government inspection of the premises, and to comply with regulations prescribed by the Commanding Officer for military requirements for safety and security purposes consistent with the use of the leased land for housing. Petitioner could not assign the lease without the written approval of the Secretary of the Air Force. The preferred stock of petitioner was held by the Commissioner of the Federal Housing Administration which, acting under Title VIII of the National Housing Act (the Wherry Military Housing Act), 63 Stat. 570, insured a mortgage on the project after receiving a certificate from the Department of the Air Force that a housing project was necessary to provide adequate housing for civilian or military personnel. After the singing of the contract and the insurance of the mortgage, construction proceeded forthwith. Petitioner filed no county tax return, although the Attorney General of Nebraska had ruled that its interest in the project, including all of the "personal property" used therein, was taxable as "personal property." On June 23, 1952, the county assessor of Sarpy County filed a schedule on behalf of petitioner, listing a taxable total of $825,685, itemized as "Furniture & Fixtures -- Tools & Equipment"; "Household Appliances"; and "Improvements on Leased Land." Petitioner never paid the resulting county and state taxes, and, after the county treasurer threatened to issue the usual distress warrant to collect the taxes, petitioner brought this suit. The District Court of Sarpy County held that, since title to the buildings and improvements was in the United States, Nebraska and Sarpy County could not tax them. The Supreme Court of Nebraska reversed, holding that Congress had given Nebraska the right to tax petitioner's interest in the property and that, for tax purposes, under Neb.Rev.Stat. Reissue 1950, § 77-1209, petitioner was, in fact and as a matter of law, the owner of the property sought to be taxed. 160 Neb. 320, 70 N.W.2d 382. Petitioner's attack on the Nebraska judgment raises serious questions of state-federal relations with respect to taxation of private housing developments on Government-owned land, and therefore we granted certiorari. 350 U.S. 893. This is another in a long series of cases in this Court dealing with the power of the States to tax property in private hands against a claim of exempt status deriving from an immunity of the Federal Government from state taxation. Offutt Air Force Base falls within the scope of Article I, § 8, cl. 17 of the United States Constitution, providing that the Congress shall have power "To exercise exclusive Legislation in all Cases whatsoever, over such District [of Columbia] . . . and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings. . . ." The course of construction of this provision cannot be said to have run smooth. The power of "exclusive Legislation" has been held to prohibit a state tax on private property located on a military base acquired pursuant to art. I, § 8, cl. 17. Surplus Trading Co. v. Cook,. On the other hand, the State may acquire the right to tax private interests within such a location by permission of Congress, see e.g., the Buck Act, 54 Stat. 1059, 4 U.S.C. §§ 104-110 (permitting state sales, use, and income taxes), and we have also held that the State may tax when the United States divests itself of proprietary interest over the area on which the tax is sought to be levied. S.R.A., Inc. v. Minnesota,; see also Baltimore Shipbuilding & Dry Dock Co. v. Baltimore,. The line of least resistance in analysis of our immediate problem is to ascertain whether Congress has given consent to the type of state taxation here asserted. The applicable congressional statutes are the Military Leasing Act of 1947 and the Wherry Military Housing Act of 1949 (adding Title VIII to the National Housing Act). The Military Leasing Act provides: "That whenever the Secretary of War or the Secretary of the Navy shall deem it to be advantageous to the Government, he is authorized to lease such real or personal property under the control of his Department as is not surplus to the needs of the Department within the meaning of the Act of October 3, 1944 (58 Stat. 765), and is not for the time required for public use, to such lessee or lessees and upon such terms and conditions as in his judgment will promote the national defense or will be in the public interest. Each such lease shall be for a period not exceeding five years unless the Secretary of the Department concerned shall determine that a longer period will promote the national defense or will be in the public interest. . . . Each such lease shall contain a provision permitting the Secretary of the Department concerned to revoke the lease at any time, unless the Secretary shall determine that the omission of such provision from the lease will promote the national defense or will be in the public interest. In any event, each such lease shall be revocable by the Secretary of the Department concerned during a national emergency declared by the President. . . . The authority herein granted shall not apply to oil, mineral, or phosphate lands. . . ." "* * * *" "SEC. 6. The lessee's interest, made or created pursuant to the provisions of this Act, shall be made subject to State or local taxation. Any lease of property authorized under the provisions of this Act shall contain a provision that, if and to the extent that such property is made taxable by State and local governments by Act of Congress, in such event the terms of such lease shall be renegotiated." 61 Stat. 774-776. Two years later, the Wherry Act provided: "Whenever the Secretary of the Army, Navy, or Air Force determines that it is desirable to lease real property within the meaning of the Act of August 5, 1947 (61 Stat. 774), to effectuate the purposes of this title, the Secretary concerned is authorized to lease such property under the authority of said Act upon such terms and conditions as in his opinion will best serve the national interest without regard to the limitations imposed by said Act in respect to the term or duration of the lease, and the power vested in the Secretary of the Department concerned to revoke any lease made pursuant to said Act in the event of a national emergency declared by the President shall not apply. . . ." 63 Stat. 570, 576. These two Acts interlock, and must be read together. The reasonable relationship between them has been thus delineated by the Court of Appeals for the Third Circuit: "In our view, this provision of the National Housing Act [the 1949 Act] merely permits leasing for military housing purposes, already covered by the general authorization of the 1947 Act, to be accomplished without regard to specified restrictions of the 1947 Act, when the elimination of these restrictions would serve the purposes of the Housing Act. Other provisions of the 1947 Act, including the language of Section 6 subjecting the lessee's interest to local taxation, apply to leases made under the authority of both Acts." "We have not overlooked the argument for a narrower view of the scope of the 1947 Act based upon legislative history indicating that the primary purpose of that Act was to provide for the leasing of standby defense plants. But the language of the Act extends the leasing authority to all non-surplus property under the control of the Defense Department except oil, mineral, or phosphate lands (an exception which would be unnecessary if the Act applied only to defense plants). An additional indication that the 1947 Act encompasses the leasing of property generally is found in Section 2, which repeals the prior authority for the leasing of War Department property generally, 27 Stat. 321. The Senate Report expresses the reporting committee's understanding that this prior leasing statute was being 'entirely superseded.' Sen.Rep.No. 626, 1947, 80th Cong.1st Sess. (p. 3)." Fort Dix Apartments Corp. v. Borough of Wrightstown, 225 F.2d 473, 475-476. We agree with this. To be sure, the 1947 Act does not refer specifically to property in an area subject to the power of "exclusive Legislation" by Congress. It does, however, govern the leasing of Government property generally, and its permission to tax extends generally to all lessees' interests created by virtue of the Act. The legislative history indicates a concern about loss of revenue to the States and a desire to prevent unfairness toward competitors of the private interests that might otherwise escape taxation. While the latter consideration is not necessarily applicable where military housing is involved, the former is equally relevant to leases for military housing as for any other purpose. We do not say that this is the only admissible construction of these Acts. We could regard art. I, § 8, cl. 17 as of such overriding and comprehensive scope that consent by Congress to state taxation of obviously valuable private interests located in an area subject to the power of "exclusive Legislation" is to be found only in explicit and unambiguous legislative enactment. We have not heretofore so regarded it, see S.R.A., Inc. v. Minnesota,; Baltimore Shipbuilding & Dry Dock Co. v. Baltimore,, nor are we constrained by reason to treat this exercise by Congress of the "exclusive Legislation" power and the manner of construing it any differently from any other exercise by Congress of that power. This is one of those cases in which Congress has seen fit not to express itself unequivocally. It has preferred to use general language, and thereby requires the judiciary to apply this general language to a specific problem. To that end, we must resort to whatever aids to interpretation the legislation in its entirety and its history provide. Charged as we are with this function, we have concluded that the more persuasive construction of the statute, however flickering and feeble the light afforded for extracting its meaning, is that the States were to be permitted to tax private interests, like those of this petitioner, in housing projects located on areas subject to the federal power of "exclusive Legislation." We do not hold that Congress has relinquished this power over these areas. We hold only that Congress, in the exercise of this power, has permitted such state taxation as is involved in the present case. Petitioner also argues that the state tax, measured by the full value of the buildings and improvements, is not on the "lessee's interest," but is on the full value of property owned by the Government. Labeling the Government as the "owner" does not foreclose us from ascertaining the nature of the real interests created, and so does not solve the problem. See Millinery Center Building Corp. v. Commissioner,. The lease is for 75 years; the buildings and improvements have an estimated useful life of 35 years. The enjoyment of the entire worth of the buildings and improvements will therefore be petitioner's. Petitioner argues, however, that the Government has a substantial interest in the buildings and improvements, since the Government prescribed the maximum rents and determined the occupants, had voting interests in petitioner, provided services, and took the financial risks by insuring the project. Petitioner compares its own position to that of a "managing agent." This characterization is an attempt by use of a phrase to make these facts fit an abstract legal category. This contention would certainly surprise a Congress which was interested in having private enterprise, and not the Government, conduct these housing projects. The Government may have "title," but only a paper title, and, while it retained the controls described in the lease as a regulatory mechanism to prevent the ordinary operation of unbridled economic forces, this does not mean that the value of the buildings and improvements should thereby be partially allocated to it. If an ordinary private housing venture were being assessed for tax purposes, the value would not be allocated between an owner and the mortgage company which does his financing, or between the owner and the State, which may fix rents and provide services. In the circumstances of this case, then, the full value of the buildings and improvements is attributable to the lessee's interest.

Petitioner entered into a contract with the Secretary of the Air Force, under which petitioner leased from the Government land on an Air Force base in Nebraska and built thereon housing accommodations to be rented by petitioner to military and civilian personnel of the base under strict governmental control. The lease was for a term of 75 years at nominal rental, and provided that the buildings and improvements erected by petitioner should become part of the real estate and that, upon expiration or termination of the lease, all improvements made upon the leased premises should remain the property of the Government without compensation. The estimated useful life of the buildings and improvements was only 35 years. The Nebraska county in which the base was located assessed against petitioner "personal property" taxes on the buildings, improvements, appliances, and furniture erected or provided by petitioner on the premises. Held: 1. By the Military Leasing Act of 1947 and the Wherry Military Housing Act of 1949, Congress consented to state taxation of petitioner's interest as lessee, though the area involved is subject to the federal power of "exclusive Legislation." . 2. In the circumstances of this case, the full value of the buildings and improvements is attributable to the lessee's interest. . 3. Petitioner's interest in the appliances is subject to the state tax in like manner as its interest in the buildings. P.. 160 Neb. 320, 70 N.W.2d 382, affirmed.

1955_320

https://www.oyez.org/cases/1955/320

Opinion of the Court by MR. JUSTICE HARLAN, announced by MR. JUSTICE BURTON. In November, 1954, petitioner was indicted in the Corpus Christi Division of the United States District Court for the Southern District of Texas for willfully attempting to evade federal income taxes by filing false returns for the years 1949, 1950 and 1951.

1. Petitioner was indicted in one division of the Federal District Court for the Southern District of Texas, and that Court granted his motion to transfer the case to another division on the ground that local prejudice would prevent a fair trial in the division where he was indicted. Subsequently, the Government obtained a new indictment in another district for the same offenses and moved in the first court for dismissal of the first indictment. This motion was granted, and petitioner appealed. Held: the Court of Appeals was without jurisdiction, because there was no final judgment. . (a) Considering the first indictment alone, an appeal from its dismissal will not lie, because petitioner has not been aggrieved, even though he is left open to further prosecution. . (b) Viewing the two indictments together as parts of a single prosecution, dismissal of the first indictment was not a final order, but only an interlocutory step in petitioner's prosecution. . (c) Dismissal of the first indictment does not come within the exceptions to the rule of "finality," because lack of an appeal at this stage will not deny effective review of his claim that he was entitled to trial in the court to which his first indictment was transferred. . 2. Petitioner's motion for leave to file in this Court an original petition for writs of mandamus and prohibition to the federal district courts of both districts, to require his trial in the court to which the first indictment was transferred, is denied. . 225 F.2d 329, affirmed.

1955_45

https://www.oyez.org/cases/1955/45

MR. JUSTICE BLACK delivered the opinion of the Court. In 1945, petitioner Stephen Herman pleaded guilty in a Pennsylvania state court to 8 charges of burglary, 12 of larceny, 8 of forgery, and 2 of false pretense. He was sentenced to serve 17 1/2 to 35 years in the penitentiary, 2 1/2 to 5 years on each of the charges, some running consecutively, some concurrently. Eight years later, in 1953, he filed this petition for habeas corpus in the same Pennsylvania court, asking that his conviction be held invalid as in violation of the Due Process Clause of the Fourteenth Amendment. He alleged: (1) that his pleas of guilty were the result of coercion and threats by state officers, and (2) that at no stage of the proceedings was he either advised of his right to or given the benefit of counsel. The District Attorney filed an answer challenging the materiality of some of petitioner's allegations denying others, and urging that the writ be refused because of petitioner's tardiness in challenging the judgment. He asked that the petition be summarily dismissed on the ground that "it would be a waste of time and very expensive for Washington County to have this defendant go into a hearing to prove charges that he could have raised at the time he was sentenced by this Court." The petition was summarily dismissed without a hearing by the same trial judge who had sentenced petitioner. On appeal, the Superior Court of the Commonwealth of Pennsylvania affirmed the dismissal. 176 Pa.Super. 387, 107 A.2d 595. The Supreme Court of Pennsylvania denied leave to appeal without opinion. We granted certiorari, 349 U.S. 904, because summary dismissal in the face of the petitioner's serious allegations appeared to be out of line with decisions of this Court. Our prior decisions have established that: (1) a conviction following trial or on a plea of guilty based on a confession extorted by violence or by mental coercion is invalid under the Federal Due Process Clause; (2) where a person convicted in a state court has not intelligently and understandingly waived the benefit of counsel, and where the circumstances show that his rights could not have been fairly protected without counsel, the Due Process Clause invalidates his conviction; (3) where a denial of these constitutional protections is alleged in an appropriate proceeding by factual allegations not patently frivolous or false on a consideration of the whole record, the proceeding should not be summarily dismissed merely because a state prosecuting officer files an answer denying some or all of the allegations. In the light of our previous holdings, we now consider the allegations of the petition for habeas corpus and the prosecuting officer's answer. The petition alleged: Petitioner, who had been to school only 6 years, was 21 years old when arrested. His only prior experience with criminal procedure was 2 years earlier, when, without the benefit of counsel, he pleaded guilty to charges of burglary, larceny, and forgery, and was sentenced to 6 to 12 months in jail. After his arrest on the present charges, he was held incommunicado for 3 days. During this period, a state trooper grabbed him by the neck and threatened to choke him if he did not confess, and there were threats against the safety of his wife and daughter. Petitioner finally confessed after 72 hours of intermittent questioning, and was taken to a justice of the peace. He waived indictment and agreed to plead guilty to 3 charges. More than a month later, he was taken before the Court of Common Pleas and charged with some 30 offenses. The assistant prosecuting attorney demanded that petitioner sign a plea of guilty to all the charges. When petitioner asked what he was signing, the assistant prosecuting attorney said, "[s]ign your name and forget it." Petitioner was not informed of the seriousness of the charges by the prosecutor or the judge; he did not know that his plea of guilty could result in a maximum sentence of some 315 years; he did not know, nor was he informed, that he could have counsel. Petitioner pleaded guilty to all of the charges against him. He now says he was innocent of all but one. The District Attorney's answer alleged: it was immaterial that petitioner was only 21 years old and of limited educational background. Since petitioner had previous experience in criminal procedure from the former case in which he pleaded guilty, he understood his rights, and was barred from alleging that his lack of criminal experience violated due process. It was not necessary that a defendant should have the advice, support, and assistance of relatives or friends, even if it be assumed that there was anything in the record to show that such an opportunity was denied to petitioner. Petitioner had no constitutional right to be informed by the court or prosecuting attorney of his right to counsel or of the severity of the sentences which might be imposed upon him. There was no showing that petitioner had been injured by not having counsel. The District Attorney did not deny that petitioner had been told in the courtroom to "[s]ign your name and forget it," but denied only "that the statements were made by the Assistant District Attorney in order to obtain pleas to the charges involved." The District Attorney defended the State's right to confine petitioner for a period of 72 hours on the ground that this was not "an unreasonable length of time to hold a defendant." The charge that the officers threatened the safety of petitioner's wife and daughter was specifically denied as untrue, as was the charge that petitioner was grabbed by the neck. The answer alleged that petitioner's confession was wholly voluntary. The foregoing narrative of the allegations in the petition and the answer reveals a sharp dispute as to the facts material to a determination of the constitutional questions involved. The allegations as to petitioner's treatment prior to confession and his understanding of the nature and consequences of a guilty plea present the very kind of dispute which should be decided only after a hearing. It is true that the trial record shows that petitioner told the judge that he was guilty and said "I throw myself at the mercy of the court, Your Honor." But neither these nor any other statements made before the trial judge at that time are, in themselves, sufficient to refute as frivolous or false the serious charges made by the petitioner concerning matters not shown by the record. See Palmer v. Ashe,,. It is entirely possible that petitioner's prior confession caused him, in the absence of counsel, to enter the guilty plea. Moreover, the number and complexity of the charges against petitioner, as well as their seriousness, create a strong conviction that no layman could have understood the accusations, and that petitioner should therefore have been advised of his right to be represented by counsel. We cannot agree with the Pennsylvania Superior Court that the mere fact that petitioner had, without the benefit of counsel, pleaded guilty to an offense 2 years before showed that he had the capacity to defend himself against the 30 charges here. We held in Gibbs v. Burke, 337 U.S. 773, that, in spite of Gibbs' conviction in 6 prior criminal cases, the circumstances showed he was entitled to the benefit of counsel. In Uveges v. Pennsylvania,, where the facts were strikingly similar to those presented here, we held that representation by counsel was required by the Due Process Clause. Nor was petitioner barred from presenting his challenge to the conviction because 8 years had passed before this action was commenced. Uveges did not challenge his conviction for 7 years. U.S. 437,. And, in a later case, we held that a prisoner could challenge the validity of his conviction 18 years after he had been convicted. Palmer v. Ashe,. The sound premise upon which these holdings rested is that men incarcerated in flagrant violation of their constitutional rights have a remedy. The chief argument made by the State here in support of the court's summary dismissal of the petition is this: "Counsel for petitioner argues that, since facts are alleged in the petition, a hearing must be held. Since our answer contradicted the allegations in the petition, the lower court was not required to grant a hearing. This contention was sustained by the Superior Court." We cannot accept this argument. Under the allegations here, petitioner is entitled to relief if he can prove his charges. He cannot be denied a hearing merely because the allegations of his petition were contradicted by the prosecuting officers. The judgment is reversed, and the cause is remanded for proceedings not inconsistent with this opinion. Reversed and remanded.

In a state court, petitioner pleaded guilty to numerous charges of burglary, larceny, forgery, and false pretense, and he was sentenced to imprisonment for terms aggregating from 17 1/2 to 35 years. Eight years later, he petitioned the same court for habeas corpus, claiming that his conviction was invalid under the Due Process Clause of the Fourteenth Amendment because (1) his pleas of guilty resulted from coercion and threats by state officers, and (2) he was never advised of his right to counsel or given the benefit of counsel. The District Attorney filed an answer challenging the materiality of some of petitioner's allegations, denying others, and urging that the writ be refused because of petitioner's tardiness in challenging the judgment. The petition was dismissed summarily without a hearing. Held: petitioner was entitled to a hearing, and the judgment is reversed. . (a) Petitioner's allegations as to his treatment prior to confession and his understanding of the nature and consequences of a guilty plea present the very kind of dispute that should be decided only after a hearing. . (b) Neither petitioner's statement at his trial that he was guilty and threw himself upon the mercy of the court nor any other statements made by him at that time were, in themselves, sufficient to refute as frivolous or false the allegations in his petition for habeas corpus concerning matters not shown by the record. P.. (c) The number and complexity of the charges against petitioner, as well as their seriousness, create a strong conviction that no layman could have understood the accusations, and that petitioner should have been advised of his right to be represented by counsel. P.. (d) The mere fact that petitioner had, without benefit of counsel, pleaded guilty to an offense two years before did not show that he had the capacity to defend himself against the numerous charges here. Gibbs v. Burke,; Uveges v. Pennsylvania,. . (e) Petitioner was not barred from presenting his challenge to the conviction, although eight years had passed before his petition for habeas corpus was filed. Uveges v. Pennsylvania, supra; Palmer v. Ashe,. P. 350 U.S. 123. (f) Petitioner's allegations were sufficient to entitle him to relief, if proven. , 350 U.S. 123. (g) Petitioner cannot be denied a hearing merely because the allegations of his petition were contradicted by the prosecuting officers, and he is entitled to relief if he can prove his charges. P. 350 U.S. 123. Reversed and remanded.

1955_10

https://www.oyez.org/cases/1955/10

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court. The respondent Steve Nelson, an acknowledged member of the Communist Party, was convicted in the Court of Quarter Sessions of Allegheny County, Pennsylvania, of a violation of the Pennsylvania Sedition Act and sentenced to imprisonment for twenty years and to a fine of $10,000 and to costs of prosecution in the sum of $13,000. The Superior Court affirmed the conviction. 172 Pa.Super. 125, 92 A.2d 431. The Supreme Court of Pennsylvania, recognizing but not reaching many alleged serious trial errors and conduct of the trial court infringing upon respondent's right to due process of law, decided the case on the narrow issue of supersession of the state law by the Federal Smith Act. In its opinion, the court stated: ' "And, while the Pennsylvania statute proscribes sedition against either the Government of the United States or the Government of Pennsylvania, it is only alleged sedition against the United States with which the instant case is concerned. Out of all the voluminous testimony, we have not found, nor has anyone pointed to, a single word indicating a seditious act or even utterance directed against the Government of Pennsylvania. " The precise holding of the court, and all that is before us for review, is that the Smith Act of 1940, as amended in 1948, which prohibits the knowing advocacy of the overthrow of the Government of the United States by force and violence, supersedes the enforceability of the Pennsylvania Sedition Act, which proscribes the same conduct. Many State Attorneys General and the Solicitor General of the United States appeared as amici curiae for petitioner, and several briefs were filed on behalf of the respondent. Because of the important question of federal-state relationship involved, we granted certiorari. 348 U.S. 814. It should be said at the outset that the decision in this case does not affect the right of States to enforce their sedition laws at times when the Federal Government has not occupied the field and is not protecting the entire country from seditious conduct. The distinction between the two situations was clearly recognized by the court below. Nor does it limit the jurisdiction of the States where the Constitution and Congress have specifically given them concurrent jurisdiction, as was done under the Eighteenth Amendment and the Volstead Act. United States v. Lanza,. Neither does it limit the right of the State to protect itself at any time against sabotage or attempted violence of all kinds. Nor does it prevent the State from prosecuting where the same act constitutes both a federal offense and a state offense under the police power, as was done in Fox v. Ohio, 5 How. 410, and Gilbert v. Minnesota,, relied upon by petitioner as authority herein. In neither of those cases did the state statute impinge on federal jurisdiction. In the Fox case, the federal offense was counterfeiting. The state offense was defrauding the person to whom the spurious money was passed. In the Gilbert case this Court, in upholding the enforcement of a state statute, proscribing conduct which would "interfere with or discourage the enlistment of men in the military or naval forces of the United States or of the State of Minnesota," treated it not as an act relating to "the raising of armies for the national defense, nor to rules and regulations for the government of those under arms [a constitutionally exclusive federal power]. It [was] simply a local police measure. . . . " Where, as in the instant case, Congress has not stated specifically whether a federal statute has occupied a field in which the States are otherwise free to legislate, different criteria have furnished touchstones for decision. Thus, "[t]his Court, in considering the validity of state laws in the light of . . . federal laws touching the same subject, has made use of the following expressions: conflicting; contrary to; occupying the field; repugnance; difference; irreconcilability; inconsistency; violation; curtailment, and interference. But none of these expressions provides an infallible constitutional test or an exclusive constitutional yardstick. In the final analysis, there can be no one crystal clear distinctly marked formula." Hines v. Davidowitz,,. And see Rice v. Santa Fe Elevator Corp.,,. In this case, we think that each of several tests of supersession is met. First, "[t]he scheme of federal regulation [is] so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it." Rice v. Santa Fe Elevator Corp., 331 U.S. at. The Congress determined in 1940 that it was necessary for it to reenter the field of anti-subversive legislation, which had been abandoned by it in 1921. In that year, it enacted the Smith Act, which proscribes advocacy of the overthrow of any government -- federal, state or local -- by force and violence and organization of and knowing membership in a group which so advocates. Conspiracy to commit any of these acts is punishable under the general criminal conspiracy provisions in 18 U.S.C. § 371. The Internal Security Act of 1950 is aimed more directly at Communist organizations. It distinguishes between "Communist action organizations" and "Communist front organizations," requiring such organizations to register and to file annual reports with the Attorney General giving complete details as to their officers and funds. Members of Communist action organizations who have not been registered by their organization must register as individuals. Failure to register in accordance with the requirements of Sections 786-787 is punishable by a fine of not more than $10,000 for an offending organization and by a fine of not more than $10,000 or imprisonment for not more than five years or both for an individual offender -- each day of failure to register constituting a separate offense. And the Act imposes certain sanctions upon both "action" and "front" organizations and their members. The Communist Control Act of 1954 declares "that the Communist Party of the United States, although purportedly a political party, is, in fact, an instrumentality of a conspiracy to overthrow the Government of the United States," and that "its role as the agency of a hostile foreign power renders its existence a clear present and continuing danger to the security of the United States. " It also contains a legislative finding that the Communist Party is a "Communist action organization" within the meaning of the Internal Security Act of 1950, and provides that "knowing" members of the Communist Party are "subject to all the provisions and penalties" of that Act. It furthermore sets up a new classification of "Communist-infiltrated organizations," and provides for the imposition of sanctions against them. We examine these Acts only to determine the congressional plan. Looking to all of them in the aggregate, the conclusion is inescapable that Congress has intended to occupy the field of sedition. Taken as a whole, they evince a congressional plan which makes it reasonable to determine that no room has been left for the States to supplement it. Therefore, a state sedition statute is superseded regardless of whether it purports to supplement the federal law. As was said by Mr. Justice Holmes in Charleston & Western Carolina R. Co. v. Varnville Furniture Co.,,: "When Congress has taken the particular subject matter in hand, coincidence is as ineffective as opposition, and a state law is not to be declared a help because it attempts to go farther than Congress has seen fit to go." Second, the federal statutes "touch a field in which the federal interest is so dominant that the federal system [must] be assumed to preclude enforcement of state laws on the same subject." Rice v. Santa Fe Elevator Corp., 331 U.S. at, citing Hines v. Davidowitz, supra. Congress has devised an all-embracing program for resistance to the various forms of totalitarian aggression. Our external defenses have been strengthened, and a plan to protect against internal subversion has been made by it. It has appropriated vast sums, not only for our own protection, but also to strengthen freedom throughout the world. It has charged the Federal Bureau of Investigation and the Central Intelligence Agency with responsibility for intelligence concerning Communist seditious activities against our Government, and has denominated such activities as part of a world conspiracy. It accordingly proscribed sedition against all government in the nation -- national, state and local. Congress declared that these steps were taken "to provide for the common defense, to preserve the sovereignty of the United States as an independent nation, and to guarantee to each State a republican form of government. . . . " Congress having thus treated seditious conduct as a matter of vital national concern, it is in no sense a local enforcement problem. As was said in the court below: "Sedition against the United States is not a local offense. It is a crime against the Nation. As such, it should be prosecuted and punished in the Federal courts, where this defendant has, in fact, been prosecuted and convicted and is now under sentence. It is not only important, but vital, that such prosecutions should be exclusively within the control of the Federal Government. . . . " Third, enforcement of state sedition acts presents a serious danger of conflict with the administration of the federal program. Since 1939, in order to avoid a hampering of uniform enforcement of its program by sporadic local prosecutions, the Federal Government has urged local authorities not to intervene in such matters, but to turn over to the federal authorities immediately and unevaluated all information concerning subversive activities. The President made such a request on September 6, 1939, when he placed the Federal Bureau of Investigation in charge of investigation in this field: "The Attorney General has been requested by me to instruct the Federal Bureau of Investigation of the Department of Justice to take charge of investigative work in matters relating to espionage, sabotage, and violations of the neutrality regulations." "This task must be conducted in a comprehensive and effective manner on a national basis, and all information must be carefully sifted out and correlated in order to avoid confusion and irresponsibility." "To this end, I request all police officers, sheriffs, and all other law enforcement officers in the United States promptly to turn over to the nearest representative of the Federal Bureau of Investigation any information obtained by them relating to espionage, counterespionage, sabotage, subversive activities and violations of the neutrality laws. " And, in addressing the Federal-State Conference on Law Enforcement Problems of National Defense, held on August 5 and 6, 1940, only a few weeks after the passage of the Smith Act, the Director of the Federal Bureau of Investigation said: "The fact must not be overlooked that meeting the spy, the saboteur and the subverter is a problem that must be handled on a nationwide basis. An isolated incident in the middle west may be of little significance, but, when fitted into a national pattern of similar incidents, it may lead to an important revelation of subversive activity. It is for this reason that the President requested all of our citizens and law enforcing agencies to report directly to the Federal Bureau of Investigation any complaints or information dealing with espionage, sabotage or subversive activities. In such matters, time is of the essence. It is unfortunate that, in a few States, efforts have been made by individuals not fully acquainted with the far-flung ramifications of this problem to interject superstructures of agencies between local law enforcement and the FBI to sift what might be vital information, thus delaying its immediate reference to the FBI. This cannot be if our internal security is to be best served. This is no time for red tape or amateur handling of such vital matters. There must be a direct and free flow of contact between the local law enforcement agencies and the FBI. The job of meeting the spy or saboteur is one for experienced men of law enforcement. " Moreover, the Pennsylvania Statute presents a peculiar danger of interference with the federal program. For, as the court below observed: "Unlike the Smith Act, which can be administered only by federal officers acting in their official capacities, indictment for sedition under the Pennsylvania statute can be initiated upon an information made by a private individual. The opportunity thus present for the indulgence of personal spite and hatred or for furthering some selfish advantage or ambition need only be mentioned to be appreciated. Defense of the Nation by law, no less than by arms, should be a public, and not a private, undertaking. It is important that punitive sanctions for sedition against the United States be such as have been promulgated by the central governmental authority and administered under the supervision and review of that authority's judiciary. If that be done, sedition will be detected and punished no less, wherever it may be found, and the right of the individual to speak freely and without fear, even in criticism of the government, will, at the same time, be protected. " In his brief, the Solicitor General states that forty-two States plus Alaska and Hawaii have statutes which, in some form, prohibit advocacy of the violent overthrow of established government. These statutes are entitled anti-sedition statutes, criminal anarchy laws, criminal syndicalist laws, etc. Although all of them are primarily directed against the overthrow of the United States Government, they are in no sense uniform. And our attention has not been called to any case where the prosecution has been successfully directed against an attempt to destroy state or local government. Some of these Acts are studiously drawn, and purport to protect fundamental rights by appropriate definitions, standards of proof, and orderly procedures in keeping with the avowed congressional purpose "to protect freedom from those who would destroy it, without infringing upon the freedom of all our people." Others are vague, and are almost wholly without such safeguards. Some even purport to punish mere membership in subversive organizations, which the federal statutes do not punish where federal registration requirements have been fulfilled. When we were confronted with a like situation in the field of labor-management relations, Mr. Justice Jackson wrote: "A multiplicity of tribunals and a diversity of procedures are quite as apt to produce incompatible or conflicting adjudications as are different rules of substantive law. " Should the States be permitted to exercise a concurrent jurisdiction in this area, federal enforcement would encounter not only the difficulties mentioned by Mr. Justice Jackson, but the added conflict engendered by different criteria of substantive offenses. Since we find that Congress has occupied the field to the exclusion of parallel state legislation, that the dominant interest of the Federal Government precludes state intervention, and that administration of state Acts would conflict with the operation of the federal plan, we are convinced that the decision of the Supreme Court of Pennsylvania is unassailable. We are not unmindful of the risk of compounding punishments which would be created by finding concurrent state power. In our view of the case, we do not reach the question whether double or multiple punishment for the same overt acts directed against the United States has constitutional sanction. Without compelling indication to the contrary, we will not assume that Congress intended to permit the possibility of double punishment. Cf. 18 U. S. Moore, 5 Wheat. 1,,; Jerome v. United States,,. The judgment of the Supreme Court of Pennsylvania is Affirmed

The Smith Act, as amended, 18 U.S.C. § 2385, which prohibits the knowing advocacy of the overthrow of the Government of the United States by force and violence, supersedes the enforceability of the Pennsylvania Sedition Act, which proscribes the same conduct. . 1. The scheme of federal regulation is so pervasive as to make reasonable the inference that the Congress left no room for the States to supplement it. . 2. The federal statutes touch a field in which the federal interest is so dominant that the federal system must be assumed to preclude enforcement of state laws on the same subject. . 3. Enforcement of state sedition acts presents a serious danger of conflict with the administration of the federal program. . 377 Pa. 58, 104 A.2d 133, affirmed.

1955_469

https://www.oyez.org/cases/1955/469

PER CURIAM. Respondent, Hawkeye-Security Insurance Company, filed a motion to quash the return of service of summons on the grounds that the District Court acquired no personal jurisdiction over it, and that the power of attorney which it had filed with the Commissioner of Motor Vehicles of the State of Wisconsin did not authorize him to accept service of process for it in this case. After this motion was denied, respondent filed its answer to the complaint in which it again pressed its claim that the District Court lacked personal jurisdiction over it. Subsequently, however, respondent filed (1) a motion to amend its answer and to interplead; (2) a counterclaim; (3) a stipulation and order adding a party plaintiff and amending the complaint and answer; and (4) a stipulation that judgment be entered against the alleged insured in favor of the additional party plaintiff. The latter stipulation included the following provision, together with others consistent with it and confirmatory of its purpose: "1. That each of the parties to this stipulation voluntarily submits to the jurisdiction of the above entitled Court without service of process herein, the same as if personal service had been obtained by each against the other." 226 F.2d 135. Following a trial on the merits, judgment was entered against respondent, but the Court of Appeals, with one judge dissenting, reversed on the ground that respondent's motion to quash should have been granted. Upon examination of the record and the law, we conclude that the District Court had jurisdiction of the subject matter, and that respondent, by its stipulation, waived any right to assert a lack of personal jurisdiction over it. We therefore reverse the judgment of the Court of Appeals and remand the case to it for further proceedings. Reversed and remanded.

The District Court had jurisdiction of the subject matter in this case, and respondent, by its stipulation, waived any right to assert a lack of personal jurisdiction over it. . 226 F.2d 126 reversed and remanded.

1955_451

https://www.oyez.org/cases/1955/451

MR. JUSTICE DOUGLAS delivered the opinion of the Court. This is a suit brought in the Nebraska courts by employees of the Union Pacific Railroad Co. against that company and labor organizations representing various groups of employees of the railroad to enjoin the application and enforcement of a union shop agreement entered into between the railroad company and the labor organizations. Plaintiffs are not members of any of the defendant labor organizations and desire not to join. Under the terms of the union shop agreement all employees of the railroad, as a condition of their continued employment, must become members of the specified union within 60 days and thereafter maintain that membership. It is alleged that failure on their part to join the union will mean the loss of their employment together with seniority, retirement, pension, and other rights. The employees claim that the union shop agreement violates the "right to work" provision of the Nebraska Constitution, Art. XV, § 13, which provides: "No person shall be denied employment because of membership in or affiliation with, or resignation or expulsion from a labor organization or because of refusal to join or affiliate with a labor organization; nor shall any individual or corporation or association of any kind enter into any contract, written or oral, to exclude persons from employment because of membership in or nonmembership in a labor organization." They ask for an injunction restraining the railroad company from enforcing and applying the union shop agreement. The answers deny that the Nebraska Constitution and laws control, and allege that the union shop agreement is authorized by § 2, Eleventh of the Railway Labor Act, as amended, 64 Stat. 1238, 45 U.S.C. § 152, Eleventh, which provides that, notwithstanding the law of "any State," a carrier and a labor organization may make an agreement requiring all employees within a stated time to become a member of the labor organization, provided there is no discrimination against any employee and provided that membership is not denied nor terminated "for any reason other than the failure of the employee to tender the periodic dues, initiation fees, and assessments (not including fines and penalties) uniformly required as a condition of acquiring or retaining membership. " The Nebraska trial court issued an injunction. The Supreme Court of Nebraska affirmed. It held that the union shop agreement violates the First Amendment in that it deprives the employees of their freedom of association and violates the Fifth Amendment in that it requires the members to pay for many things besides the cost of collective bargaining. The Nebraska Supreme Court, therefore, held that there is no valid federal law to supersede the "right to work" provision of the Nebraska Constitution. 160 Neb. 669, 71 N.W.2d 526. The case is here by appeal. 28 U.S.C. § 1257(1) and (2). We noted probable jurisdiction. 350 U.S. 910. The union shop provision of the Railway Labor Act was written into the law in 1951. Prior to that date, the Railway Labor Act prohibited union shop agreements. 48 Stat. 1186, 45 U.S.C. § 152, Fourth and Fifth; 40 Op.Atty.Gen. 254. Those provisions were enacted in 1934, when the union shop was being used by employers to establish and maintain company unions, "thus effectively depriving a substantial number of employees of their right to bargain collectively." S.Rep.No. 2262, 81st Cong., 2d Sess., p. 3. By 1950, company unions in this field had practically disappeared. Id. Between 75 and 80% of railroad employees were members of labor organizations. H.R.Rep.No.2811, 81st Cong., 2d Sess., p. 4. While nonunion members got the benefits of the collective bargaining of the unions, they bore "no share of the cost of obtaining such benefits." Id. at p. 4. As Senator Hill, who managed the bill on the floor of the Senate, said, "The question in this instance is whether those who enjoy the fruits and the benefits of the unions should make a fair contribution to the support of the unions." 96 Cong.Rec., Pt. 12, p. 16279. The union shop provision of the Railway Labor Act is only permissive. Congress has not compelled nor required carriers and employees to enter into union shop agreements. The Supreme Court of Nebraska nevertheless took the view that justiciable questions under the First and Fifth Amendments were presented, since Congress, by the union shop provision of the Railway Labor Act, sought to strike down inconsistent laws in 17 States. Cf. Hudson v. Atlantic Coast Line R. Co., 242 N.C. 650, 89 S.E.2d 441; Otten v. Baltimore & O. R. Co., 205 F.2d 58. The Supreme Court of Nebraska said, "Such action on the part of Congress is a necessary part of every union shop contract entered into on the railroads as far as these 17 states are concerned, for, without it, such contracts could not be enforced therein." 160 Neb. at 698, 71 N.W.2d at 547. We agree with that view. If private rights are being invaded, it is by force of an agreement made pursuant to federal law which expressly declares that state law is superseded. Cf. Smith v. Allwright,,. In other words, the federal statute is the source of the power and authority by which any private rights are lost or sacrificed. Cf. Steele v. Louisville & N. R. Co.,,,; Brotherhood of Railroad Trainmen v. Howard,; Public Utilities Commission of District of Columbia v. Pollak,,. The enactment of the federal statute authorizing union shop agreements is the governmental action on which the Constitution operates, though it takes a private agreement to invoke the federal sanction. As already noted, the 1951 amendment, permitting the negotiation of union shop agreements, expressly allows those agreements notwithstanding any law "of any State." § 2, Eleventh. A union agreement made pursuant to the Railway Labor Act has, therefore, the imprimatur of the federal law upon it and, by force of the Supremacy Clause of Article VI of the Constitution, could not be made illegal nor vitiated by any provision of the laws of a State. We come then to the merits. In the absence of conflicting federal legislation, there can be no doubt that it is within the police power of a State to prohibit the union or the closed shop. We so held in Lincoln Union v. Northwestern Iron & Metal Co.,, and in American Federation of Labor v. American Sash & Door Co.,, against the challenge that local "right to work" laws, including Nebraska's, violated the requirements of due process. But the power of Congress to regulate labor relations in interstate industries is likewise well established. Congress has authority to adopt all appropriate measures to "facilitate the amicable settlement of disputes which threaten the service of the necessary agencies of interstate transportation." Texas & N.O. R. Co. v. Railway Clerks,,. These measures include provisions that will encourage the settlement of disputes "by inducing collective bargaining with the true representative of the employees and by preventing such bargaining with any who do not represent them," Virginian R. Co. v. Federation,,, and that will protect the employees against discrimination or coercion which would interfere with the free exercise of their right to self-organization and representation. Labor Board v. Jones & Laughlin Steel Corp.,,. Industrial peace along the arteries of commerce is a legitimate objective, and Congress has great latitude in choosing the methods by which it is to be obtained. The choice by the Congress of the union shop as a stabilizing force seems to us to be an allowable one. Much might be said pro and con if the policy issue were before us. Powerful arguments have been made here that the long-run interests of labor would be better served by the development of democratic traditions in trade unionism without the coercive element of the union or the closed shop. Mr. Justice Brandeis, who had wide experience in labor-management relations prior to his appointment to the Court, wrote forcefully against the closed shop. He feared that the closed shop would swing the pendulum in the opposite extreme and substitute "tyranny of the employee" for "tyranny of the employer." But the question is one of policy with which the judiciary has no concern, as Mr. Justice Brandeis would have been the first to concede. Congress, acting within its constitutional powers, has the final say on policy issues. If it acts unwisely, the electorate can make a change. The task of the judiciary ends once it appears that the legislative measure adopted is relevant or appropriate to the constitutional power which Congress exercises. The ingredients of industrial peace and stabilized labor-management relations are numerous and complex. They may well vary from age to age and from industry to industry. What would be needful one decade might be anathema the next. The decision rests with the policymakers, not with the judiciary. It is said that the right to work, which the Court has frequently included in the concept of "liberty" within the meaning of the Due Process Clauses (see Truax v. Raich,; Takahashi v. Fish & Game Commission,), may not be denied by the Congress. The question remains, however, whether the long-range interests of workers would be better served by one type of union agreement or another. That question is germane to the exercise of power under the Commerce Clause -- a power that often has the quality of police regulations. See Cleveland v. United States,,. One would have to be blind to history to assert that trade unionism did not enhance and strengthen the right to work. See Webb, History of Trade Unionism; Gregory, Labor and the Law. To require, rather than to induce, the beneficiaries of trade unionism to contribute to its costs may not be the wisest course. But Congress might well believe that it would help insure the right to work in and along the arteries of interstate commerce. No more has been attempted here. The only conditions to union membership authorized by § 2, Eleventh of the Railway Labor Act are the payment of "periodic dues, initiation fees, and assessments." The assessments that may be lawfully imposed do not include "fines and penalties." The financial support required relates, therefore, to the work of the union in the realm of collective bargaining. No more precise allocation of union overhead to individual members seems to us to be necessary. The prohibition of "fines and penalties" precludes the imposition of financial burdens for disciplinary purposes. If "assessments" are in fact imposed for purposes not germane to collective bargaining, a different problem would be presented. Wide-ranged problems are tendered under the First Amendment. It is argued that the union shop agreement forces men into ideological and political associations which violate their right to freedom of conscience, freedom of association, and freedom of thought protected by the Bill of Rights. It is said that, once a man becomes a member of these unions, he is subject to vast disciplinary control, and that, by force of the federal Act, unions now can make him conform to their ideology. On the present record, there is no more an infringement or impairment of First Amendment rights than there would be in the case of a lawyer who, by state law, is required to be a member of an integrated bar. It is argued that compulsory membership will be used to impair freedom of expression. But that problem is not presented by this record. Congress endeavored to safeguard against that possibility by making explicit that no conditions to membership may be imposed except as respects "periodic dues, initiation fees, and assessments." If other conditions are in fact imposed, or if the exaction of dues, initiation fees, or assessments is used as a cover for forcing ideological conformity or other action in contravention of the First Amendment, this judgment will not prejudice the decision in that case. For we pass narrowly on § 2, Eleventh of the Railway Labor Act. We only hold that the requirement for financial support of the collective bargaining agency by all who receive the benefits of its work is within the power of Congress under the Commerce Clause, and does not violate either the First or the Fifth Amendments. We express no opinion on the use of other conditions to secure or maintain membership in a labor organization operating under a union or closed shop agreement. Reversed.

Claiming that a "union shop" agreement between an interstate railroad and unions of its employees made pursuant to § 2, Eleventh, of the Railway Labor Act, which expressly authorizes such agreements notwithstanding any state law, violated the First and Fifth Amendments of the Federal Constitution and the "right to work" provision of the Nebraska Constitution, nonunion employees of the railroad sued in a Nebraska state court to enjoin enforcement of such an agreement. Held: on the record in this case, the agreement is valid and enforceable as to these employees. . 1. The enactment of the federal statute authorizing union shop agreements is the governmental action on which the Constitution operates, though it takes a private agreement to invoke the federal sanction. . 2. Since § 2, Eleventh, of the Railway Labor Act expressly permits "union shop" agreements notwithstanding any state law, an agreement made pursuant thereto has the imprimatur of the federal law upon it and, by force of the Supremacy Clause of Art. VI of the Constitution, could not be invalidated or vitiated by any state law. P.. 3. On the record in this case, the requirement for financial support of a collective bargaining agency by all who receive the benefits of its work is within the power of Congress under the Commerce Clause, and does not violate either the First or the Fifth Amendment. . (a) Enactment of the provision of § 2, Eleventh, of the Railway Labor Act authorizing union shop agreements between interstate railroads and unions of their employees was a valid exercise by Congress of its powers under the Commerce Clause, and it does not violate the Due Process Clause. . (b) The only conditions to union membership authorized by § 2, Eleventh, of the Railway Labor Act are the payment of "periodic dues, initiation fees, and assessments," which relate to financial support of the work of the union in the realm of collective bargaining, and this involves no violation of the First or the Fifth Amendment. . (c) Judgment is reserved a to the validity or enforceability of a union or closed shop agreement if other conditions of union membership are imposed or if the exaction of dues, initiation fees, or assessments is used as a cover for forcing ideological conformity or other action in contravention of the First or the Fifth Amendment. P.. 160 Neb. 669, 71 N.W.2d 526, reversed.

1955_30

https://www.oyez.org/cases/1955/30

MR. JUSTICE DOUGLAS delivered the opinion of the Court. Petitioner was indicted for the unlawful acquisition of marihuana in violation of 26 U.S.C. § 2593(a). The indictment, found in September, 1953, was based on evidence obtained by a search warrant issued by a United States Commissioner, as authorized by Rule 41(a) of the Rules of Criminal Procedure in August, 1953. Petitioner moved under Rule 41(e) to suppress the evidence on the ground that the search warrant was improperly issued under Rule 41(c) in that it was insufficient on its face, no probable cause existed, and the affidavit was based on unsworn statements. 350 U. S. and, on the Government's later motion, dismissed the indictment. No motion for return of the evidence was made. The evidence seized was indeed contraband. Since the crime charged was a violation of a provision of the Internal Revenue Code, 28 U.S.C. § 2463, was applicable. That section provides against the return of the property in the following words: "All property taken or detained under any revenue law of the United States shall not be repleviable, but shall be deemed to be in the custody of the law and subject only to the orders and decrees of the courts of the United States having jurisdiction thereof." And see 26 U.S.C. § 2598. After the District Court suppressed the evidence, a federal narcotics agent swore to a complaint before a New Mexico judge and caused a warrant for petitioner's arrest to issue. Petitioner has now been charged with being in possession of marihuana in violation of New Mexico law, and awaits trial in the state court. The case against petitioner in the state court will be made by testimony of the federal agent based on the illegal search and on the evidence seized under the illegal federal warrant. That, at least, is the basis of the motion in the District Court to enjoin the federal narcotics agent from testifying in the state case with respect to the narcotics obtained in the illegal search and, if the evidence seized is out of the custody of the United States, to direct the agent to reacquire the evidence and destroy it or transfer it to other agents. The District Court denied the motion and the Court of Appeals affirmed. 218 F.2d 237. The case is here on a petition for certiorari which we granted because of the importance in federal law enforcement of the question presented. 348 U.S. 958. The briefs and oral argument have been largely devoted to constitutional questions. It is said, for example, that, while the Fourth Amendment, as judicially construed, would bar the use of this evidence in a federal prosecution, Weeks v. United States,, our decision in Wolf v. Colorado,, would permit New Mexico to use the evidence in its prosecution of petitioner. Moreover, it is said that to suppress the use of the evidence in the state criminal proceedings would run counter to our decision in Stefanelli v. Minard,. We put all the constitutional questions to one side. We have here no problem concerning the interplay of the Fourth and the Fourteenth Amendments, nor the use which New Mexico might make of the evidence. The District Court is not asked to enjoin state officials, nor in any way to interfere with state agencies in enforcement of state law. Cf. Boske v. Comingore,. The only relief asked is against a federal agent, who obtained the property as a result of the abuse of process issued by a United States Commissioner. The property seized is contraband which Congress has made "subject only to the orders and decrees of the courts of the United States having jurisdiction thereof," as provided in 28 U.S.C. § 2463, already quoted. In this posture, we have then a case that raises not a constitutional question, but one concerning our supervisory powers over federal law enforcement agencies. Cf. McNabb v. United States,. A federal agent has violated the federal Rules governing searches and seizures -- Rules prescribed by this Court and made effective after submission to the Congress. See 327 U.S. 821 et seq. The power of the federal courts extends to policing those requirements and making certain that they are observed. As stated in Wise v. Henkel,,, which involved an order directing the district attorney to return certain books and papers unlawfully seized: ". . . it was within the power of the court to take jurisdiction of the subject of the return, and pass upon it, as the result of its inherent authority to consider and decide questions arising before it concerning an alleged unreasonable exertion of authority in connection with the execution of the process of the court." No injunction is sought against a state official. The only remedy asked is against a federal agent who, we are told, plans to use his illegal search and seizure as the the basis of testimony in the state court. To enjoin the federal agent from testifying is merely to enforce the federal Rules against those owing obedience to them. The command of the federal Rules is in no way affected by anything that happens in a state court. They are designed as standards for federal agents. The fact that their violation may be condoned by state practice has no relevancy to our problem. Federal courts sit to enforce federal law; and federal law extends to the process issuing from those courts. The obligation of the federal agent is to obey the Rules. They are drawn for innocent and guilty alike. They prescribe standards for law enforcement. They are designed to protect the privacy of the citizen, unless the strict standards set for searches and seizures are satisfied. That policy is defeated if the federal agent can flout them and use the fruits of his unlawful act either in federal or state proceedings. Reversed.

On the basis of evidence seized under an invalid federal search warrant, petitioner was indicted in a federal court for unlawful acquisition of marihuana. On his motion under Rule 41(e) of the Federal Rules of Criminal Procedure, this evidence was suppressed. Thereafter, he was charged in a state court with possession of marihuana in violation of state law. Alleging that the evidence suppressed in the federal court was the basis of the state charge, petitioner moved in a federal court for an order enjoining the federal agent who had seized the evidence from transferring it to state authorities or testifying with respect thereto in the state courts. Held: the motion should have been granted. . 218 F.2d 237 reversed.

1955_112

https://www.oyez.org/cases/1955/112

MR. JUSTICE CLARK delivered the opinion of the Court. Petitioner, Amos Reece, a Negro, was convicted of the rape of a white woman in Cobb County, Georgia. He contends here that Georgia's rule of practice requiring him to challenge the composition of the grand jury before indictment violates the Due Process Clause of the Fourteenth Amendment. The Georgia Supreme Court affirmed his conviction, 211 Ga. 339, 85 S.E.2d 773, and we granted certiorari because of the important issues involved, 349 U.S. 944. Reece was arrested on October 20, 1953, and was held in the county jail until his indictment three days later. On October 24, the day after his indictment, two local attorneys were appointed by the trial court to defend him. On October 30, before his arraignment, Reece moved to quash the indictment on the ground that Negroes had been systematically excluded from service on the grand jury. This motion was overruled after a hearing. On the same day, petitioner was tried, convicted, and sentenced to be electrocuted. The Supreme Court of Georgia held that the motion to quash was properly denied because, by Georgia practice, objections to a grand jury must be made before the indictment is returned, 210 Ga. 578, 82 S.E.2d 10, but reversed the case on another ground, not pertinent here, and remanded it for a new trial. Before his second trial, Reece filed a special plea in abatement which alleged systematic exclusion of Negroes from the jury commission, the grand jury which indicted him, and the petit jury about to be put upon him. This plea also stated that petitioner had neither knowledge of the grand jury nor the benefit of counsel before his indictment. The State's demurrer to this plea was sustained, and petitioner was again tried, convicted and sentenced to be electrocuted. It is this judgment which is here for review. At the outset, the State contends that the case is not properly before us, because petitioner did not apply for a writ of certiorari within 90 days after the first judgment of the Supreme Court of Georgia. This contention is clearly without substance. A timely application for certiorari to review the second judgment was made, and the case is properly here. 28 U.S.C. § 1257. We have jurisdiction to consider all of the substantial federal questions determined in the earlier stages of the litigation, Urie v. Thompson,,, and our right to reexamine such questions is not affected by a ruling that the first decision of the state court became the law of the case, Davis v. O'Hara,. This Court over the past 50 years has adhered to the view that valid grand jury selection is a constitutionally protected right. The indictment of a defendant by a grand jury from which members of his race have been systematically excluded is a denial of his right to equal protection of the laws. Patton v. Mississippi,; Norris v. Alabama,; Rogers v. Alabama,; Carter v. Texas,. Where no opportunity to challenge the grand jury selection has been afforded a defendant, his right may be asserted by a plea in abatement or a motion to quash before arraignment, United States v. Gale,,. Of course, if such a motion is controverted, it must be supported by evidence, Patton v. Mississippi, supra; Martin v. Texas,. We mention these principles since the State contests the merits of Reece's claim of systematic exclusion. In the hearing on his motion to quash before the first trial, he presented uncontradicted evidence to support the following facts: no Negro had served on the grand jury in Cobb County for the previous 18 years; the 1950 census showed that the county had a white population of 55,606 and a Negro population of 6,224; the same census showed a population of 16,201 male white citizens over 21 years of age, and 1,710 male Negro citizens over 21 years of age. Petitioner's motion alleged, and this was not contradicted, that there were 534 names on the grand jury list, and, of this number, only six were Negroes. Of the six Negroes, one did not reside in the county, and the other five testified in this proceeding. Two were over 80 years of age: one was partially deaf and the other in poor health. The remaining three were 62 years of age. Each of the witnesses had lived in the county for at least 30 years. None had ever served on a grand jury nor heard of any other Negro serving on a grand jury in the county. The Clerk and Deputy Clerk of the court testified that the jury boxes had been revised in 1952, that there was no discrimination or systematic exclusion of Negroes from the grand jury list, that six Negroes were on the list, and that neither had ever known a Negro to serve on a grand jury in Cobb County. This evidence, without more, is sufficient to make a strong showing of systematic exclusion. The sizeable Negro population in the county, the fact that all-white juries had been serving for as long as witnesses could remember, and the selection on the jury list of a relatively few Negroes who would probably be disqualified for actual jury service all point to a discrimination "ingenious or ingenuous," Smith v. Texas,,. This evidence placed the burden on the State to refute it, Patton v. Mississippi, supra, and mere assertions of public officials that there has not been discrimination will not suffice. See Hernandez v. Texas,. However, we do not decide this issue. It is sufficient to say that petitioner's motion stated, and his evidence supported, a prima facie constitutional claim. Georgia's rule of practice provides that, when an "accused has been arrested for the commission of a penal offense and is committed to jail, he is apprised of the fact that his case or the charge against him will undergo grand jury investigation, and it is incumbent upon him to raise objections to the competency of the grand jurors before they find an indictment against him." Reece v. State, 210 Ga. 578, 82 S.E.2d 10. This rule goes back to 1882, Williams v. State, 69 Ga. 11, and has been consistently followed in that State. A similar requirement was considered by this Court in Carter v. Texas,. In that case, the Texas Code of Criminal Procedure provided that a challenge to the array must be made before the grand jury was impaneled, and that anyone confined in the jail at the time would, at his request, be brought into court to make such challenge. The defendant in Carter moved to quash the indictment after the grand jury had been impaneled, but before his arraignment. Since the grand jury had been impaneled before the commission of the offense for which the defendant was indicted, this Court held that he "never had any opportunity to challenge the array of the grand jury, and was entitled to present the objection on which he relied by motion to quash." 177 U.S. at. In the present case, as in Carter, the right to object to a grand jury presupposes an opportunity to exercise that right. United States v. Gale,,. Michel v. Louisiana,. We may now turn to the present case to see if Reece was afforded such opportunity. He was indicted by a grand jury that was impaneled and sworn eight days before his arrest. It adjourned the day before his arrest, and was reconvened two days later by an order which did not list him as one against whom a case would be presented. Reece is a semi-illiterate Negro of low mentality. We need not decide whether, with the assistance of counsel, he would have had an opportunity to raise his objection during the two days he was in jail before indictment. But it is utterly unrealistic to say that he had such opportunity when counsel was not provided for him until the day after he was indicted. In Powell v. Alabama,, this Court held that the assignment of counsel in a state prosecution at such time and under such circumstances as to preclude the giving of effective aid in the preparation and trial of a capital case is a denial of due process of law. The effective assistance of counsel in such a case is a constitutional requirement of due process which no member of the Union may disregard. Georgia should have considered Reece's motion to quash on its merits. In view of this disposition, it is not necessary that we consider other issues first raised by Reece in his plea in abatement at the second trial. The judgment is reversed, and the cause is remanded for further proceedings not inconsistent with this opinion. Reversed.

1. Georgia law requires that objections of a defendant to the composition of a grand jury be raised before indictment. Petitioner, a Negro of low mentality, was indicted and convicted of a capital offense, but was not provided with counsel until the day after he was indicted. Before his arraignment, petitioner moved to quash the indictment on the ground that Negroes had been systematically excluded from service on the grand jury. This motion was denied on the ground that it was made too late. Held: failure to consider the motion to quash on its merits was a denial of due process of law, and violated the Fourteenth Amendment. . (a) The indictment of a defendant by a grand jury from which members of his race have been systematically excluded is a denial of his right to equal protection of the laws. P.. (b) Where no opportunity to challenge the grand jury selection has been afforded a defendant, his right may be asserted by a plea in abatement or a motion to quash before arraignment. P.. (c) Assignment of counsel in a state prosecution at such time and under such circumstances as to preclude the giving of effective aid in the preparation and trial of a capital case is a denial of due process of law. . 2. This case being properly here upon review of the second judgment of the Georgia Supreme Court therein, this Court has jurisdiction to consider all of the substantial federal questions determined in the earlier stages of the litigation, and reexamination of such questions here is unaffected by a ruling of the state court that its first decision became the law of the case. P.. 211 Ga. 339, 85 S.E.2d 773, reversed and remanded.

1955_621

https://www.oyez.org/cases/1955/621

MR. JUSTICE MINTON delivered the opinion of the Court. The question we have for decision here is whether petitioner, a clerical employee of respondent railroad, is within the coverage of the Federal Employers' Liability Act, § 1, 35 Stat. 65, as amended, 53 Stat. 1404, 45 U.S.C. § 51. Petitioner is employed entirely in respondent's office building in Philadelphia. Her duties consist of filing original tracings of all of respondent's engines, cars, parts, tracks, bridges, and other structures, from which blueprints of those items are made. There are some 325,000 tracings on file in the office in which petitioner works. Whenever an order for blueprints comes in from anywhere in respondent's system, it is petitioner's responsibility to fill the order by securing the correct tracings from the files. These she takes to the blueprint maker in the same office building. After the blueprints are made, it is petitioner's further duty to return the original tracings to the appropriate file. About 67% of the blueprints so made are sent to points outside Pennsylvania. The files which petitioner attends are the sole depository of the original tracings of the structural details of all of respondent's rolling stock, trackage, and other equipment and installations, and, as such, represent a fund of documents without which maintenance of the operating system would be impossible. Petitioner was injured when a cracked window pane in her office blew in upon her. She brought suit for personal injury under the Federal Employers' Liability Act. On respondent's motion to dismiss, the District Court held that petitioner was not within the coverage of § 1 of the Act and, there being no diversity of citizenship between the parties, dismissed the complaint for lack of jurisdiction. The Court of Appeals affirmed. 227 F.2d 810. We granted certiorari because of the importance of the question presented in the administration of the Act. 350 U.S. 965. As originally enacted, § 1 provided that every railroad, "while engaging" in interstate commerce, "shall be liable in damages to any person suffering injury while he is employed by such carrier in such commerce . . . for such injury or death resulting in whole or in part from the negligence of any of the officers, agents, or employees of such carrier, or by reason of any defect or insufficiency, due to its negligence, in its cars, engines, appliances, machinery, track, roadbed, works, boats, wharves, or other equipment." 35 Stat. 65. A further paragraph was added to the section in 1939, and it is clear that two specific problems which the amendment sought at least to remedy were the results of this Court's holdings that, at the moment of his injury, the employee as well as the railroad had to be engaged in interstate commerce in order to come within the coverage of § 1, and that employees engaged in construction of new facilities were not covered. S.Rep.No. 661, 76th Cong., 1st Sess. 2-3; Southern Pacific Co. v. Gileo, decided today, ante, p.. The amendment took the form of an expanded definition of "person . . . employed" in interstate commerce. The amendment reads: "Any employee of a carrier, any part of whose duties as such employee shall be the furtherance of interstate or foreign commerce, or shall in any way directly or closely and substantially, affect such commerce as above set forth shall, for the purposes of this Act, be considered as being employed by such carrier in such commerce, and shall be considered as entitled to the benefits of this Act. . . ." 53 Stat. 1404. No argument is made that Congress could not constitutionally include petitioner within the coverage of the Act. The argument is that the amendment was narrowly drawn to remedy specific evils, and that to construe it to include petitioner would amount to inclusion in the Act of virtually all railroad employees -- a result which respondent assumes is unintended and undesirable. The argument takes several forms. First, it is said that "commerce" in the Act means only transportation, and that petitioner is not employed in transportation. See Shanks v. Delaware, L. & W. R. Co.,,. But the interstate commerce in which respondent is engaged is interstate transportation. If "any part" of petitioner's duties is in "furtherance" of or substantially affects interstate commerce, it also is in "furtherance" of or substantially affects interstate transportation. The test for coverage under the amendment is not whether the employee is engaged in transportation, but rather whether what he does in any way furthers or substantially affects transportation. Nor can we resolve the issue presented here in terms of whether or not clerical employees as a class are excluded from the benefits of the statute. The 1939 amendment was designed to obliterate fine distinctions as to coverage between employees who, for the purpose of this remedial legislation, should be treated alike. There is no meaningful distinction, in terms of whether the employee's duties are clerical or not, between petitioner and, for illustration, an assistant chief timekeeper, Straub v. Reading Co., 220 F.2d 177, or a messenger boy carrying waybills and grain orders between separate local offices and freight stations, Bowers v. Wabash R. Co., 246 S.W.2d 535, or a lumber inspector hurt while inspecting ties at a lumber company, Ericksen v. Southern Pacific Co., 39 Cal. 2d 374, 246 P.2d 642 -- all of whom have been held covered by the 1939 amendment. See also Lillie v. Thompson,. Nor are the benefits of the Act limited to those exposed to the special hazards of the railroad industry. The Act has not been so interpreted, and the 1939 amendment specifically affords protection to "any employee" whose duties bring him within that amendment. There is no basis in the language of § 1 for confining liability of the railroad so as to exclude any class of railroad employees as a class. The benefits of the Act are not limited to those who have cinders in their hair, soot on their faces, or callouses on their hands. Section 1 cannot be interpreted to exclude petitioner from its benefits without further consideration of the function she performs and its impact on interstate commerce. We think that the present petitioner is employed by the respondent in interstate commerce within the meaning of the 1939 amendment to § 1. Although the amendment may have been prompted by a specific desire to obviate certain court-made rules limiting coverage, the language used goes far beyond that narrow objective. It evinces a purpose to expand coverage substantially, as well as to avoid narrow distinctions in deciding questions of coverage. Under the amendment, it is the "duties" of the employee that must further or affect commerce, and it is enough if "any part" of those duties has the requisite effect. The statute commands us to examine the purpose and effect of the employee's function in the railroad's interstate operation, without limitation to nonclerical employees or determination on the basis of the employee's importance as an individual in the railroad's organization. Here, respondent railroad has chosen to arrange its operations so that repairs and construction anywhere within its system which require blueprints must go through its Philadelphia office. No such work can be done without recourse to the files of 325,000 original tracings in petitioner's custody. Loss or misplacing of those tracings could promptly cause delay, confusion, or worse in the day-to-day operation of respondent's lines. If all employees who perform petitioner's duties were removed from service, respondent could not conduct its operations without a change in its organizational system. To recognize this is to attribute to petitioner neither an exaggerated nor an attenuated relationship to respondent's transportation system. The filing of tracings and the dispatch of blueprints taken from them comprise a direct link in the maintenance of respondent's lines and rolling stock. Together with the makers of blueprints, petitioner constitutes the means by which men throughout respondent's system obtain the information they must have to maintain the railroad's trains, equipment, track, and structures. The very purpose of petitioner's job is to further physical maintenance of an interstate railroad system. Proper performance of her duties makes an obvious contribution to the maintenance of that system. We hold that the petitioner, by the performance of her duties, is furthering the interstate transportation in which the respondent is engaged. "The word furtherance' is a comprehensive term. Its periphery may be vague, but admittedly it is both large and elastic." Shelton v. Thomson, 148 F.2d 1, 3. Petitioner's duties here come within the confines of that concept. Similarly, those duties which "in any way directly or closely and substantially affect" interstate commerce in the railroad industry must necessarily be marked out through the process of case-by-case adjudication. This definition and the "furtherance" definition of employment in interstate commerce in the 1939 amendment are set forth in the disjunctive. In some situations, they may overlap. Here, we hold that, for the reasons already given, performance of petitioner's duties has a close and substantial effect upon the operation of respondent's interstate activities. Cf. Overstreet v. North Shore Corp.,. Petitioner's duties brought her within the coverage of § 1 as amended, and the District Court therefore had jurisdiction over this suit under the Federal Employers' Liability Act. The judgment below is reversed, and the cause remanded to the District Court for further proceedings. Reversed.

Petitioner is a clerical employee of an interstate railroad whose duties consist of filing original tracings of all of the carrier's rolling stock, equipment and structures, from which tracings blueprints are made. Without these documents, maintenance of the carrier's operating system would be impossible. Petitioner was injured in her office when a cracked window pane blew in upon her. Held: Petitioner is within the coverage of the Federal Employers' Liability Act, as amended in 1939; and the Federal District Court has jurisdiction of her suit under the Act. . (a) The test for coverage under the amended Act is not whether the employee is engaged in interstate transportation, but whether what he does in any way furthers or substantially affects interstate transportation. P.. (b) The issue in this case cannot be resolved in terms of whether or not clerical employees as a class are excluded from the benefits of the Act. . (c) Petitioner is employed in interstate commerce within the meaning of the 1939 amendment to § 1 of the Act. . (d) The performance by petitioner of her duties is in "furtherance" of interstate commerce, and has a close and substantial effect upon the railroad's interstate activities. P.. 227 F.2d 810 reversed.

1955_701

https://www.oyez.org/cases/1955/701

MR. JUSTICE BLACK announced the judgment of the Court and delivered an opinion, in which THE CHIEF JUSTICE, MR. JUSTICE DOUGLAS, and MR. JUSTICE BRENNAN join. These cases raise basic constitutional issues of the utmost concern. They call into question the role of the military under our system of government. They involve the power of Congress to expose civilians to trial by military tribunals, under military regulations and procedures, for offenses against the United States, thereby depriving them of trial in civilian courts, under civilian laws and procedures and with all the safeguards of the Bill of Rights. These cases are particularly significant because, for the first time since the adoption of the Constitution, wives of soldiers have been denied trial by jury in a court of law and forced to trial before courts-martial. In No. 701, Mrs. Clarice Covert killed her husband, a sergeant in the United States Air Force, at an airbase in England. Mrs. Covert, who was not a member of the armed services, was residing on the base with her husband at the time. She was tried by a court-martial for murder under Article 118 of the Uniform Code of Military Justice (UCMJ). The trial was on charges preferred by Air Force personnel, and the court-martial was composed of Air Force officers. The court-martial asserted jurisdiction over Mrs. Covert under Article 2(11) of the UCMJ, which provides: "The following persons are subject to this code: " "* * * *" "(11) Subject to the provisions of any treaty or agreement to which the United States is or may be a party or to any accepted rule of international law, all persons serving with, employed by, or accompanying the armed forces without the continental limits of the United States. . . ." Counsel for Mrs. Covert contended that she was insane at the time she killed her husband, but the military tribunal found her guilty of murder and sentenced her to life imprisonment. The judgment was affirmed by the Air Force Board of Review, 16 CMR 465, but was reversed by the Court of Military Appeals, 6 U.S.C.M.A 48, because of prejudicial errors concerning the defense of insanity. While Mrs. Covert was being held in this country pending a proposed retrial by court-martial in the District of Columbia, her counsel petitioned the District Court for a writ of habeas corpus to set her free on the ground that the Constitution forbade her trial by military authorities. Construing this Court's decision in United States ex rel. Toth v. Quarles,, as holding that "a civilian is entitled to a civilian trial," the District Court held that Mrs. Covert could not be tried by court-martial, and ordered her released from custody. The Government appealed directly to this Court under 28 U.S.C. § 1252. See 350 U.S. 985. In No. 713, Mrs. Dorothy Smith killed her husband, an Army officer, at a post in Japan where she was living with him. She was tried for murder by a court-martial and, despite considerable evidence that she was insane, was found guilty and sentenced to life imprisonment. The judgment was approved by the Army Board of Review, 10 CMR 350, 13 CMR 307, and the Court of Military Appeals, 5 U.S.C.MA 314. Mrs. Smith was then confined in a federal penitentiary in West Virginia. Her father, respondent here, filed a petition for habeas corpus in a District Court for West Virginia. The petition charged that the court-martial was without jurisdiction because Article 2(11) of the UCMJ was unconstitutional insofar as it authorized the trial of civilian dependents accompanying servicemen overseas. The District Court refused to issue the writ, 137 F. Supp. 806, and, while an appeal was pending in the Court of Appeals for the Fourth Circuit, we granted certiorari at the request of the Government, 350 U.S. 986. The two cases were consolidated and argued last Term, and a majority of the Court, with three Justices dissenting and one reserving opinion, held that military trial of Mrs. Smith and Mrs. Covert for their alleged offenses was constitutional. U.S. 470,. The majority held that the provisions of Article III and the Fifth and Sixth Amendments which require that crimes be tried by a jury after indictment by a grand jury did not protect an American citizen when he was tried by the American Government in foreign lands for offenses committed there, and that Congress could provide for the trial of such offenses in any manner it saw fit, so long as the procedures established were reasonable and consonant with due process. The opinion then went on to express the view that military trials, as now practiced, were not unreasonable or arbitrary when applied to dependents accompanying members of the armed forces overseas. In reaching their conclusion, the majority found it unnecessary to consider the power of Congress "To make Rules for the Government and Regulation of the land and naval Forces" under Article I of the Constitution. Subsequently, the Court granted a petition for rehearing, 352 U.S. 901. Now, after further argument and consideration, we conclude that the previous decisions cannot be permitted to stand. We hold that Mrs. Smith and Mrs. Covert could not constitutionally be tried by military authorities. I At the beginning, we reject the idea that, when the United States acts against citizens abroad, it can do so free of the Bill of Rights. The United States is entirely a creature of the Constitution. Its power and authority have no other source. It can only act in accordance with all the limitations imposed by the Constitution. When the Government reaches out to punish a citizen who is abroad, the shield which the Bill of Rights and other parts of the Constitution provide to protect his life and liberty should not be stripped away just because he happens to be in another land. This is not a novel concept. To the contrary, it is as old as government. It was recognized long before Paul successfully invoked his right as a Roman citizen to be tried in strict accordance with Roman law. And many centuries later, an English historian wrote: "In a Settled Colony, the inhabitants have all the rights of Englishmen. They take with them, in the first place, that which no Englishman can by expatriation put off, namely, allegiance to the Crown, the duty of obedience to the lawful commands of the Sovereign, and obedience to the Laws which Parliament may think proper to make with reference to such a Colony. But, on the other hand, they take with them all the rights and liberties of British Subjects; all the rights and liberties as against the Prerogative of the Crown, which they would enjoy in this country. " The rights and liberties which citizens of our country enjoy are not protected by custom and tradition alone; they have been jealously preserved from the encroachments of Government by express provisions of our written Constitution. Among those provisions, Art. III, § 2 and the Fifth and Sixth Amendments are directly relevant to these cases. Article III, § 2 lays down the rule that: "The Trial of all Crimes, except in Cases of Impeachment, shall be by Jury, and such Trial shall be held in the State where the said Crimes shall have been committed; but when not committed within any State, the Trial shall be at such Place or Places as the Congress may by Law have directed." The Fifth Amendment declares: "No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; . . ." And the Sixth Amendment provides: "In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed. . . ." The language of Art. III, § 2 manifests that constitutional protections for the individual were designed to restrict the United States Government when it acts outside of this country, as well as here at home. After declaring that all criminal trials must be by jury, the section states that, when a crime is "not committed within any State, the Trial shall be at such Place or Places as the Congress may by Law have directed." If this language is permitted to have its obvious meaning, § 2 is applicable to criminal trials outside of the States as a group without regard to where the offense is committed or the trial held. From the very first Congress, federal statutes have implemented the provisions of § 2 by providing for trial of murder and other crimes committed outside the jurisdiction of any State "in the district where the offender is apprehended, or into which he may first be brought." The Fifth and Sixth Amendments, like Art. III, § 2, are also all inclusive with their sweeping references to "no person" and to "all criminal prosecutions. " This Court and other federal courts have held or asserted that various constitutional limitations apply to the Government when it acts outside the continental United States. While it has been suggested that only those constitutional rights which are "fundamental" protect Americans abroad, we can find no warrant, in logic or otherwise, for picking and choosing among the remarkable collection of "Thou shalt nots" which were explicitly fastened on all departments and agencies of the Federal Government by the Constitution and its Amendments. Moreover, in view of our heritage and the history of the adoption of the Constitution and the Bill of Rights, it seems peculiarly anomalous to say that trial before a civilian judge and by an independent jury picked from the common citizenry is not a fundamental right. As Blackstone wrote in his Commentaries: ". . . the trial by jury ever has been, and I trust ever will be, looked upon as the glory of the English law. And if it has so great an advantage over others in regulating civil property, how much must that advantage be heightened when it is applied to criminal cases! . . . [I]t is the most transcendent privilege which any subject can enjoy, or wish for, that he cannot be affected either in his property, his liberty, or his person, but by the unanimous consent of twelve of his neighbours and equals. " Trial by jury in a court of law and in accordance with traditional modes of procedure after an indictment by grand jury has served and remains one of our most vital barriers to governmental arbitrariness. These elemental procedural safeguards were embedded in our Constitution to secure their inviolateness and sanctity against the passing demands of expediency or convenience. The keystone of supporting authorities mustered by the Court's opinion last June to justify its holding that Art. III, § 2, and the Fifth and Sixth Amendments did not apply abroad was In re Ross,. The Ross case is one of those cases that cannot be understood except in its peculiar setting; even then, it seems highly unlikely that a similar result would be reached today. Ross was serving as a seaman on an American ship in Japanese waters. He killed a ship's officer, was seized and tried before a consular "court" in Japan. At that time, statutes authorized American consuls to try American citizens charged with committing crimes in Japan and certain other "non-Christian" countries. These statutes provided that the laws of the United States were to govern the trial except: ". . . where such laws are not adapted to the object, or are deficient in the provisions necessary to furnish suitable remedies, the common law and the law of equity and admiralty shall be extended in like manner over such citizens and others in those countries, and if neither the common law, nor the law of equity or admiralty, nor the statutes of the United States, furnish appropriate and sufficient remedies, the ministers in those countries, respectively, shall, by decrees and regulations which shall have the force of law, supply such defects and deficiencies. " The consular power approved in the Ross case was about as extreme and absolute as that of the potentates of the "non-Christian" countries to which the statutes applied. Under these statutes, consuls could and did make the criminal laws, initiate charges, arrest alleged offenders, try them, and, after conviction, take away their liberty or their life -- sometimes at the American consulate. Such a blending of executive, legislative, and judicial powers in one person, or even in one branch of the Government, is ordinarily regarded as the very acme of absolutism. Nevertheless, the Court sustained Ross' conviction by the consul. It stated that constitutional protections applied "only to citizens and others within the United States, or who are brought there for trial for alleged offences committed elsewhere, and not to residents or temporary sojourners abroad." Despite the fact that it upheld Ross' conviction under United States laws passed pursuant to asserted constitutional authority, the Court went on to make a sweeping declaration that "[t]he Constitution can have no operation in another country." The Ross approach that the Constitution has no applicability abroad has long since been directly repudiated by numerous cases. That approach is obviously erroneous if the United States Government, which has no power except that granted by the Constitution, can and does try citizens for crimes committed abroad. Thus, the Ross case rested, at least in substantial part, on a fundamental misconception, and the most that can be said in support of the result reached there is that the consular court jurisdiction had a long history antedating the adoption of the Constitution. The Congress has recently buried the consular system of trying Americans. We are not willing to jeopardize the lives and liberties of Americans by disinterring it. At best, the Ross case should be left as a relic from a different era. The Court's opinion last Term also relied on the "Insular Cases" to support its conclusion that Article III and the Fifth and Sixth Amendments were not applicable to the trial of Mrs. Smith and Mrs. Covert. We believe that reliance was misplaced. The "Insular Cases," which arose at the turn of the century, involved territories which had only recently been conquered or acquired by the United States. These territories, governed and regulated by Congress under Art. IV, § 3, had entirely different cultures and customs from those of this country. This Court, although closely divided, ruled that certain constitutional safeguards were not applicable to these territories since they had not been "expressly or impliedly incorporated" into the Union by Congress. While conceding that "fundamental" constitutional rights applied everywhere, the majority found that it would disrupt long-established practices and would be inexpedient to require a jury trial after an indictment by a grand jury in the insular possessions. The "Insular Cases" can be distinguished from the present cases in that they involved the power of Congress to provide rules and regulations to govern temporarily territories with wholly dissimilar traditions and institutions whereas here the basis for governmental power is American citizenship. None of these cases had anything to do with military trials and they cannot properly be used as vehicles to support an extension of military jurisdiction to civilians. Moreover, it is our judgment that neither the cases nor their reasoning should be given any further expansion. The concept that the Bill of Rights and other constitutional protections against arbitrary government are inoperative when they become inconvenient or when expediency dictates otherwise is a very dangerous doctrine and, if allowed to flourish, would destroy the benefit of a written Constitution and undermine the basis of our Government. If our foreign commitments become of such nature that the Government can no longer satisfactorily operate within the bounds laid down by the Constitution, that instrument can be amended by the method which it prescribes. But we have no authority, or inclination, to read exceptions into it which are not there. II At the time of Mrs. Covert's alleged offense, an executive agreement was in effect between the United States and Great Britain which permitted United States' military courts to exercise exclusive jurisdiction over offenses committed in Great Britain by American servicemen or their dependents. For its part, the United States agreed that these military courts would be willing and able to try and to punish all offenses against the laws of Great Britain by such persons. In all material respects, the same situation existed in Japan when Mrs. Smith killed her husband. Even though a court-martial does not give an accused trial by jury and other Bill of Rights protections, the Government contends that Art. 2 (11) of the UCMJ, insofar as it provides for the military trial of dependents accompanying the armed forces in Great Britain and Japan, can be sustained as legislation which is necessary and proper to carry out the United States' obligations under the international agreements made with those countries. The obvious and decisive answer to this, of course, is that no agreement with a foreign nation can confer power on the Congress, or on any other branch of Government, which is free from the restraints of the Constitution. Article VI, the Supremacy Clause of the Constitution, declares: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof, and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; . . ." There is nothing in this language which intimates that treaties and laws enacted pursuant to them do not have to comply with the provisions of the Constitution. Nor is there anything in the debates which accompanied the drafting and ratification of the Constitution which even suggests such a result. These debates, as well as the history that surrounds the adoption of the treaty provision in Article VI, make it clear that the reason treaties were not limited to those made in "pursuance" of the Constitution was so that agreements made by the United States under the Articles of Confederation, including the important peace treaties which concluded the Revolutionary War, would remain in effect. It would be manifestly contrary to the objectives of those who created the Constitution, as well as those who were responsible for the Bill of Rights -- let alone alien to our entire constitutional history and tradition -- to construe Article VI as permitting the United States to exercise power under an international agreement without observing constitutional prohibitions. In effect, such construction would permit amendment of that document in a manner not sanctioned by Article V. The prohibitions of the Constitution were designed to apply to all branches of the National Government, and they cannot be nullified by the Executive or by the Executive and the Senate combined. There is nothing new or unique about what we say here. This Court has regularly and uniformly recognized the supremacy of the Constitution over a treaty. For example, in Geofroy v. Riggs,,, it declared: "The treaty power, as expressed in the Constitution, is in terms unlimited except by those restraints which are found in that instrument against the action of the government or of its departments, and those arising from the nature of the government itself and of that of the States. It would not be contended that it extends so far as to authorize what the Constitution forbids, or a change in the character of the government, or in that of one of the States, or a cession of any portion of the territory of the latter, without its consent." This Court has also repeatedly taken the position that an Act of Congress, which must comply with the Constitution, is on a full parity with a treaty, and that, when a statute which is subsequent in time is inconsistent with a treaty, the statute to the extent of conflict renders the treaty null. It would be completely anomalous to say that a treaty need not comply with the Constitution when such an agreement can be overridden by a statute that must conform to that instrument. There is nothing in Missouri v. Holland,, which is contrary to the position taken here. There, the Court carefully noted that the treaty involved was not inconsistent with any specific provision of the Constitution. The Court was concerned with the Tenth Amendment, which reserves to the States or the people all power not delegated to the National Government. To the extent that the United States can validly make treaties, the people and the States have delegated their power to the National Government, and the Tenth Amendment is no barrier. In summary, we conclude that the Constitution in its entirety applied to the trials of Mrs. Smith and Mrs. Covert. Since their court-martial did not meet the requirements of Art. III, § 2 or the Fifth and Sixth Amendments, we are compelled to determine if there is anything within the Constitution which authorizes the military trial of dependents accompanying the armed forces overseas. III Article I, § 8, cl. 14 empowers Congress "To make Rules for the Government and Regulation of the land and naval Forces." It has been held that this creates an exception to the normal method of trial in civilian courts as provided by the Constitution, and permits Congress to authorize military trial of members of the armed services without all the safeguards given an accused by Article III and the Bill of Rights. But if the language of Clause 14 is given its natural meaning, the power granted does not extend to civilians -- even though they may be dependents living with servicemen on a military base. The term "land and naval Forces" refers to persons who are members of the armed services and not to their civilian wives, children and other dependents. It seems inconceivable that Mrs. Covert or Mrs. Smith could have been tried by military authorities as members of the "land and naval Forces" had they been living on a military post in this country. Yet this constitutional term surely has the same meaning everywhere. The wives of servicemen are no more members of the "land and naval Forces" when living at a military post in England or Japan than when living at a base in this country or in Hawaii or Alaska. The Government argues that the Necessary and Proper Clause, when taken in conjunction with Clause 14, allows Congress to authorize the trial of Mrs. Smith and Mrs. Covert by military tribunals and under military law. The Government claims that the two clauses together constitute a broad grant of power "without limitation" authorizing Congress to subject all persons, civilians and soldiers alike, to military trial if "necessary and proper" to govern and regulate the land and naval forces. It was on a similar theory that Congress once went to the extreme of subjecting persons who made contracts with the military to court-martial jurisdiction with respect to frauds related to such contracts. In the only judicial test, a Circuit Court held that the legislation was patently unconstitutional. Ex parte Henderson, 11 Fed.Cas. 1067, No. 6,349. It is true that the Constitution expressly grants Congress power to make all rules necessary and proper to govern and regulate those persons who are serving in the "land and naval Forces." But the Necessary and Proper Clause cannot operate to extend military jurisdiction to any group of persons beyond that class described in Clause 14 -- "the land and naval Forces." Under the grand design of the Constitution, civilian courts are the normal repositories of power to try persons charged with crimes against the United States. And to protect persons brought before these courts, Article III and the Fifth, Sixth, and Eighth Amendments establish the right to trial by jury, to indictment by a grand jury, and a number of other specific safeguards. By way of contrast, the jurisdiction of military tribunals is a very limited and extraordinary jurisdiction derived from the cryptic language in Art. I, § 8, and, at most, was intended to be only a narrow exception to the normal and preferred method of trial in courts of law. Every extension of military jurisdiction is an encroachment on the jurisdiction of the civil courts, and, more important, acts as a deprivation of the right to jury trial and of other treasured constitutional protections. Having run up against the steadfast bulwark of the Bill of Rights, the Necessary and Proper Clause cannot extend the scope of Clause 14. Nothing said here contravenes the rule laid down in McCulloch v. Maryland, 4 Wheat. 316, at, that: "Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional. " In McCulloch, this Court was confronted with the problem of determining the scope of the Necessary and Proper Clause in a situation where no specific restraints on governmental power stood in the way. Here, the problem is different. Not only does Clause 14, by its terms, limit military jurisdiction to members of the "land and naval Forces," but Art. III, § 2 and the Fifth and Sixth Amendments require that certain express safeguards, which were designed to protect persons from oppressive governmental practices, shall be given in criminal prosecutions -- safeguards which cannot be given in a military trial. In the light of these as well as other constitutional provisions, and the historical background in which they were formed, military trial of civilians is inconsistent with both the "letter and spirit of the constitution." Further light is reflected on the scope of Clause 14 by the Fifth Amendment. That Amendment, which was adopted shortly after the Constitution, reads: "No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; . . ." (Emphasis added.) Since the exception in this Amendment for "cases arising in the land or naval forces" was undoubtedly designed to correlate with the power granted Congress to provide for the "Government and Regulation" of the armed services, it is a persuasive and reliable indication that the authority conferred by Clause 14 does not encompass persons who cannot fairly be said to be "in" the military service. Even if it were possible, we need not attempt here to precisely define the boundary between "civilians" and members of the "land and naval Forces." We recognize that there might be circumstances where a person could be "in" the armed services for purposes of Clause 14 even though he had not formally been inducted into the military or did not wear a uniform. But the wives, children and other dependents of servicemen cannot be placed in that category, even though they may be accompanying a serviceman abroad at Government expense and receiving other benefits from the Government. We have no difficulty in saying that such persons do not lose their civilian status and their right to a civilian trial because the Government helps them live as members of a soldier's family. The tradition of keeping the military subordinate to civilian authority may not be so strong in the minds of this generation as it was in the minds of those who wrote the Constitution. The idea that the relatives of soldiers could be denied a jury trial in a court of law, and instead be tried by court-martial under the guise of regulating the armed forces, would have seemed incredible to those men, in whose lifetime the right of the military to try soldiers for any offenses in time of peace had only been grudgingly conceded. The Founders envisioned the army as a necessary institution, but one dangerous to liberty if not confined within its essential bounds. Their fears were rooted in history. They knew that ancient republics had been overthrown by their military leaders. They were familiar with the history of Seventeenth Century England, where Charles I tried to govern through the army and without Parliament. During this attempt, contrary to the Common Law, he used courts-martial to try soldiers for certain non-military offenses. This court-martialing of soldiers in peacetime evoked strong protests from Parliament. The reign of Charles I was followed by the rigorous military rule of Oliver Cromwell. Later, James II used the Army in his fight against Parliament and the people. He promulgated Articles of War (strangely enough relied on in the Government's brief) authorizing the trial of soldiers for non-military crimes by courts-martial. This action hastened the revolution that brought William and Mary to the throne upon their agreement to abide by a Bill of Rights which, among other things, protected the right of trial by jury. It was against this general background that two of the greatest English jurists, Lord Chief Justice Hale and Sir William Blackstone -- men who exerted considerable influence on the Founders -- expressed sharp hostility to any expansion of the jurisdiction of military courts. For instance, Blackstone went so far as to assert: "For martial law, which is built upon no settled principles, but is entirely arbitrary in its decisions, is, as Sir Matthew Hale observes, in truth and reality no law, but something indulged, rather than allowed as a law. The necessity of order and discipline in an army is the only thing which can give it countenance; and therefore it ought not to be permitted in time of peace, when the king's courts are open for all persons to receive justice according to the laws of the land. " The generation that adopted the Constitution did not distrust the military because of past history alone. Within their own lives, they had seen royal governors sometimes resort to military rule. British troops were quartered in Boston at various times from 1768 until the outbreak of the Revolutionary War to support unpopular royal governors and to intimidate the local populace. The trial of soldiers by courts-martial and the interference of the military with the civil courts aroused great anxiety and antagonism not only in Massachusetts, but throughout the colonies. For example, Samuel Adams in 1768 wrote: ". . . [I]s it not enough for us to have seen soldiers and mariners forejudged of life, and executed within the body of the county by martial law? Are citizens to be called upon, threatened, ill-used at the will of the soldiery, and put under arrest, by pretext of the law military, in breach of the fundamental rights of subjects, and contrary to the law and franchise of the land? . . . Will the spirits of people as yet unsubdued by tyranny, unawed by the menaces of arbitrary power, submit to be governed by military force? No, Let us rouse our attention to the common law -- which is our birthright, our great security against all kinds of insult and oppression. . . . " Colonials had also seen the right to trial by jury subverted by acts of Parliament which authorized courts of admiralty to try alleged violations of the unpopular "Molasses" and "Navigation" Acts. This gave the admiralty courts jurisdiction over offenses historically triable only by a jury in a court of law, and aroused great resentment throughout the colonies. As early as 1765, delegates from nine colonies meeting in New York asserted in a "Declaration of Rights" that trial by jury was the "inherent and invaluable" right of every citizen in the colonies. With this background, it is not surprising that the Declaration of Independence protested that George III had "affected to render the Military independent of and superior to the Civil Power," and that Americans had been deprived in many cases of "the benefits of Trial by Jury." And those who adopted the Constitution embodied their profound fear and distrust of military power, as well as their determination to protect trial by jury, in the Constitution and its Amendments. Perhaps they were aware that memories fade, and hoped that, in this way, they could keep the people of this Nation from having to fight again and again the same old battles for individual freedom. In light of this history, it seems clear that the Founders had no intention to permit the trial of civilians in military courts, where they would be denied jury trials and other constitutional protections, merely by giving Congress the power to make rules which were "necessary and proper" for the regulation of the "land and naval Forces." Such a latitudinarian interpretation of these clauses would be at war with the well established purpose of the Founders to keep the military strictly within its proper sphere, subordinate to civil authority. The Constitution does not say that Congress can regulate "the land and naval Forces and all other persons whose regulation might have some relationship to maintenance of the land and naval Forces." There is no indication that the Founders contemplated setting up a rival system of military courts to compete with civilian courts for jurisdiction over civilians who might have some contact or relationship with the armed forces. Courts-martial were not to have concurrent jurisdiction with courts of law over nonmilitary America. On several occasions, this Court has been faced with an attempted expansion of the jurisdiction of military courts. Ex parte Milligan, 4 Wall. 2, one of the great landmarks in this Court's history, held that military authorities were without power to try civilians not in the military or naval service by declaring martial law in an area where the civil administration was not deposed and the courts were not closed. In a stirring passage, the Court proclaimed: "Another guarantee of freedom was broken when Milligan was denied a trial by jury. The great minds of the country have differed on the correct interpretation to be given to various provisions of the Federal Constitution, and judicial decision has been often invoked to settle their true meaning; but, until recently, no one ever doubted that the right of trial by jury was fortified in the organic law against the power of attack. It is now assailed; but if ideas can be expressed in words, and language has any meaning, this right -- one of the most valuable in a free country -- is preserved to everyone accused of crime who is not attached to the army, or navy, or militia in actual service. " In Duncan v. Kahanamoku,, the Court reasserted the principles enunciated in Ex parte Milligan and reaffirmed the tradition of military subordination to civil authorities and institutions. It refused to sanction the military trial of civilians in Hawaii during wartime despite government claims that the needs of defense made martial law imperative. Just last Term, this Court held in United States ex rel. Toth v. Quarles,, that military courts could not constitutionally try a discharged serviceman for an offense which he had allegedly committed while in the armed forces. It was decided (1) that, since Toth was a civilian, he could not be tried by military court-martial, and (2) that, since he was charged with murder, a "crime" in the constitutional sense, he was entitled to indictment by a grand jury, jury trial, and the other protections contained in Art. III, § 2 and the Fifth, Sixth, and Eighth Amendments. The Court pointed out that trial by civilian courts was the rule for persons who were not members of the armed forces. There are no supportable grounds upon which to distinguish the Toth case from the present cases. Toth, Mrs. Covert, and Mrs. Smith were all civilians. All three were American citizens. All three were tried for murder. All three alleged crimes were committed in a foreign country. The only differences were: (1) Toth was an ex-serviceman while they were wives of soldiers; (2) Toth was arrested in the United States, while they were seized in foreign countries. If anything, Toth had closer connection with the military than the two women, for his crime was committed while he was actually serving in the Air Force. Mrs. Covert and Mrs. Smith had never been members of the army, had never been employed by the army, had never served in the army in any capacity. The Government appropriately argued in Toth that the constitutional basis for court-martialing him was clearer than for court-martialing wives who are accompanying their husbands abroad. Certainly Toth's conduct as a soldier bears a closer relation to the maintenance of order and discipline in the armed forces than the conduct of these wives. The fact that Toth was arrested here, while the wives were arrested in foreign countries is material only if constitutional safeguards do not shield a citizen abroad when the Government exercises its power over him. As we have said before, such a view of the Constitution is erroneous. The mere fact that these women had gone overseas with their husbands should not reduce the protection the Constitution gives them. The Milligan, Duncan, and Toth cases recognized and manifested the deeply rooted and ancient opposition in this country to the extension of military control over civilians. In each instance an effort to expand the jurisdiction of military courts to civilians was repulsed. There have been a number of decisions in the lower federal courts which have upheld military trial of civilians performing services for the armed forces "in the field" during time of war. To the extent that these cases can be justified, insofar as they involved trial of persons who were not "members" of the armed forces, they must rest on the Government's "war powers." In the face of an actively hostile enemy, military commanders necessarily have broad power over persons on the battlefront. From a time prior to the adoption of the Constitution, the extraordinary circumstances present in an area of actual fighting have been considered sufficient to permit punishment of some civilians in that area by military courts under military rules. But neither Japan nor Great Britain could properly be said to be an area where active hostilities were under way at the time Mrs. Smith and Mrs. Covert committed their offenses or at the time they were tried. The Government urges that the concept "in the field" should be broadened to reach dependents accompanying the military forces overseas under the conditions of world tension which exist at the present time. It points out how the "war powers" include authority to prepare defenses and to establish our military forces in defensive posture about the world. While we recognize that the "war powers" of the Congress and the Executive are broad, we reject the Government's argument that present threats to peace permit military trial of civilians accompanying the armed forces overseas in an area where no actual hostilities are under way. The exigencies which have required military rule on the battlefront are not present in areas where no conflict exists. Military trial of civilians "in the field" is an extraordinary jurisdiction, and it should not be expanded at the expense of the Bill of Rights. We agree with Colonel Winthrop, an expert on military jurisdiction, who declared: "a statute cannot be framed by which a civilian can lawfully be made amenable to the military jurisdiction in time of peace." (Emphasis not supplied.) As this Court stated in United States ex rel. Toth v. Quarles,, the business of soldiers is to fight and prepare to fight wars, not to try civilians for their alleged crimes. Traditionally, military justice has been a rough form of justice emphasizing summary procedures, speedy convictions and stern penalties with a view to maintaining obedience and fighting fitness in the ranks. Because of its very nature and purpose, the military must place great emphasis on discipline and efficiency. Correspondingly, there has always been less emphasis in the military on protecting the rights of the individual than in civilian society and in civilian courts. Courts-martial are typically ad hoc bodies appointed by a military officer from among his subordinates. They have always been subject to varying degrees of "command influence." In essence, these tribunals are simply executive tribunals whose personnel are in the executive chain of command. Frequently, the members of the court-martial must look to the appointing officer for promotions, advantageous assignments and efficiency ratings -- in short, for their future progress in the service. Conceding to military personnel that high degree of honesty and sense of justice which nearly all of them undoubtedly have, the members of a court-martial, in the nature of things, do not and cannot have the independence of jurors drawn from the general public or of civilian judges. We recognize that a number of improvements have been made in military justice recently by engrafting more and more of the methods of civilian courts on courts-martial. In large part, these ameliorations stem from the reaction of civilians, who were inducted during the two World Wars, to their experience with military justice. Notwithstanding the recent reforms, military trial does not give an accused the same protection which exists in the civil courts. Looming far above all other deficiencies of the military trial, of course, is the absence of trial by jury before an independent judge after an indictment by a grand jury. Moreover the reforms are merely statutory; Congress -- and perhaps the President -- can reinstate former practices, subject to any limitations imposed by the Constitution, whenever it desires. As yet, it has not been clearly settled to what extent the Bill of Rights and other protective parts of the Constitution apply to military trials. It must be emphasized that every person who comes within the jurisdiction of courts-martial is subject to military law -- law that is substantially different from the law which governs civilian society. Military law is, in many respects, harsh law which is frequently cast in very sweeping and vague terms. It emphasizes the iron hand of discipline more that it does the even scales of justice. Moreover, it has not yet been definitely established to what extent the President, as Commander-in-Chief of the armed forces, or his delegates, can promulgate, supplement or change substantive military law as well as the procedures of military courts in time of peace, or in time of war. In any event, Congress has given the President broad discretion to provide the rules governing military trials. For example, in these very cases, a technical manual issued under the President's name with regard to the defense of insanity in military trials was of critical importance in the convictions of Mrs. Covert and Mrs. Smith. If the President can provide rules of substantive law as well as procedure, then he and his military subordinates exercise legislative, executive and judicial powers with respect to those subject to military trials. Such blending of functions in one branch of the Government is the objectionable thing which the draftsmen of the Constitution endeavored to prevent by providing for the separation of governmental powers. In summary, "it still remains true that military tribunals have not been, and probably never can be, constituted in such way that they can have the same kind of qualifications that the Constitution has deemed essential to fair trials of civilians in federal courts. " In part, this is attributable to the inherent differences in values and attitudes that separate the military establishment from civilian society. In the military, by necessity, emphasis must be placed on the security and order of the group, rather than on the value and integrity of the individual. It is urged that the expansion of military jurisdiction over civilians claimed here is only slight, and that the practical necessity for it is very great. The attitude appears to be that a slight encroachment on the Bill of Rights and other safeguards in the Constitution need cause little concern. But to hold that these wives could be tried by the military would be a tempting precedent. Slight encroachments create new boundaries from which legions of power can seek new territory to capture. "It may be that it is the obnoxious thing in its mildest and least repulsive form; but illegitimate and unconstitutional practices get their first footing in that way, namely, by silent approaches and slight deviations from legal modes of procedure. This can only be obviated by adhering to the rule that constitutional provisions for the security of person and property should be liberally construed. A close and literal construction deprives them of half their efficacy, and leads to gradual depreciation of the right, as if it consisted more in sound than in substance. It is the duty of courts to be watchful for the constitutional rights of the citizen, and against any stealthy encroachments thereon. " Moreover, we cannot consider this encroachment a slight one. Throughout history, many transgressions by the military have been called "slight" and have been justified as "reasonable" in light of the "uniqueness" of the times. We cannot close our eyes to the fact that, today, the peoples of many nations are ruled by the military. We should not break faith with this Nation's tradition of keeping military power subservient to civilian authority, a tradition which we believe is firmly embodied in the Constitution. The country has remained true to that faith for almost one hundred seventy years. Perhaps no group in the Nation has been truer than military men themselves. Unlike the soldiers of many other nations, they have been content to perform their military duties in defense of the Nation in every period of need, and to perform those duties well without attempting to usurp power which is not theirs under our system of constitutional government. Ours is a government of divided authority on the assumption that in division there is not only strength but freedom from tyranny. And, under our Constitution, courts of law alone are given power to try civilians for their offenses against the United States. The philosophy expressed by Lord Coke, speaking long ago from a wealth of experience, is still timely: "God send me never to live under the Law of Conveniency or Discretion. Shall the Souldier and Justice Sit on one Bench, the Trumpet will not let the Cryer speak in Westminster-Hall. " In No. 701, Reid v. Covert, the judgment of the District Court directing that Mrs. Covert be released from custody is Affirmed. In No. 713, Kinsella v. Krueger, the judgment of the District Court is reversed and the case is remanded with instructions to order Mrs. Smith released from custody. Reversed and remanded.

Article 2(11) of the Uniform Code of Military Justice, providing for the trial by court-martial of "all persons . . . accompanying the armed forces" of the United States in foreign countries, cannot constitutionally be applied, in capital cases, to the trial of civilian dependents accompanying members of the armed forces overseas in time of peace. Kinsella v. Krueger,, and Reid v. Covert,, withdrawn. . Judgment below in No. 701, October Term, 1955, affirmed. 137 F. Supp. 806, reversed and remanded. MR. JUSTICE BLACK, in an opinion joined by THE CHIEF JUSTICE, MR. JUSTICE DOUGLAS and MR. JUSTICE BRENNAN, concluded that: 1. When the United States acts against its citizens abroad, it can do so only in accordance with all the limitations imposed by the Constitution, including Art. III, § 2, and the Fifth and Sixth Amendments. . 2. Insofar as Art. 2(11) of the Uniform Code of Military Justice provides for the military trial of civilian dependents accompanying the armed forces in foreign countries, it cannot be sustained as legislation which is "necessary and proper" to carry out obligations of the United States under international agreements made with those countries, since no agreement with a foreign nation can confer on Congress or any other branch of the Government power which is free from the restraints of the Constitution. . 3. The power of Congress under Art. I, § 8, cl. 14, of the Constitution, "To make Rules for the Government and Regulation of the land and naval Forces," taken in conjunction with the Necessary and Proper Clause, does not extend to civilians -- even though they may be dependents living with servicemen on a military base. . 4. Under our Constitution, courts of law alone are given power to try civilians for their offenses against the United States. . MR. JUSTICE FRANKFURTER, concurring in the result, concluded that, in capital cases, the exercise of court-martial jurisdiction over civilian dependents in time of peace cannot be justified by the power of Congress under Article I to regulate the "land and naval Forces," when considered in connection with the specific protections afforded civilians by Article III and the Fifth and Sixth Amendments. . MR. JUSTICE HARLAN, concurring in the result, concluded that, where the offense is capital, Art. 2(11) of the Uniform Code of Military Justice cannot constitutionally be applied to the trial of civilian dependents of members of the armed forces overseas in times of peace. .

1955_156

https://www.oyez.org/cases/1955/156

MR. JUSTICE MINTON delivered the opinion of the Court. This case is here for the third time. Petitioner was convicted on four counts of wilfully attempting to evade and defeat federal income taxes. When this case was first here, we knew nothing about the facts concerning the phase of the case now before us. It was alleged in the petitioner's motion and affidavits supporting his motion for a new trial that, during the trial, one juror, Smith, had been approached by one Satterly, an outsider, with a suggestion that the juror could make some easy money if he would make a deal with petitioner Remmer. It was further alleged by the petitioner that the juror reported the matter to the trial judge, who, in turn, reported it to the district attorney, who, with the judge's approval, called in the Federal Bureau of Investigation -- all of which was unknown to the petitioner until he read about it in the newspaper after the jury had returned its verdict finding him guilty. The Government did not deny these allegations. We sent the case back to the District Court with directions to hold a hearing, with the petitioner and counsel present, to determine from the facts whether or not communication with the juror by the outsider and the events that followed were prejudicial and, therefore, harmful to the petitioner, and, if so, to grant a new trial. U.S. 227. On remand, the District Court held a hearing and found the incidents to be free of harm. 122 F. Supp. 673. Thereafter, this Court remanded the entire record to the Court of Appeals for the Ninth Circuit to consider the whole case in the light of our recent net-worth decisions. 348 U.S. 904. The Court of Appeals reviewed the whole record and affirmed the petitioner's conviction in a per curiam opinion. 222 F.2d 720. The case is here again on certiorari, limited to the question of the effect of the extraneous communications with the juror upon the petitioner's right to a fair trial. 350 U.S. 820. The District Court read our opinion and mandate to mean that "the incident complained of" (122 F.Supp. 675) to be inquired into at the hearing was the purpose and effect of the FBI investigation. The District Court found that the purpose of the FBI investigation was not to examine Smith's conduct, but rather to determine whether Satterly had committed an offense. The court further found that the FBI agent's discussion with Smith had "no effect whatever upon the judgment, or the integrity or state of mind" of Smith, whom the court found to be a "forthright and honest man." On the basis of these two findings, the court concluded: "Consequently, the court finds that 'the incident complained of' was entirely harmless so far as the petitioner was concerned, and did not have the slightest bearing upon the integrity of the verdict, nor the state of mind of the foreman of the jury, or any of the members of the jury. Thus, any presumption of prejudice is conclusively dispelled. . . ." The District Court's limit of our mandate, it seems to us, is hardly warranted by the language of the opinion, even though the language might well have been more explicit. It was our intention that the entire picture should be explored and the incident complained of and to be examined included Satterly's communication with the juror and the impact thereof upon him then, immediately thereafter, and during the trial, taken together with the fact that the FBI was investigating a circumstance involving the juror and the fact that the juror never knew all during the balance of the trial what the outcome of that investigation was. Thus, we stated: "In a criminal case, any private communication, contact, or tampering directly or indirectly with a juror during a trial about the matter pending before the jury is, for obvious reasons, deemed presumptively prejudicial, if not made in pursuance of known rules of the court . . . with full knowledge of the parties." 347 U.S. at. We also pointed out that the record we had before us did not reflect what in fact transpired, "or whether the incidents that may have occurred were harmful or harmless." Ibid. It was the paucity of information relating to the entire situation, coupled with the presumption which attaches to the kind of facts alleged by petitioner, which, in our view, made manifest the need for a full hearing. Nevertheless, there is sufficient evidence in the record relating to the total situation, including both the Satterly and the FBI contacts, which makes it unnecessary to remand the case for further consideration. We will consider the evidence free from what we think are the unduly narrow limits of the question as viewed by the District Court. The evidence shows that, three weeks after the trial started, juror Smith, who is a real estate and insurance broker, was visited in his home by Satterly and his wife about an insurance policy. Satterly had been employed in a gambling house in Nevada as a dealer of craps. The petitioner was or had been engaged in the operation of gambling houses in Nevada. The Satterlys had met the Smiths socially at a hunting lodge. Smith and Satterly seated themselves in one end of a large room and their wives were seated in the other end of the room, a convenient arrangement if an approach was to be made. Satterly made substantially the following remark: I know Bones Remmer very well. He sold Cal-Neva for $850,000, and really got about $300,000 under the table which he daren't touch. Why don't you make a deal with him? Smith vigorously reminded Satterly that he was on the jury, and that he could not talk about the case. Nothing more was said. Smith was disturbed. As he later testified, "I always felt, whether Mr. Satterly said it in so many words or not, I always felt that money was involved; otherwise, why would any question be put to me." So disturbed was Smith that he told the trial judge about it. The judge's reaction, at least as he manifested it to Smith, was that the Satterly conversation should be regarded as a joke. But the judge related the incident to the district attorney, and they decided to refer the matter to the Federal Bureau of Investigation. Shortly thereafter, during a recess, an FBI agent called on Smith at his place of business. Smith testified that the agent explained the purpose of this visit as follows: "He told me that he had been instructed to come and interview me relative to this conversation I had with Mr. Satterly. . . . To check and see whether there was anything to this or not." On direct examination, the agent testified: "I told him I had been requested to conduct an investigation relating to his talk with Mr. Satterly and the possibility of improper approach." In reply to questions put by the District Court, the agent testified that he had explained to Smith that the purpose of his investigation was to examine Satterly's conduct. Satterly was never interviewed by the FBI during its investigation. It was not until a month after the trial had ended that the Government determined that further investigation or criminal prosecution was unwarranted. Driving home after the trial with two other jurors, Smith mentioned that there was some question as to whether he had been approached during the trial, and that he had reported the incident to the trial judge. He thanked one of the jurors, on dropping her at her home, "because I have been under a terrific pressure. . . . Sometime, I will discuss it." We think this evidence covering the total picture reveals such a state of facts that neither Mr. Smith nor anyone else could say that he was not affected in his freedom of action as a juror. From Smith's testimony, it is quite evident that he was a disturbed and troubled man from the date of the Satterly contact until after the trial. Proper concern for protecting and preserving the integrity of our jury system dictates against our speculating that the FBI agent's interview with Smith, whatever the Government may have understood its purpose to be, dispersed the cloud created by Satterly's communication. As he sat on the jury for the remainder of the long trial, and as he cast his ballot, Smith was never aware of the Government's interpretation of the events to which he, however unwillingly, had become a party. He had been subjected to extraneous influences to which no juror should be subjected, for it is the law's objective to guard jealously the sanctity of the jury's right to operate as freely as possible from outside unauthorized intrusions purposefully made. The unduly restrictive interpretation of the question by the District Court had the effect of diluting the force of all the other facts and circumstances in the case that may have influenced and disturbed Smith in the untrammeled exercise of his judgment as a juror. We hold that, on a consideration of all the evidence uninfluenced by the District Court's narrow construction of the incident complained of, petitioner is entitled to a new trial. The Court of Appeals' judgment is vacated, and the case is remanded to the District Court with directions to grant a new trial. It is so ordered.

During petitioner's trial in a Federal District Court, which resulted in his conviction of a federal offense, one of the jurors was approached by an outsider who suggested that he could make some money by making a deal with petitioner. The juror refused to discuss the case with the outsider, and reported the incident to the trial judge. Without informing petitioner or his counsel, the judge related the incident to the district attorney, and it was referred to the Federal Bureau of Investigation. During a recess in the trial, an FBI agent interrogated the juror about the matter, and the juror did not know the purpose or result of this investigation until a month after the end of the trial. Immediately after the trial, the juror told another juror that he "had been under a terrific pressure." Held: on the record in this case, it cannot be said that the juror was not affected in his freedom of action as a juror; and petitioner is entitled to a new trial. . 222 F.2d 720, judgment vacated and case remanded for new trial.

1955_46

https://www.oyez.org/cases/1955/46

MR. JUSTICE CLARK delivered the opinion of the Court. Petitioner contends that this action brought by the Government to recover $2,000 on each of five counts of a complaint based on § 26(b)(1) of the Surplus Property Act of 1944 places it twice in jeopardy in violation of the Fifth Amendment. In an earlier proceeding, it had pleaded nolo contendere to a five-count indictment bottomed on the same five transactions and paid fines in the aggregate amount of $25,000. In the present case, the District Court granted the Government's motion for summary judgment, and the Court of Appeals affirmed, 218 F.2d 880. We granted certiorari, 349 U.S. 937, to resolve an asserted conflict between the decisions of the Courts of Appeals. At the close of World War II, the Government was faced with the problem of disposing of vast quantities of surplus war materials. A large part of this property, valued at many billions of dollars, was needed to satisfy the civilian demand caused by wartime shortages in consumer goods. To facilitate and regulate the orderly disposal of this property, Congress passed the Surplus Property Act of 1944, 58 Stat. 765. The stated purposes of this statute included the reestablishment of returning veterans in business, agricultural, or professional life, the discouragement of speculation in surplus property, and the elimination of unusual and excessive profits to speculators. The concern of Congress for returning veterans is emphasized by its 1946 Amendment to the Act, 60 Stat. 168, which gave veterans a priority for the purchase of surplus property, second only to that of the Federal Government, and authorized the Administrator to assign the highest priority to veterans for the purchase of certain items. This legislation thus afforded veterans an opportunity to purchase goods not available elsewhere at a fair price and on good credit terms. The benefits were of great value to the millions of men and women returning to civilian life just after the war. With this background in mind, we may turn to the facts of the present case. In June, 1947, the Rex Trailer Company purchased five motor vehicles from the War Assets Administration at Tinker Field, Oklahoma. Rex had only a nonpriority right of purchase under the Surplus Property Act, but, by the fraudulent use of the names of five persons possessing veteran priority rights, it was able to purchase the vehicles. Admittedly, the terms of the statute were violated, but the record does not show petitioner's gain from the fraud. The United States limited itself to the recovery of the sum of $2,000 for each of the five overt acts alleged in its complaint. Petitioner's sole contention is that § 26(b)(1) provides a criminal penalty and, having once been convicted and fined for the transactions in question, it cannot again be subjected to punishment. The only question for our decision, then, is whether § 26(b)(1) is civil or penal, for "Congress may impose both a criminal and a civil sanction in respect to the same act or omission; for the double jeopardy clause prohibits merely punishing twice, or attempting a second time to punish criminally, for the same offense." Helvering v. Mitchell,,. We conclude that the recovery here is civil in nature. The Government has the right to make contracts and hold and dispose of property, and, for the protection of its property rights, it may resort to the same remedies as a private person. Cotton v. United States, 11 How. 229. Liquidated damages are a well known remedy, and in fact Congress has utilized this form of recovery in numerous situations. In all building contracts, for example, Congress has required the insertion of a liquidated damage clause which "shall be conclusive and binding upon all parties" without proof of "actual or specific damages sustained. . . ." 32 Stat. 326, 40 U.S.C. § 269. Liquidated damage provisions, when reasonable, are not to be regarded as penalties, United States v. United Engineering & Contracting Co.,,, and are therefore civil in nature. In § 26 of the Surplus Property Act, Congress has provided three alternative remedies. The first provides a recovery of $2,000 plus double the amount of the damage sustained; the second permits a recovery "as liquidated damages" of twice the consideration agreed upon; the third permits the Government to recover the property and retain "as liquidated damages" the consideration it received. These alternative remedies are set out in three consecutively numbered subsections of § 26(b). All three were recognized as civil remedies by Congress before the bill was passed, and the conclusion is inescapable that each was of the same nature and designed to serve the same purpose. Further, Congress provided in § 26(d) that: "[t]he civil remedies provided in this section shall be in addition to all other criminal penalties and civil remedies provided by law." The case of United States ex rel. Marcus v. Hess,, involved a provision of the False Claims Act, R.S. §§ 5438, 3490, 31 U.S.C. § 231, essentially the equivalent of § 26(b)(1). In Marcus, as here, the defendant had pleaded nolo contendere in an earlier criminal prosecution based on the same transaction. This Court rejected the petitioner's contention of double jeopardy and held that the statute involved was remedial and not penal, since it was unable to say that the provision for $2,000 plus double damages would "do more than afford the government complete indemnity for the injuries done it." 317 U.S. at. In concluding, it recognized that "[t]he inherent difficulty of choosing a proper specific sum which would give full restitution was a problem for Congress." 317 U.S. at. It is insisted, however, that the failure of the Government to allege specific damages precludes recovery here. But there is no requirement, statutory or judicial, that specific damages be shown, and this was recognized by the Court in Marcus. The Government's recovery here is comparable to the recovery under liquidated damage provisions which fix compensation for anticipated loss. As this Court recognized in Priebe & Sons v. United States,,, liquidated damages "serve a particularly useful function when damages are uncertain in nature or amount or are unmeasurable, as is the case in many government contracts. . . ." And the fact that no damages are shown is not fatal. Section 26(b)(1) merely accomplishes the intended result of Congress by authorizing a separate proceeding for the recovery of a lump sum in damages. It is obvious that injury to the Government resulted from the Rex Trailer Company's fraudulent purchase of trucks. It precluded bona fide sales to veterans, decreased the number of motor vehicles available to Government agencies, and tended to promote undesirable speculation. The damages resulting from this injury may be difficult or impossible to ascertain, but it is the function of liquidated damages to provide a measure of recovery in such circumstances. On this record, it cannot be said that the measure of recovery fixed by Congress in the Act is so unreasonable or excessive that it transformed what was clearly intended as a civil remedy into a criminal penalty. Affirmed.

In an action based on § 26(b)(1) of the Surplus Property Act of 1944, the United States recovered $2,000 on each of five counts of a complaint charging petitioner with fraudulent purchases of motor vehicles. Petitioner had previously pleaded nolo contendere to a 5-count indictment arising out of the same five transactions, and paid fines aggregating $25,000. Held: 1. The recovery under 26(b)(1) is civil in nature, and did not put petitioner twice in jeopardy in violation of the Fifth Amendment. . 2. The failure of the Government to allege specific damages did not preclude the recovery here. . 3. On the record in this case, it cannot be said that the measure of recovery fixed by Congress in the Act is so unreasonable or excessive that it transformed the civil remedy into a criminal penalty. . 218 F.2d 880 affirmed.

1955_4

https://www.oyez.org/cases/1955/4

MR. JUSTICE BURTON delivered the opinion of the Court. This case presents two questions as to the liability of a stevedoring contractor to reimburse a shipowner for damages paid by the latter to one of the contractor's longshoremen on account of injuries received by him in the course of his employment on shipboard. 1. The first question is whether the Longshoremen's and Harbor Workers' Compensation Act precludes a shipowner from asserting such a liability. 2. The second is whether the liability exists where a contractor, without entering into an express agreement of indemnity, contracts to perform a shipowner's stevedoring operations and the longshoreman's injuries are caused by the contractor's unsafe stowage of the ship's cargo. For the reasons hereafter stated, we answer the first question in the negative and the second in the affirmative. In 1949, respondent, Pan-Atlantic Steamship Corporation, a Delaware corporation, operated the SS. Canton Victory in the American coastwise trade under a bareboat charter. As evidenced by letters, but without a formal stevedoring contract or an express indemnity agreement, respondent secured, for that year, the agreement of petitioner, Ryan Stevedoring Co., inc., an Alabama corporation, to perform all stevedoring operations required by respondent in its coastwise service. Pursuant to that contract, petitioner loaded the Canton Victory at Georgetown, South Carolina, with mixed cargo. This included pulpboard, such as is used in making corrugated paper and paper bags, shipped in rolls 4 feet wide and 3 to 5 feet long. Petitioner stowed some of these rolls side-by-side on the floor of Hatch No. 3 and "nested" others above them by placing the upper rolls in the troughs between the lower ones. To immobilize the rolls, it was necessary to secure or "chock" the bottom tier with wedges or with miscellaneous pieces of wood known as "dunnage." There is little evidence as to what took place when the rolls were stowed at Georgetown, but it was the uniform practice of petitioner's longshoremen to stow such cargo under the immediate direction of their hatch foreman, while respondent's cargo officers supervised the loading of the entire ship and had authority to reject unsafe stowage. A few days later, on July 20, 1949, in navigable water at a pier in Brooklyn, New York, petitioner engaged in unloading these rolls. While one of petitioner's Brooklyn longshoremen, Frank Palazzolo, was working in Hatch No. 3, one roll, weighing about 3,200 pounds, broke loose from the others, struck him violently, and severely injured his left leg. There is no evidence that he was negligent. On the other hand, it appears that the rolls in Hatch No. 3 had been insufficiently secured when stowed by petitioner in Georgetown. This is established by the absence of proper wedges and dunnage holding the rolls in place at the time of the accident. Petitioner's insurance carrier under the Longshoremen's Act paid Palazzolo $2,940 compensation and furnished him medical services costing $9,857.36, all without any formal award by the Deputy Commissioner. As permitted by § 33 of that Act, Palazzolo sued the respondent shipowner in the Supreme Court of New York. He claimed that the unsafe stowage of the cargo, which caused his injuries, established either the unseaworthiness of the ship or the shipowner's negligence in failing to furnish him with a safe place to work, or both. The shipowner removed the case to the United States District Court for the Eastern District of New York and filed a third-party complaint against petitioner. By stipulation, Palazzolo's case against the shipowner was tried to a jury, which returned a verdict in his favor for $75,000. The District Court entered judgment on the jury verdict. From the above sum, petitioner's insurance carrier was to be reimbursed for the $12,797.36 it had advanced because of Palazzolo's injuries. Also by stipulation, the shipowner's third-party complaint was submitted on the same record to the judge who had presided over Palazzolo's case. He dismissed the complaint. 111 F. Supp. 505. The Court of Appeals affirmed Palazzolo's judgment, but reversed the dismissal of the third-party complaint and directed that judgment be entered for the shipowner. 211 F.2d 277. Petitioner, the stevedoring contractor, contends that the order reversing the dismissal of the impleader suit is erroneous. Because of the wide application of the case and the conflicting views that have been expressed on the issues, we granted certiorari. 349 U.S. 813. The United States filed a brief as amicus curiae in support of the shipowner and took part in the oral argument. 348 U.S. 948. The judgment was affirmed by an equally divided Court, 349 U.S. 901, but the case was restored to the docket for reargument before a full Court, 349 U.S. 926. 1. The first question is whether the Longshoremen's Compensation Act precludes the assertion by a shipowner of a stevedoring contractor's liability to it, where the contractor is also the employer of the injured longshoreman. Neither court below discussed this question, although petitioner presented it to them. Petitioner's argument is based upon the following provision in the Longshoremen's and Harbor Workers' Compensation Act: "SEC. 5. The liability of an employer prescribed in section 4 [for compensation] shall be exclusive and in place of all other liability of such employer to the employee, his legal representative, husband or wife, parents, dependents, next of kin, and anyone otherwise entitled to recover damages from such employer at law or in admiralty on account of such injury or death, except that if an employer fails to secure payment of compensation as required by this Act, an injured employee, or his legal representative in case death results from the injury, may elect to claim compensation under this Act, or to maintain an action at law or in admiralty for damages on account of such injury or death. . . ." (Emphasis supplied.) 44 Stat. 1426, 33 U.S.C. § 905. The obvious purpose of this provision is to make the statutory liability of an employer to contribute to its employee's compensation the exclusive liability of such employer to its employee, or to anyone claiming under or through such employee, on account of his injury or death arising out of that employment. In return, the employee, and those claiming under or through him, are given a substantial quid pro quo in the form of an assured compensation, regardless of fault, as a substitute for their excluded claims. On the other hand, the Act prescribes no quid pro quo for a shipowner that is compelled to pay a judgment obtained against it for the full amount of a longshoreman's damages. Section 5 of the Act expressly excludes the liability of the employer "to the employee," or others, entitled to recover "on account of such [employee's] injury or death." Therefore, in the instant case, it excludes the liability of the stevedoring contractor to its longshoreman, and to his kin, for damages on account of the longshoreman's injuries. At the same time, however, § 5 expressly preserves to each employee a right to recover damages against third persons. It thus preserves the right, which Palazzolo has exercised, to recover damages from the shipowner in the present case. The Act nowhere expressly excludes or limits a shipowner's right, as a third person, to insure itself against such a liability either by a bond of indemnity, or the contractor's own agreement to save the shipowner harmless. Petitioner's agreement in the instant case amounts to the latter, for, as will be shown, it is a contractual undertaking to stow the cargo "with reasonable safety," and thus to save the shipowner harmless from petitioner's failure to do so. In the face of a formal bond of indemnity, this statute clearly does not cut off a shipowner's right to recover from a bonding company the reimbursement that the indemnitor, for good consideration, has expressly contracted to pay. Such a liability springs from an independent contractual right. It is not an action by or on behalf of the employee, and it is not one to recover damages "on account of" an employee's "injury or death." It is a simple action to recover, under a voluntary and self-sufficient contract, a sum measured by foreseeable damages occasioned to the shipowner by the injury or death of a longshoreman on its ship. A like result occurs where a shipowner sues, for breach of warranty, a supplier of defective ship's gear that has caused injury or death to a longshoreman using it in the course of his employment on shipboard. And a like liability for breach of contract accrues to a shipowner against a stevedoring contractor in any instance when the latter's improper stowage of cargo causes an injury on shipboard to some one other than one of its employees. The coincidence that the loading contractor here happens to be the employer of the injured longshoreman makes no difference in principle. While the Compensation Act protects a stevedoring contractor from actions brought against it by its employee on account of the contractor's tortious conduct causing injury to the employee, the contractor has no logical ground for relief from the full consequences of its independent contractual obligation, voluntarily assumed to the shipowner, to load the cargo properly. See American Stevedores v. Porello,; Crawford v. Pope & Talbot, 206 F.2d 784, 792-793; Brown v. American-Hawaiian S.S. Co., 211 F.2d 16; Rich v. United States, 177 F.2d 688; United States v. Arrow Stevedoring Co., 175 F.2d 329. The shipowner's action here is not founded upon a tort, or upon any duty which the stevedoring contractor owes to its employee. The third-party complaint is grounded upon the contractor's breach of its purely consensual obligation owing to the shipowner to stow the cargo in a reasonably safe manner. Accordingly, the shipowner's action for indemnity on that basis is not barred by the Compensation Act. 2. The other question is whether, in the absence of an express agreement of indemnity, a stevedoring contractor is obligated to reimburse a shipowner for damages caused it by the contractor's improper stowage of cargo. The answer to this is found in the precise ground of the shipowner's action. By hypothesis, its action is not based on a bond of indemnity such as it may purchase by way of insurance, or may require of its stevedoring contractor, and which expressly undertakes to save the shipowner harmless. If the shipowner did hold such an express agreement of indemnity here, it is not disputed that it would be enforceable against the indemnitor. On the other hand, the shipowner's action for indemnity here is not based merely on the ground that the shipowner and contractor each is responsible in some related degree for the tortious stowage of cargo that caused injury to Palazzolo. Such an action, brought without reliance upon contractual undertakings, would present the bald question whether the stevedoring contractor or the shipowner, because of their respective responsibilities for the unsafe stowage, should bear the ultimate burden of the injured longshoreman's judgment. That question has been widely discussed elsewhere in terms of the relative responsibility of the parties for the tort, and those discussions have dealt with concepts of primary and secondary or active and passive tortious conduct. Because respondent in the instant case relies entirely upon petitioner's contractual obligation, we do not meet the question of a noncontractual right of indemnity or of the relation of the Compensation Act to such a right. The shipowner's claim here also is not a claim for contribution from a joint tortfeasor. Consequently, the considerations which led to the decision in Halcyon Lines v. Haenn Ship Ceiling & Refitting Corp.,, are not applicable. See American Mutual Liability Ins. Co. v. Matthews, 182 F.2d 322. The shipowner here holds petitioner's uncontroverted agreement to perform all of the shipowner's stevedoring operations at the time and place where the cargo in question was loaded. That agreement necessarily includes petitioner's obligation not only to stow the pulp rolls, but to stow them properly and safely. Competency and safety of stowage are inescapable elements of the service undertaken. This obligation is not a quasi-contractual obligation implied in law or arising out of a noncontractual relationship. It is of the essence of petitioner's stevedoring contract. It is petitioner's warranty of workmanlike service that is comparable to a manufacturer's warranty of the soundness of its manufactured product. The shipowner's action is not changed from one for a breach of contract to one for a tort simply because recovery may turn upon the standard of the performance of petitioner's stevedoring service. The Court of Appeals has stated that the liability of petitioner in this case is for the performance of its obligation to stow the rolls on board ship "in a reasonably safe manner." 211 F.2d at 279. That court also has affirmed the decision of the District Court which was based upon the verdict of the jury that petitioner's improper stowage of the rolls produced either the unseaworthiness of the ship or the hazardous working condition which is the basis for the shipowner's liability to Palazzolo. Petitioner suggests that, because the shipowner had an obligation to supervise the stowage and had a right to reject unsafe stowage of the cargo and did not do so, it now should be barred from recovery from the stevedoring contractor of any damage caused by that contractor's uncorrected failure to stow the rolls "in a reasonably safe manner." Accepting the facts and obligations as above stated, the shipowner's present claim against the contractor should not thereby be defeated. Whatever may have been the respective obligations of the stevedoring contractor and of the shipowner to the injured longshoreman for proper stowage of the cargo, it is clear that, as between themselves, the contractor, as the warrantor of its own services, cannot use the shipowner's failure to discover and correct the contractor's own breach of warranty as a defense. Respondent's failure to discover and correct petitioner's own breach of contract cannot here excuse that breach. The judgment of the Court of Appeals, accordingly, is Affirmed.

Without signing a formal stevedoring contract or an express indemnity agreement, a stevedoring contractor agreed to perform all stevedoring operations required by a shipowner in the latter's coastwise service. Under this agreement, the contractor loaded a ship at Georgetown, S.C., with a mixed cargo, including rolls of pulpboard, and unloaded it in navigable water at a pier in Brooklyn, N.Y. During the unloading, a longshoreman employed by the contractor was injured by a roll of pulpboard which had been insufficiently secured when stored by the contractor in Georgetown. Under the Longshoremen's Act, the contractor's insurance carrier paid the longshoreman compensation and furnished him medical services, without any formal award by the Deputy Commissioner. Claiming that, because of unsafe stowage of the cargo, the ship was unseaworthy and that the shipowner had neglected to furnish him with a safe place to work, the longshoreman sued the shipowner and obtained a judgment for a much larger sum, from which the contractor's insurance carrier was to be reimbursed for the amount it had advanced to the longshoreman. Held: on the shipowner's third-party complaint against the contractor, the shipowner was entitled to reimbursement from the contractor for the amount of the judgment against the shipowner. . 1. Section 5 of the Longshoremen's and Harbor Workers' Compensation Act, which provides that the liability of an employer prescribed in § 4 "shall be exclusive and in place of all other liability of such employer to the employee," does not preclude assertion by the shipowner of the contractor's contractual liability to it, though the contractor was also the employer of the injured longshoreman. . 2. Even in the absence of an express agreement of indemnity, the contractor was obligated to reimburse the shipowner for damages caused it by the contractor's breach of its contract to stow the cargo properly and safely. . 3. Halcyon Lines v. Haenn Ship Corp.,, distinguished. P.. 4. That the shipowner had an obligation to supervise the stowage and had a right to reject unsafe stowage and did not do so does not bar the shipowner's right to recover from the contractor any damage caused by the contractor's failure to stow the rolls safely. . 211 F.2d 277 affirmed.

1955_282

https://www.oyez.org/cases/1955/282

MR. JUSTICE BLACK delivered the opinion of the Court. The petitioner brought this suit for damages under the Jones Act, alleging that her husband, while employed by the respondent railroad as a tug fireman was drowned because of the negligent failure of respondent to provide him with a safe place to work. The District Judge directed the jury to return a verdict for the defendant, stating, "There is some evidence of negligence, and there is an accidental death. But there is not a shred of evidence connecting the two." The Court of Appeals affirmed, saying that, while the evidence was "perhaps at most only doubtfully sufficient to present a jury question as to defendant's breach of duty," it failed to show "where the accident occurred" or "that it was proximately caused by any default on the part of the defendant." The jury trial "is part and parcel of the remedy afforded railroad workers under the Employers Liability Act," which the Jones Act makes applicable to those working as petitioner's husband was here. The Seventh Amendment to the Constitution provides that "the right of trial by jury shall be preserved, and no fact tried by a jury shall be otherwise reexamined in any Court of the United States than according to the rules of the common law. " We granted certiorari to consider the failure of the District Court to let this case go to the jury. 350 U.S. 882. While some facts were in dispute, there was evidence from which a jury could have found: on Christmas Day, 1949, at about 5:15 p.m., the deceased, Schulz, reported for work on his job at Pier H, Jersey City, New Jersey, and was assigned to work on four tugboats docked side by side there. He went immediately to check the boats without waiting to change from his street to his working clothes. Returning to the pier alongside the tugs about seven o'clock, Schulz reported that he had finished his checking and was now going back to the boats to change to his work clothes and proceed with his other duties there. He was last seen alive walking in the direction of the nearest tug. At 1:25 a.m., a supervisor found Schulz was not on the boats. His street clothes were hanging in the upper engine room, where the tug attendants usually changed clothes. His lunch package was also there. Three of the tugs were at all times wholly unlighted and dark; one was partially illuminated by spotlights from the pier. The night was cold -- 10 above zero -- and there was some ice on the tugs. Because the company did not have enough workers that night properly to perform the duties that were required, Schultz had to try to take care of all four tugs by himself. To do this, he had to step from one boat to another in the dark, except for such limited illumination as he could obtain from a flashlight. Several weeks after Schulz disappeared from the boats, his body was found in the water near an adjacent pier. He was clothed in nothing but shorts and socks. A flashlight was in his hand. He had drowned. It is conceded that the deceased was not under the influence of alcohol when he came to the boat, that he did not commit suicide, that there was no foul play, and that he met his death by accident. The evidence showed that he was a capable and experienced workman who had been employed by the defendant for several years. In considering the scope of the issues entrusted to juries in cases like this, it must be borne in mind that negligence cannot be established by direct, precise evidence such as can be used to show that a piece of ground is or is not an acre. Surveyors can measure an acre. But measuring negligence is different. The definitions of negligence are not definitions at all, strictly speaking. Usually one discussing the subject will say that negligence consists of doing that which a person of reasonable prudence would not have done, or of failing to do that which a person of reasonable prudence would have done under like circumstances. Issues of negligence, therefore, call for the exercise of common sense and sound judgment under the circumstances of particular cases. "[W]e think these are questions for the jury to determine. We see no reason, so long as the jury system is the law of the land, and the jury is made the tribunal to decide disputed questions of fact, why it should not decide such questions as these, as well as others." Jones v. East Tennessee, V. & G. R. Co.,, (1888). In this case, petitioner is entitled to recover if her husband's death resulted "in whole or in part" from defendant's negligence. Fair-minded men could certainly find from the foregoing facts that defendant was negligent in requiring Schulz to work on these dark, icy and, undermanned boats. And reasonable men could also find from the discovery of Schulz' half-robed body with a flashlight gripped in his hand that he slipped from an unlighted tug as he groped about in the darkness attempting to perform his duties. But the courts below took this case from the jury because of a possibility that Schulz might have fallen on a particular spot where there happened to be no ice, or that he might have fallen from the one boat that was partially illuminated by shore lights. Doubtless the jury could have so found (had the court allowed it to perform its function), but it would not have been compelled to draw such inferences. For "[t]he very essence of its function is to select from among conflicting inferences and conclusions that which it considers most reasonable." Factfinding does not require mathematical certainty. Jurors are supposed to reach their conclusions on the basis of common sense, common understanding, and fair beliefs, grounded on evidence consisting of direct statements by witnesses or proof of circumstances from which inferences can fairly be drawn. We think the evidence was sufficient to require submission of the case to the jury, and that it was error not to do so. Reversed.

On the record in this case, a suit under the Jones Act to recover for the death of a tugboat fireman who disappeared while working at night on four unlighted, icy, and undermanned tugboats and whose drowned body was found later partly clothed and clutching a flashlight, the evidence was sufficient to go to the jury on the issues of whether respondent was negligent in failing to provide the deceased with a safe place to work and whether such negligence was the proximate cause of his death, and the trial court erred in directing a verdict for respondent. . 222 F.2d 540, reversed.

1955_34

https://www.oyez.org/cases/1955/34

MR. JUSTICE BURTON delivered the opinion of the Court. This action, presenting multiple claims for relief, was brought by Mackey and another in the United States District Court for the Northern District of Illinois, Eastern Division, in 1953. The court expressly directed that judgment be entered for the defendant, Sears, Roebuck & Co., on two, but less than all, of the claims presented. It also expressly determined that there was no just reason for delay in making the entry. After Mackey's notice of appeal from that judgment to the Court of Appeals for the Seventh Circuit, Sears, Roebuck & Co. moved to dismiss the appeal for lack of appellate jurisdiction. The Court of Appeals upheld its jurisdiction and denied the motion, relying upon 28 U.S.C. § 1291 and Rule 54(b) of the Federal Rules of Civil Procedure, as amended in 1946. Because of the importance of the issue in determining appellate jurisdiction and because of a conflict of judicial views on the subject, we granted certiorari. 348 U.S. 970. For the reasons hereafter stated, we sustain the Court of Appeals and its appellate jurisdiction. Although we are here concerned with the present appealability of the judgment of the District Court, and not with its merits, we must examine the claims stated in the complaint so as to consider adequately the issue of appealability. The complaint contains six counts. We disregard the fifth because it has been abandoned, and the sixth because it duplicates others. The claims stated in Counts I and II are material, and have been dismissed without leave to amend. The claim contained in Count III and that in amended Court IV are at issue on the answers filed by Sears, Roebuck & Co. The appeal before us is from a judgment striking out Counts I and II without disturbing Counts III and IV, and the question presented is whether such a judgment is presently appealable when the District Court, pursuant to amended Rule 54(b), has made "an express determination that there is no just reason for delay" and has given "an express direction for the entry of judgment." In Count I, Mackey, a citizen of Illinois, and Time Saver Tools, Inc., and Illinois corporation owned by Mackey, are the original plaintiffs and the respondents here. Sears, Roebuck & Co., a New York corporation doing business in Illinois, is the original defendant and the petitioner here. Mackey charges Sears with conduct violating the Sherman Antitrust Act in a manner prejudicial to three of Mackey's commercial ventures causing him $190,000 damages, for which he seeks $570,000 as treble damages. His first charge is unlawful destruction by Sears, since 1949, of the market for nursery lamps manufactured by General Metalcraft Company, a corporation wholly owned by Mackey. Mackey claims that this caused him a loss of $150,000. His second charge is unlawful interference by Sears, in 1952, with Mackey's contract to sell, on commission, certain tools and other products of the Vascoloy-Ramet Corporation, causing Mackey to lose $15,000. His third charge is unlawful destruction by Sears, in 1952, of the market for a new type of carbide-tipped lathe bit and for other articles manufactured by Time Saver Tools, Inc., resulting in a loss to Mackey of $25,000. Mackey combines such charges with allegations that Sears has used its great size to monopolize commerce and restrain competition in these fields. He asks for damages and equitable relief. In Count II, Mackey claims federal jurisdiction by virtue of diversity of citizenship. He incorporates the allegations of Count I as to the Metalcraft transactions, and asks for $250,000 damages for Sears' wilful destruction of the business of Metalcraft, plus $50,000 for Mackey's loss on obligations guaranteed by him. In Count III, Mackey seeks $75,000 in a common law proceeding against Sears for unlawfully inducing a breach of his Vascoloy commission contract. In Count IV, Time Saver seeks $200,000 in a common law proceeding against Sears for unlawfully destroying Time Saver's business by unfair competition and patent infringement. The jurisdiction of the Court of Appeals to entertain Mackey's appeal from the District Court's judgment depends upon 28 U.S.C. § 1291, which provides that "The courts of appeals shall have jurisdiction of appeals from all final decisions of the district courts of the United States. . . ." (Emphasis supplied.) If Mackey's complaint had contained only Count I, there is no doubt that a judgment striking out that count and thus dismissing, in its entirety, the claim there stated would be both a final and an appealable decision within the meaning of § 1291. Similarly, if his complaint had contained Counts I, II, III and IV, there is no doubt that a judgment striking out all four would be a final and appealable decision under § 1291. The controversy before us arises solely because, in this multiple claims action, the District Court has dismissed the claims stated in Counts I and II, but has left unadjudicated those stated in Counts III and IV. Before the adoption of the Federal Rules of Civil Procedure in 1939, such a situation was generally regarded as leaving the appellate court without jurisdiction of an attempted appeal. It was thought that, although the judgment was a final decision on the respective claims in Counts I and II, it obviously was not a final decision of the whole case, and there was no authority for treating anything less than the whole case as a judicial unit for purposes of appeal. This construction of the judicial unit was developed from the common law, which had dealt with litigation generally less complicated than much of that of today. With the Federal Rules of Civil Procedure, there came an increased opportunity for the liberal joinder of claims in multiple claims actions. This, in turn, demonstrated a need for relaxing the restrictions upon what should be treated as a judicial unit for purposes of appellate jurisdiction. Sound judicial administration did not require relaxation of the standard of finality in the disposition of the individual adjudicated claims for the purpose of their appealability. It did, however, demonstrate that, at least in multiple claims actions, some final decisions, on less than all of the claims, should be appealable without waiting for a final decision on all of the claims. Largely to meet this need, in 1939, Rule 54(b) was promulgated in its original form through joint action of Congress and this Court. It read as follows: "(b) JUDGMENT AT VARIOUS STAGES. When more than one claim for relief is presented in an action, the court at any stage, upon a determination of the issues material to a particular claim and all counterclaims arising out of the transaction or occurrence which is the subject matter of the claim, may enter a judgment disposing of such claim. The judgment shall terminate the action with respect to the claim so disposed of, and the action shall proceed as to the remaining claims. In case a separate judgment is so entered, the court, by order, may stay its enforcement until the entering of a subsequent judgment or judgments, and may prescribe such conditions as are necessary to secure the benefit thereof to the party in whose favor the judgment is entered." It gave limited relief. The courts interpreted it as not relaxing the requirement of a "final decision" on each individual claim as the basis for an appeal, but as authorizing a limited relaxation of the former general practice that, in multiple claims actions, all the claims had to be finally decided before an appeal could be entertained from a final decision upon any of them. Thus, original Rule 54(d) modified the single judicial unit theory but left unimpaired the statutory concept of finality prescribed by § 1291. However, it was soon found to be inherently difficult to determine by any automatic standard of unity which of several multiple claims were sufficiently separable from others to qualify for this relaxation of the unitary principle in favor of their appealability. The result was that the jurisdictional time for taking an appeal from a final decision on less than all of the claims in a multiple claims action in some instances expired earlier than was foreseen by the losing party. It thus became prudent to take immediate appeals in all cases of doubtful appealability, and the volume of appellate proceedings was undesirably increased. Largely to overcome this difficulty, Rule 54(b) was amended, in 1946, to take effect in 1948. Since then, it has read as follows: "(b) JUDGMENT UPON MULTIPLE CLAIMS. When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, the court may direct the entry of a final judgment upon one or more but less than all of the claims only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates less than all the claims shall not terminate the action as to any of the claims, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims." (Emphasis supplied.) In this form, it does not relax the finality required of each decision, as an individual claim, to render it appealable, but it does provide a practical means of permitting an appeal to be taken from one or more final decisions on individual claims, in multiple claims actions, without waiting for final decisions to be rendered on all the claims in the case. The amended rule does not apply to a single claim action, nor to a multiple claims action in which all of the claims have been finally decided. It is limited expressly to multiple claims actions in which "one or more but less than all" of the multiple claims have been finally decided and are found otherwise to be ready for appeal. To meet the demonstrated need for flexibility, the District Court is used as a "dispatcher." It is permitted to determine, in the first instance, the appropriate time when each "final decision" upon "one or more but less than all" of the claims in a multiple claims action is ready for appeal. This arrangement already has lent welcome certainty to the appellate procedure. Its "negative effect" has met with uniform approval. The effect so referred to is the rule's specific requirement that, for "one or more but less than all" multiple claims to become appealable, the District Court must make both "an express determination that there is no just reason for delay" and "an express direction for the entry of judgment." A party adversely affected by a final decision thus knows that his time for appeal will not run against him until this certification has been made. In the instant case, the District Court made this certification, but Sears, Roebuck & Co. nevertheless moved to dismiss the appeal for lack of appellate jurisdiction under § 1291. The grounds for such a motion ordinarily might be (1) that the judgment of the District Court was not a decision upon a "claim for relief", (2) that the decision was not a "final decision" in the sense of an ultimate disposition of an individual claim entered in the course of a multiple claims action, or (3) that the District Court abused its discretion in certifying the order. In the case before us, there is no doubt that each of the claims dismissed is a "claim for relief" within the meaning of Rule 54(b), or that their dismissal constitutes a "final decision" on individual claims. Also, it cannot well be argued that the claims stated in Counts I and II are so inherently inseparable from, or closely related to, those stated in Counts III and IV that the District Court has abused its discretion in certifying that there exists no just reason for delay. They certainly can be decided independently of each other. Petitioner contends that amended Rule 54(b) attempts to make an unauthorized extension of § 1291. We disagree. It could readily be argued here that the claims stated in Counts I and II are sufficiently independent of those stated in Counts III and IV to satisfy the requirements of Rule 54(b) even in its original form. If that were so, the decision dismissing them would also be appealable under the amended rule. It is nowhere contended today that a decision that would have been appealable under the original rule is not also appealable under the amended rule, provided the District Court makes the required certification. While it thus might be possible to hold that, in this case, the Court of Appeals had jurisdiction under original Rule 54(b), there at least would be room for argument on the issue of whether the decided claims were separate and independent from those still pending in the District Court. Thus, the instant case affords an excellent illustration of the value of the amended rule which was designed to overcome that difficulty. Assuming that the requirements of the original rule are not met in this case, we nevertheless are enabled to recognize the present appellate jurisdiction of the Court of Appeals under the amended rule. The District Court cannot, in the exercise of its discretion, treat as "final" that which is not "final" within the meaning of § 1291. But the District Court may, by the exercise of its discretion in the interest of sound judicial administration, release for appeal final decisions upon one or more, but less than all, claims in multiple claims actions. The timing of such a release is, with good reason, vested by the rule primarily in the discretion of the District Court as the one most likely to be familiar with the case and with any justifiable reasons for delay. With equally good reason, any abuse of that discretion remains reviewable by the Court of Appeals. Rule 54(b), in its original form, thus may be said to have modified the single judicial unit practice which had been developed by court decisions. The validity of that rule is no longer questioned. In fact, it was applied by this Court in Reeves v. Beardall,, without its validity's being questioned. Rule 54(b), in its amended form, is a comparable exercise of the rulemaking authority of this Court. It does not supersede any statute controlling appellate jurisdiction. It scrupulously recognizes the statutory requirement of a "final decision" under § 1291 as a basic requirement for an appeal to the Court of Appeals. It merely administers that requirement in a practical manner in multiple claims actions, and does so by rule, instead of by judicial decision. By its negative effect, it operates to restrict in a valid manner the number of appeals in multiple claims actions. We reach a like conclusion as to the validity of the amended rule where the District Court acts affirmatively, and thus assists in properly timing the release of final decisions in multiple claims actions. The amended rule adapts the single judicial unit theory so that it better meets the current needs of judicial administration. Just as Rule 54(b), in its original form, resulted in the release of some decisions on claims in multiple claims actions before they otherwise would have been released, so amended Rule 54(b) now makes possible the release of more of such decisions subject to judicial supervision. The amended rule preserves the historic federal policy against piecemeal appeals in many cases more effectively than did the original rule. Accordingly, the appellate jurisdiction of the Court of Appeals is sustained, and its judgment denying the motion to dismiss the appeal for lack of appellate jurisdiction is Affirmed

In a multiple claims action, the Federal District Court expressly directed that judgment be entered for the defendant on two, but less than all, of the claims presented. The court also expressly determined that there was no just reason for delay in making the entry. On appeal from that judgment, the Court of Appeals upheld its jurisdiction and denied a motion to dismiss, relying upon 28 U.S.C. § 1291 and Rule 54(b) of the Federal Rules of Civil Procedure, as amended in 1946. Held: the appellate jurisdiction of the Court of Appeals is sustained, and its judgment denying the motion to dismiss the appeal for lack of appellate jurisdiction is affirmed. . (a) Rule 54(b), as amended, does not relax the finality required of each decision, as an individual claim, to render it appealable, but does provide a practical means of permitting an appeal to be taken from one or more final decisions on individual claims, in multiple claims actions, without waiting for final decisions to be rendered on all the claims in the case. . (b) The application of the amended rule is limited expressly to multiple claims actions in which "one or more but less than all" of the multiple claims have been finally decided and are found otherwise to be ready for appeal. P.. (c) The amended rule requires that for "one or more but less than all" multiple claims to become appealable, the District Court must make both "an express determination that there is no just reason for delay" and "an express direction for the entry of judgment." . (d) In this case, each of the claims dismissed was a "claim for relief" within the meaning of Rule 54(b), and the dismissal of each constituted a "final decision" on the individual claim. P.. (e) The claims adjudged by the District Court could properly be decided independently of the claims which the court did not adjudge. P.. (f) Amended Rule 54(b) does not constitute an unauthorized extension of 28 U.S.C. § 1291, since the District Court cannot, in the exercise of its discretion, treat as "final" that which is not "final" within the meaning of § 1291. . (g) In the exercise of its discretion under amended Rule 54(b), the District Court may release for appeal final decisions upon one or more, but less than all, claims in multiple claims actions, and any abuse of that discretion is reviewable by the Court of Appeals. P.. (h) Rule 54(b), as amended, does not supersede any statute controlling appellate jurisdiction, and it scrupulously recognizes the statutory requirement of a "final decision" under § 1291 as a basic requirement for an appeal to the Court of Appeals. P.. (i) Rule 54(b), as amended, is valid in both its "affirmative" and "negative" aspects. The rule is not rendered invalid because, though its "affirmative" operation, a final decision may be released for appeal to the Court of Appeals at a time when, under prior law, it would not have been appealable. P.. 218 F.2d 295 affirmed.

1955_6

https://www.oyez.org/cases/1955/6

Opinion of the Court by MR. JUSTICE HARLAN, announced by MR. JUSTICE CLARK. These cases involve the validity of railroad tariff provisions exonerating the appellee railroads from liability for stated percentages of damage to shell eggs shipped over their lines. The cases come to us by direct appeal from a judgment of a three-judge district court in Utah which dismissed an action brought to set aside and enjoin an order of the Interstate Commerce Commission approving such tariff provisions. We noted probable jurisdiction on October 14, 1954. Claims against the railroads for damage to egg shipments steadily and rapidly increased in the years following 1939, particularly on shipments to the eastern seaboard area. In 1950, the railroads, believing that, because of the difficulties of proof, they were being exposed to liability for damage for which they were not responsible, filed with the Commission proposed tariff provisions similar in form to those approved by the order under review. After an investigation and hearing, the Commission concluded that egg shipments ordinarily contained substantial amounts of damage for which the railroads were not responsible -- namely, (a) damage existing prior to shipment, and (b) damage unavoidably arising in transit because of the inherently fragile nature of eggs. The average amount of such damage was found to be 3% for eggs packaged at railhead points and 5% for those packaged elsewhere. On the basis of this finding, the Commission, although rejecting the higher percentage provisions proposed by the railroads, found reasonable -- and hence authorized the railroads to include in their tariff schedules -- the following tolerance provision: "On eggs placed in packages at rail point of origin of the shipment, no claim shall be allowed where the physical damage to the eggs at destination does not exceed 3% of the contents of the packages containing damaged eggs. Where damage exceeds 3%, claims shall be allowed for all damage in excess of 3% if investigation develops carrier liability." "Exception. -- Where bona fide certificates of Federal or State egg inspection agencies showing extent of physical damage to eggs determined at rail point of origin of the shipment immediately prior to tender for rail transportation indicate the actual shell damage to be other than 2%, the percentage of actual damage as shown on such certificates, plus 1% shall be used in lieu of 3% specified in this Section." An otherwise identical provision applicable to "eggs placed in packages at points other than the rail point of origin" was determined to be reasonable with a tolerance of 5%. It is claimed that these tariff provisions violate § 20(11) of the Interstate Commerce Act, 24 Stat. 386, as amended, 49 U.S.C. § 20(11), which provides that any common carrier subject to the Act receiving property for interstate transportation "shall be liable . . . for any loss, damage, or injury to such property caused by it . . . , and no contract, receipt, rule, regulation, or other limitation of any character whatsoever shall exempt such common carrier . . . from the liability hereby imposed. . . ." The Commission and the court below (one judge dissenting) held that the tolerance provisions did not violate § 20(11) because the pre-shipment and unavoidably-caused damage represented by the tolerances was not damage "caused by" the railroads; hence, the tolerance regulations, in providing a means for determining the extent of such damage, did not limit the railroads' proper liability, but operated simply to eliminate from damage claims the damage for which the railroads were not liable. The appellants attack the provisions on six principal grounds: (1) the Commission has no jurisdiction over damage claims, and hence no power to prescribe regulations governing their disposition; (2) tolerances based on averages necessarily embrace a forbidden limitation of liability since, by definition, some shipments will contain less than the "average" damage, resulting in those cases in the carrier being relieved of its full liability; (3) the railroads are liable for in-transit damage even though "unavoidable"; (4) the averages found by the Commission are not supported by the evidence; (5) the approval of uniform nationwide tolerances was unreasonable in light of the wide differences in the egg damage experience of consignees located in different areas of the country; and (6) the conclusion that the tolerances do not limit liability is not supported by the Commission's findings. Our agreement with this last contention makes it unnecessary for us to consider the other arguments, and we may assume, though we do not decide, that the tariff provisions are not invalid for any of the other reasons assigned. The Commission's justification of the tolerance regulations as not limiting liability rests upon two distinct propositions: (1) that there is present in every case of eggs at destination physical damage not "caused by" the railroads -- and hence for which they are not liable under § 20(11) -- in the amount of the specified percentages; and (2) that the deduction of those percentages from damage claims operates merely to prevent liability for such damage from being improperly imposed on the railroads. We shall accept for purposes of discussion the validity of the first proposition. The infirmity we find in the Commission's report is, rather, that the second proposition is simply assumed, and is supported by no findings upon which we can say that the Commission's conclusion was reasonably based. Such a conclusion being essential to remove the tolerance provisions from the prohibition of § 20(11), the lack of findings necessary to justify that conclusion renders invalid the Commission's order approving the tolerance regulations. See Florida v. United States,,. Indeed, so far does the report fail to support the Commission's conclusion that it tends affirmatively to support precisely the opposite conclusion -- namely, that the tolerances do unlawfully limit liability. We know of no better way to illustrate the inadequacies of the report than by showing the manner in which the inferences raised by it and unanswered by the Commission would, if accepted, lead to that opposing conclusion. In the first place, we are unable to discover in the report any showing that damage claims include -- or should reasonably be deemed to include -- the exempt damage which is to be deducted from them. At common law, proof that a case of eggs contained a specified amount of damage for which the carrier was not liable would afford no defense to a damage claim not shown to include that damage. To complete the defense, some showing that the damage claimed included the exempt damage would be required, such as evidence that all of the damage had been found and claimed. Similarly, to justify a regulation authorizing the deduction from damage claims of a tolerance representing exempt damage, some basis for inferring that damage claims ordinarily include such damage would seem required, such as a finding that the type of inspection upon which damage claims are based is adequate to reveal substantially all the damage present in a case. Far from making such a finding, however, the Commission report indicates that damage claims normally do not include all the damage present in a case. As described by the Commission, the customary inspection at destination upon which damage claims are based is simply a visual examination of a layer of 36 eggs at a time, continuing only until a layer in the case with no visible damage is found, at which point none of the succeeding layers is even looked at. Inasmuch as "damage" of the sort represented by the tolerances includes even the most minor shell imperfections, the inference seems inevitable that much damage is overlooked. This inference is strengthened by the Commission's statement that much of the damage normally present in a case could be found only "by candling and clicking, and could not be detected by the kind of inspection performed at" destination. And that damage claims do not in practice include all damage is further indicated by the Department of Agriculture studies cited by the Commission in which the damage overlooked by customary inspections at destination was found to range between 3.6% and 7.3%. Indeed, if the inferences suggested by these latter studies be accepted, it would appear that there is ordinarily overlooked in the destination inspection -- and hence not included in damage claims -- physical damage nearly equal to or greater than the exempt damage represented by the tolerances. If that be true, a further reduction of the claim by the full amount of the tolerance would necessarily operate to "limit" liability by approximately the full amount of the tolerance. Nor is it an answer to this that the consignee is entitled to make a more thorough inspection than the prevailing practice entails. By in effect requiring a consignee to prove that his damage claim does not include the exempt damage, the tolerances would impose on the consignee the burden of disproving a defense which at common law it would be the carrier's burden to establish. Whether or not the Commission has power so to alter the burden of proof, there is nothing to indicate that it had any intention of doing so. The Commission seems to have believed that, under the prevailing commercial practices, the carriers were being exposed to an improper liability, and that the tolerances, applied in the same commercial setting, would do no more than remedy that situation. It would pervert the Commission's purpose to deal realistically with a commercial problem now to seek to justify the tolerances on the ground that it is technically possible for consignees, by departing from the normal commercial practices, to avoid the limitation of liability caused by the tolerances. Especially is this true in the absence of any suggestion in the Commission's report that such a complete inspection by consignees would be commercially feasible. Another inadequacy of the Commission's report arises from its failure to distinguish between different kinds of physical damage in the application of the tolerances. The most favorable evidence supporting the Commission's conclusions as to the extent of the damage not "caused by" the railroads was a Department of Agriculture study showing that, at destination, the average case of eggs contains 4.8% "checked" or "stained" eggs and 0.3% broken eggs. Presumably, therefore, the tolerances approved by the Commission represent physical damage in the same proportions -- that is, primarily checked and stained eggs with only a nominal percentage of broken eggs. Checked and stained eggs are salable at a reduced price, and therefore, unlike broken eggs, represent only a partial loss. The tariff provisions, however, do not differentiate between these types of damage, and apparently authorize the deduction of the full tolerance without regard to the nature of the damage claimed. But to permit the offsetting of checked and stained eggs, representing only a partial loss, against broken eggs, representing a total loss, would seem necessarily to limit the railroads' proper liability under § 20(11). A third major respect in which the Commission's report falls short of establishing that the tolerances will not limit liability results from its failure to consider the relationship between the physical damage represented by the tolerances and the legal loss for which damage claims are asserted. We have thus far assumed that "physical damage" could properly be equated with "loss," and have shown that, even on that assumption, the Commission has not shown the existence of a relationship between the damage represented by the tolerances and that included in damage claims which would justify the deduction authorized by the tariff provisions. In fact, however, it would appear that damage claims are based not on physical damage to individual eggs, but rather on the loss of commercial acceptability of a case of eggs as a whole. As the Commission observed, the "commercially sound" case of eggs invariably contains some damage, and it is apparently only when the damage is so great as to make a case commercially unacceptable for its grade that it loses value. When a commercially unsound case is received, the consignee, rather than suffer the presumably greater loss that would result from selling it at a lower grade or as salvage, ordinarily "reconditions" the case by replacing the visibly damaged eggs and, if necessary, the packaging materials. From the character of this process as described by the Commission, it is apparent that the purpose is simply to make the case commercially sound, and not to discover and remove all the damage present in the case. The damage claim, if liability is asserted against the carrier, then consists simply of the cost of reconditioning the case -- that is, the labor and material costs plus the loss on the damaged eggs removed. Viewed in the above terms, the probable effect of the tolerances on liability becomes even more apparent. Inasmuch as the highest grade specifications prescribed by the Department of Agriculture permit physical damage of 5%, a case of eggs received at destination with only the tolerance damage of 3% or 5% would presumably be considered "commercially sound" and be salable at the full price. Thus, it would seem that presence of the tolerance damage, by itself, causes the consignee no loss and affords no basis for a damage claim, and that it is only when there is additional damage, making it necessary to recondition the case to make it commercially sound, that there is a loss for which a claim may be asserted. And if the additional damage is caused by the railroad, it necessarily follows that the cost of the reconditioning made necessary only because of that damage is a loss "caused by" the railroad within § 20(11). Any reduction of the damage claim in such circumstances would thus relieve the carrier of its proper liability. The Commission's report thus leaves us not merely with uncertainty as to the impact of the tolerances, cf. 294 U. S. Chicago, M., St. P. & P. R. Co., 294 U.S. 499,,, but with the strong impression that they are likely to operate in a forbidden manner. The report contains no answers to the problems we have raised, if indeed the Commission considered them at all. Since the report falls far short of establishing that the tolerances will not operate to limit carrier liability in violation of § 20(11), the order of the Commission approving the tolerances must be set aside, and the judgment below Reversed. *

The Interstate Commerce Commission issued an order approving tariff regulations providing that railroads will be responsible for claims for physical damage to shell eggs carried by them only to the extent that such damage is in excess of specified percentages or "tolerances." The validity of the regulations was challenged on the ground that they violated § 20(11) of the Interstate Commerce Act, which provides that any carrier subject to the Act receiving property for interstate transportation "shall be liable . . . for any loss, damage, or injury to such property caused by it" and forbids any limitation of, or exemption from, such liability. The Commission had concluded that, since the tolerances represented pre-shipment and unavoidable damage not "caused by" the railroads, their deduction from damage claims could not limit the railroads' proper liability. Held: the Commission's findings were insufficient to support this conclusion or to establish that the tolerances permitted by its order will not operate to limit carrier liability in violation of § 20(11), and the Commission's order must be set aside. . 119 F. Supp. 86 reversed.

1955_150

https://www.oyez.org/cases/1955/150

MR. JUSTICE MINTON delivered the opinion of the Court. Petitioner, an independent contractor in the business of unloading gasoline, was instructed by the consignee to unload a tank car of gasoline which had been hauled by respondent Atlantic Coast Line and which was located at the time on a siding in respondent's freight yards. In order to release the gasoline through a hose attached to the bottom of the car, it was necessary to go to the dome on top of the car, remove the dome cap, and open a valve inside the dome. ,While petitioner and his helper were engaged in opening the valve, the board on which they were standing broke, and petitioner fell, sustaining injuries. There is no dispute that the board was defective. It was a wooden board over seven feet long attached to the side of the tank near the top just below the dome by means of two triangular steel braces extending from the side of the tank at either end of the board. The question presented here is whether this device, which for convenience we shall call a dome running board, is a safety appliance within the meaning of §§ 2 and 3 of the Safety Appliance Act of 1910. Act of April 14, 1910, c. 160, §§ 2 and 3, 36 Stat. 298, 45 U.S.C. §§ 11 and 12. Petitioner brought suit in the District Court, alleging in one count of his amended complaint absolute liability for a violation of the Act and in a second count common law negligence. The jury returned a general verdict in his favor. The Court of Appeals reversed and remanded for a new trial on the negligence count alone, holding that the trial court erred in instructing that the dome running board was a safety appliance. 220 F.2d 242. We granted certiorari because of the importance of the questions raised as to the proper interpretation of the Safety Appliance Act. 350 U.S. 819. Section 2 of the Safety Appliance Act of 1910 provides in part: ". . . all cars requiring secure ladders and secure running boards shall be equipped with such ladders and running boards. . . ." Section 3 provides: "That, within six months from the passage of this Act, the Interstate Commerce Commission, after hearing, shall designate the number, dimensions, location, and manner of application of the appliances provided for by section two . . . , and thereafter said number, location, dimensions, and manner of application as designated by said commission shall remain as the standards of equipment to be used on all cars subject to the provisions of this Act, unless changed by an order of said Interstate Commerce Commission . . . , and failure to comply with any such requirement of the Interstate Commerce Commission shall be subject to a like penalty as failure to comply with any requirement of this Act. . . . " Under the authority of § 3, the Commission in 1911 promulgated regulations still in force providing in detail for one running board running around the perimeter, or at least the full length of the sides, of tank cars. Such a board enables a trainman to walk the length of a tank car between cars adjoining it on either end. The regulations make no mention whatever by any name of dome running boards. Petitioner nevertheless contends that the dome running board is a required running board affording him protection under § 2. The obvious purpose of a dome running board is to provide a secure flooring for those who must perform operations in connection with the tank car dome. Clearly the dome running board has major importance in loading and unloading operations. But a railroad man of over twenty-five years' experience testified that it also may be used to stand on in order to pass hand signals or repair minor troubles occurring while the train is en route. The dome running board is an integrated part of the exterior equipment of a tank car; it functions as a permanently attached outside "floor" near the dome of the car. The testimony showed that railroad men, including respondent's employees, often refer to the dome running board as a running board. We hold that it comes within the meaning of the term "running boards" as used in § 2. The fact that the Commission, in its 1911 regulations under § 3, has not specified uniform standards for dome running boards is not a binding administrative determination that they are not running boards for the purposes of § 2. The reason for the omission is apparently the Commission's view that only appliances affording safety while the train is moving need be standardized. But there is no showing that the regulations purport to exhaust by implication each category of statutory appliances listed in § 2. Omission of dome running boards, of itself, shows no more than that the Commission has not standardized all possible running boards within § 2. Davis v. Manry,, is consistent with our view. There, the Court itself interpreted the language in § 2 requiring grab irons "on their roofs" of "cars having ladders" to apply only to cars having roofs. It then pointed to the Commission's failure to standardize a grab iron over a standardized ladder on a tender without a roof only as a supporting "practical construction" of the section. Moreover, the Commission in that case, having standardized the ladder, had no alternative but to interpret the statutory word "roofs" by either standardizing a grab iron or not standardizing it. Here, no such practical construction is implied by the failure to standardize. Even if the dome running board be properly characterized as a running board, respondent contends that, since § 2 refers to "cars requiring . . . secure running boards," the Commission's failure to standardize dome running boards under § 3 constitutes an administrative determination that they are not required within the meaning of § 2. The purpose of § 3 was to provide uniformity in the location and characteristics of those appliances upon which railroad men, working "always, in haste, and often in darkness and storm," must "instinctively" rely in the hazards of their employment. Illinois Central R. Co. v. Williams,,. Effectuation of such a purpose would require standardization of running boards which extend the length of train cars. But considerations of administrative expertise relevant to § 3 are not equally applicable to the effectuation of the purpose of § 2. The purpose of the latter section was "to convert the general legal duty of exercising ordinary care to provide" safety appliances on cars "requiring [them] for their proper use" into a "statutory, an absolute and imperative duty, of making them secure.'" Illinois Central R. Co. v. Williams, supra. The purpose of § 3 is to standardize the appliances required by § 2. But it does not follow that appliances necessary and furnished for the safe use of the car, although not standardized under § 3, are not within the sweep of § 2. Clearly, those who work on train cars may necessarily have to rely on the security of a dome running board, although the purposes of that appliance may not require any unhesitating reliance on its uniform characteristics. In the Williams case, supra, this Court held that the Commission's statutory power to postpone the effective date of its standardization regulations under § 3 did not suspend the railroad's duty under § 2 to make appliances secure. There was no question that the appliance in Williams was required, but the teaching of the case is that Commission action under § 3 does not exhaust the commands of § 2. See also Southern Pac. Co. v. Carson, 169 F.2d 734, holding a railroad liable under § 2 for defects in an independent wooden club used to help turn a brake wheel where the wheel itself complied with the Commission's regulations, which made no mention of the club. We conclude that failure of the Commission to standardize the dome running board need not mean that it was not a required running board under § 2. To hold otherwise would relieve railroads from the absolute duty under § 2 to make safety appliances secure whenever new appliances are adopted which have not yet been standardized by the Commission. Both the respondent and the manufacturer of the tank car considered that the dome running board was required for the proper use of the car. The railroad industry itself has recognized that tank cars require secure dome running boards. The Association of American Railroads safety appliance standards, largely identical to the Interstate Commerce Commission regulations, contain detailed uniform specifications for dome running boards, and compliance with those safety standards is required for interchange of cars between lines. Petitioner used the dome running board not simply because it happened to be there, but also because it had to be there for him to perform his duties safely, and performance of his duties was essential to the operation of the tank car. At best, appliances standardized in Commission regulations represent the minimum of safety equipment, and there is no prohibition of additional safety appliances. If a dome running board is provided by the railroad or the makers of the car and used by the railroad as an appliance necessary for the use of the car, it must be a safe board as required by § 2. Cf. Texas & Pacific R. Co. v. Rigsby,,. The Commission, in a brief filed here, contends that only appliances designed to insure safety while the train is in movement are within § 2, and, therefore, a dome running board cannot be a statutory running board. No case is cited to support this construction. Nothing in the language of § 2 itself or in its legislative history indicates that it should be read so narrowly. Whether or not an appliance is designed to afford protection while the train is moving may provide the Commission with an appropriate guide for deciding which appliances should be standardized under § 3. But there is no reason to import such a distinction into § 2 in order to deny the humane benefits of the Act to those who perform dangerous work on train cars that are not moving. Section 2 is not limited to such running boards as are required only in the movement of the train. The dome running board here was required for the use of the car. Section 2 required it to be safe, although regulations pursuant to § 3 had not standardized it. There is no merit in respondent's contention that, since petitioner is not one of its employees, no duty is owed him under § 2 of the Act. Having been upon the dome running board for the purpose of unloading the car, he was a member of one class for whose benefit that device is a safety appliance under the statute. As to him, the violation of the statute must therefore result in absolute liability. Coray v. Southern Pacific Co.,; Brady v. Terminal Railroad Assn.,; Fairport, P. & E. R. Co. v. Meredith,; Louisville & N. R. Co. v. Layton,. The judgment below must be reversed, and the judgment of the District Court reinstated. Reversed.

Petitioner, an independent contractor in the business of unloading gasoline, was instructed by the consignee to unload a tank car of gasoline which had been hauled by respondent railroad and which was located on a siding in its freight yards. While petitioner was standing on a board attached to the car near the dome, in order to unload the car by opening a valve inside the dome, the board broke and petitioner fell, sustaining injuries. The board, which was defective, was permanently fastened to the car near the dome, and had been placed there for the purpose for which petitioner was using it. Held: the board as a safety appliance within the meaning of §§ 2 and 3 of the Safety Appliance Act of 1910, and the railroad was absolutely liable for damages resulting from petitioner's injuries. . (a) The board here involved came within the meaning of the term "running boards" as used in § 2 of the Act, which provides that "all cars requiring . . . secure running boards shall be equipped with such . . . running boards." P.. (b) The fact that the Interstate Commerce Commission, in its 1911 regulations under § 3, has not specified uniform standards for such running boards is not a binding administrative determination that they are not "running boards" for the purposes of § 2. . (c) Failure of the Commission to specify uniform standards for such running boards under § 3 need not mean that the tank car was not a car "requiring" such a running board within the meaning of § 2. . (d) If such a running board is provided by a railroad or the makers of the car and used by the railroad as an appliance necessary for the use of the car, it must be a safe board as required by § 2. . (e) Section 2 is not limited to such running boards as are required only in the movement of the train. . (f) There is no merit in the railroad's contention that, since petitioner is not one of its employees, no duty is owed him under § 2 of the Act. P.. 220 F.2d 242 reversed.

1955_23

https://www.oyez.org/cases/1955/23

MR. JUSTICE CLARK. This appeal brings into question the constitutionality of § 903 of the Charter of the City of New York. That section provides that whenever an employee of the City utilizes the privilege against self-incrimination to avoid answering a question relating to his official conduct, "his term or tenure of office or employment shall terminate and such office or employment shall be vacant, and he shall not be eligible to election or appointment to any office or employment under the city or any agency. " Appellant Slochower invoked the privilege against self-incrimination under the Fifth Amendment before an investigating committee of the United States Senate, and was summarily discharged from his position as associate professor at Brooklyn College, an institution maintained by the City of New York. He now claims that the charter provision, as applied to him, violates both the Due Process and Privileges and Immunities Clauses of the Fourteenth Amendment. On September 24, 1952, the Internal Security Subcommittee of the Committee on the Judiciary of the United States Senate held open hearings in New York City. The investigation, conducted on a national scale, related to subversive influences in the American educational system. At the beginning of the hearings, the Chairman stated that education was primarily a state and local function, and therefore the inquiry would be limited to "considerations affecting national security, which are directly within the purview and authority of the subcommittee." Hearings before the Subcommittee to Investigate the Administration of the Internal Security Act and other Internal Security Laws of Senate Committee on the Judiciary, 82d Cong., 2d sess. 1. Professor Slochower, when called to testify, stated that he was not a member of the Communist Party, and indicated complete willingness to answer all questions about his associations or political beliefs since 1941. But he refused to answer questions concerning his membership during 1940 and 1941 on the ground that his answers might tend to incriminate him. The Chairman of the Senate Subcommittee accepted Slochower's claim as a valid assertion of an admitted constitutional right. It had been alleged that Slochower was a Communist in 1941 in the testimony of one Bernard Grebanier before the Rapp-Coudert Committee of the New York Legislature. See Report of the Subcommittee of the Joint Legislative Committee to Investigate Procedures and Methods of Allocating State Moneys for Public School Purposes and Subversive Activities, Legislative Document (1942), No. 49, State of New York at 318. Slochower testified that he had appeared twice before the Rapp-Coudert Committee, and had subsequently testified before the Board of Faculty relating to this charge. He also testified that he had answered questions at these hearings relating to his Communist affiliations in 1940 and 1941. Shortly after testifying before the Internal Security Subcommittee, Slochower was notified that he was suspended from his position at the College; three days later, his position was declared vacant "pursuant to the provisions of Section 903 of the New York City charter." * Slochower had 27 years' experience as a college teacher, and was entitled to tenure under state law. McKinney's New York Laws, c. 16, Education Law, § 6206(2). Under this statute, appellant may be discharged only for cause, and after notice, hearing, and appeal. § 6206(10). The Court of Appeals of New York, however, has authoritatively interpreted § 903 to mean that "The assertion of the privilege against self-incrimination is equivalent to a resignation." Daniman v. Board of Education of City of New York, 306 N.Y. 532, 538, 119 N.E.2d 373, 377. Dismissal under this provision is therefore automatic, and there is no right to charges, notice, hearing, or opportunity to explain. The Supreme Court of New York, County of Kings, concluded that appellant's behavior fell within the scope of § 903, and upheld its application here. 202 Misc. 915, 118 N.Y.S.2d 487. The Appellate Division, 282 App.Div. 718, 122 N.Y.S.2d 286, reported sub nom. Shlakman v. Board of Higher Education of City of New York, and the Court of Appeals, reported sub nom. Daniman v. Board of Education of City of New York, supra, each by a divided court, affirmed. We noted probable jurisdiction, 348 U.S. 935, because of the importance of the question presented. Slochower argues that § 903 abridges a privilege or immunity of a citizen of the United States, since it, in effect, imposes a penalty on the exercise of a federally guaranteed right in a federal proceeding. It also violates due process, he argues, because the mere claim of privilege under the Fifth Amendment does not provide a reasonable basis for the State to terminate his employment. Appellee insists that no question of "privileges or immunities" was raised or passed on below, and therefore directs its argument solely to the proposition that § 903 does not operate in an arbitrary or capricious manner. We do not decide whether a claim under the "privileges or immunities" clause was considered below, since we conclude the summary dismissal of appellant in the circumstances of this case violates due process of law. The problem of balancing the State's interest in the loyalty of those in its service with the traditional safeguards of individual rights is a continuing one. To state that a person does not have a constitutional right to government employment is only to say that he must comply with reasonable, lawful, and nondiscriminatory terms laid down by the proper authorities. Adler v. Board of Education,, upheld the New York Feinberg Law which authorized the public school authorities to dismiss employees who, after notice and hearing, were found to advocate the overthrow of the Government by unlawful means, or who were unable to explain satisfactorily membership in certain organizations found to have that aim. Likewise, Garner v. Los Angeles Board,,, upheld the right of the city to inquire of its employees as to "matters that may prove relevant to their fitness and suitability for the public service," including their membership, past and present, in the Communist Party or the Communist Political Association. There, it was held that the city had power to discharge employees who refused to file an affidavit disclosing such information to the school authorities. But, in each of these cases, it was emphasized that the State must conform to the requirements of due process. In Wieman v. Updegraff,, we struck down a so-called "loyalty oath" because it based employability solely on the fact of membership in certain organizations. We pointed out that membership itself may be innocent, and held that the classification of innocent and guilty together was arbitrary. This case rests squarely on the proposition that "constitutional protection does extend to the public servant whose exclusion pursuant to a statute is patently arbitrary or discriminatory." 344 U.S. at. Here, the Board, in support of its position, contends that only two possible inferences flow from appellant's claim of self-incrimination: (1) that the answering of the question would tend to prove him guilty of a crime in some way connected with his official conduct; or (2) that, in order to avoid answering the question, he falsely invoked the privilege by stating that the answer would tend to incriminate him, and thus committed perjury. Either inference, it insists, is sufficient to justify the termination of his employment. The Court of Appeals, however, accepted the Committee's determination that the privilege had been properly invoked, and it further held that no inference of Communist Party membership could be drawn from such a refusal to testify. It found the statute to impose merely a condition on public employment, and affirmed the summary action taken in the case. With this conclusion, we cannot agree. At the outset, we must condemn the practice of imputing a sinister meaning to the exercise of a person's constitutional right under the Fifth Amendment. The right of an accused person to refuse to testify, which had been in England merely a rule of evidence, was so important to our forefathers that they raised it to the dignity of a constitutional enactment, and it has been recognized as "one of the most valuable prerogatives of the citizen." Brown v. Walker,,. We have reaffirmed our faith in this principle recently in Quinn v. United States,. In Ullmann v. United States,, we scored the assumption that those who claim this privilege are either criminals or perjurers. The privilege against self-incrimination would be reduced to a hollow mockery if its exercise could be taken as equivalent either to a confession of guilt or a conclusive presumption of perjury. As we pointed out in Ullmann, a witness may have a reasonable fear of prosecution and yet be innocent of any wrongdoing. The privilege serves to protect the innocent who otherwise might be ensnared by ambiguous circumstances. See Griswold, The Fifth Amendment Today (1955). With this in mind, we consider the application of § 903. As interpreted and applied by the state courts, it operates to discharge every city employee who invokes the Fifth Amendment. In practical effect, the questions asked are taken as confessed, and made the basis of the discharge. No consideration is given to such factors as the subject matter of the questions, remoteness of the period to which they are directed, or justification for exercise of the privilege. It matters not whether the plea resulted from mistake, inadvertence, or legal advice conscientiously given, whether wisely or unwisely. The heavy hand of the statute falls alike on all who exercise their constitutional privilege, the full enjoyment of which every person is entitled to receive. Such action falls squarely within the prohibition of Wieman v. Updegraff, supra. It is one thing for the city authorities themselves to inquire into Slochower's fitness, but quite another for his discharge to be based entirely on events occurring before a federal committee whose inquiry was announced as not directed at "the property, affairs, or government of the city, or . . . official conduct of city employees." In this respect, the present case differs materially from Garner, where the city was attempting to elicit information necessary to determine the qualifications of its employees. Here, the Board had possessed the pertinent information for 12 years, and the questions which Professor Slochower refused to answer were admittedly asked for a purpose wholly unrelated to his college functions. On such a record, the Board cannot claim that its action was part of a bona fide attempt to gain needed and relevant information. Without attacking Professor Slochower's qualification for his position in any manner, and apparently with full knowledge of the testimony he had given some 12 years before at the state committee hearing, the Board seized upon his claim of privilege before the federal committee and converted it through the use of § 903 into a conclusive presumption of guilt. Since no inference of guilt was possible from the claim before the federal committee, the discharge falls of its own weight as wholly without support. There has not been the "protection of the individual against arbitrary action" which Mr. Justice Cardozo characterized as the very essence of due process. Ohio Bell Telephone Co. v. Public Utilities Commission,,. This is not to say that Slochower has a constitutional right to be an associate professor of German at Brooklyn College. The State has broad powers in the selection and discharge of its employees, and it may be that proper inquiry would show Slochower's continued employment to be inconsistent with a real interest of the State. But there has been no such inquiry here. We hold that the summary dismissal of appellant violates due process of law. The judgment is reversed, and the cause is remanded for further proceedings not inconsistent with this opinion. Reversed and remanded.

Section 903 of the New York City Charter provides that, whenever a city employee utilizes the privilege against self-incrimination to avoid answering before a legislative committee, a question relating to his official conduct, his employment shall terminate. A teacher in a college operated by the City was summarily discharged under this section, without notice or hearing, because, while testifying before a federal legislative committee, he refused to answer questions concerning his membership in the Communist Party in 1940 and 1941 on the ground that his answers might tend to incriminate him. Under the New York Education Law, he was entitled to tenure, and could be discharged only for cause and after notice, hearing and appeal. Held: in the circumstances of this case, his summary dismissal violated the Due Process Clause of the Fourteenth Amendment. . (a) The privilege against self-incrimination would be reduced to a hollow mockery if its exercise could be taken as equivalent either to a confession of guilt or a conclusive presumption of perjury. . (b) On the record in this case, it cannot be claimed that the Board's action in dismissing the teacher was part of a bona fide attempt to gain needed and relevant information regarding his qualifications for his position. . (c) Since no inference of guilt was possible from the claim of the privilege against self-incrimination before the federal committee, the discharge falls of its own weight as wholly without support. P.. (d) Adler v. Board of Education,, and Garner v. Los Angeles Board,, distinguished. . (e) Wieman v. Updegraff,, followed. . 306 N.Y. 532, 119 N.E.2d 373, 307 N.Y. 806, 121 N.E.2d 629, reversed and remanded.

1955_257

https://www.oyez.org/cases/1955/257

MR. JUSTICE MINTON delivered the opinion of the Court. These five cases present questions of the extent of coverage of the Federal Employers' Liability Act, as amended.

1. An employee of an interstate railroad who is injured while engaged in building new cars which are to be used by the railroad and its subsidiary in interstate commerce is within the coverage and entitled to the benefits of the Federal Employers' Liability Act, as amended in 1939. . (a) Under the 1939 amendment of § 1 of the Act, the test of coverage is whether any part of the employee's duties as a railroad employee furthers interstate commerce or in any way directly or closely and substantially affects such commerce -- not whether the employee is engaged in "new construction." . 2. An employee of an interstate railroad who was employed as a wheel molder in the railroad's wheel foundry, where worn wheels are sent from the railroad's lines for remolding and eventual return to the railroad's rolling stock, is within the coverage and entitled to the benefits of the Federal Employers' Liability Act, as amended in 1939. P.. 3. An employee of an interstate railroad who was injured while laying rails in a retarder yard, which the railroad was constructing for the purpose of facilitating the movement of freight trains in interstate commerce and which was opened to interstate traffic four months after the employee was injured, is within the coverage and entitled to the benefits of the Federal Employers' Liability Act, as amended in 1939. . 4. A decision of the Supreme Court of California in a case under the Federal Employers' Liability Act, the effect of which is to remand the case to the trial court, where the issues of negligence and damages remain to be tried, is not a final judgment reviewable by this Court under 28 U.S.C. § 1257. . 44 Cal. 2d 539, 543, 547, 282 P.2d 872, 875, 877, affirmed. 44 Cal. 2d 881, 882, 282 P.2d 879, 880, certiorari dismissed.

1955_134

https://www.oyez.org/cases/1955/134

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court. The question presented is whether the proceeds of the sale by the United States Government of standing timber on allotted lands on the Quinaielt Indian Reservation may be made subject to capital gains tax, consistently with applicable treaty and statutory provisions and the Government's role as respondents' trustee and guardian. When white men first came to the Olympic Peninsula, in what is now the State of Washington, they found the Quinaielt Tribe of Indians and their neighboring allied tribes occupying a tract of country lying between the Coast Range and the Pacific Ocean. This vast tract, with the exception of a small portion reserved for their exclusive use, was ceded by the Quinaielts and their neighbors to the United States in exchange for protection and tutelage by the treaty of July 1, 1855, and January 25, 1856, 12 Stat. 971. According to this treaty, the Quinaielts were to have exclusive use of their reservation "and no white man shall be permitted to reside thereon without permission of the tribe. . . ." Article II. Years later, Congress passed the General Allotment Act of 1887. Thereunder, Indians were to be allotted lands on their reservations not to exceed 160 acres of grazing land or 80 acres of agricultural land, and, 25 years after allotment, the allottees were to receive the lands discharged of the trust under which the United States had theretofore held them, and to obtain a patent "in fee, discharged of said trust and free of all charge or incumbrance whatsoever," though the President might extend the period. Respondents, husband and wife, were born on the reservation, and are described by the Government as full-blood, noncompetent Quinaielt Indians. They have lived on the reservation all their lives with the exception of the time served by respondent husband in the Armed Forces of the United States during World War II. Pursuant to the treaty and under the General Allotment Act of 1887, respondent husband was allotted from the treaty-guaranteed reservation 93.25 acres, and received a trust patent therefor dated October 1, 1907. During the tax year here in question, the fee title to this land was still held by the United States in trust for him, and was not subject to alienation or encumbrance by him except with the consent of the United States Government, which consent had never been given. The land was forest land, covered by coniferous trees from one hundred years to several hundred years old. It was not adaptable to agricultural purposes, and was of little value after the timber was cut. In the year 1943, the Bureau of Indian Affairs of the United States Department of the Interior entered into a contract of sale for the standing timber on respondent's allotted land for the total price of $15,080.80. The Government received the sum of $8,418.28 on behalf of respondent in that year. Upon demand of petitioner, Collector of Internal Revenue for the District of Washington, respondents filed a joint income tax return on October 10, 1947, for the tax year 1943, reporting long-term capital gain from the sale of the timber in that year. Simultaneously, they paid the taxes shown due. Thereafter, they filed a timely claim for refund of the taxes paid, and contended that the proceeds from the sale of timber from the allotted land were not subject to federal income taxation, because such taxation would be in violation of the provisions of the Quinaielt Treaty, the trust patent, and the General Allotment Act. The claim for refund was denied, and this action was instituted. The District Court found that the tax had been unlawfully collected, and ordered the refund. 110 F. Supp. 924. The Court of Appeals, agreeing with the District Court but recognizing a conflict between this case and the decision of the Tenth Circuit in the case of Jones v. Taunah, 186 F.2d 445, affirmed. 220 F.2d 349. Because of the apparent conflict, we granted certiorari. 350 U.S. 816. The Government urges us to view this case as an ordinary tax case, without regard to the treaty, relevant statutes, congressional policy concerning Indians, or the guardian-ward relationship between the United States and these particular Indians. It argues: "As citizens of the United States, they are taxable under the broad provisions of Sections 11 and 22(a) of the Internal Revenue Code of 1939, which imposes a tax on the net income of every individual, derived from any source whatever. There is no exemption from tax in the Quinaielt Treaty, the General Allotment Act, the taxing statute, or in any other legislation dealing with taxpayers' affairs. . . ." "Even if it be assumed that the United States would be prohibited from imposing a direct tax on the allotted land held in trust for the taxpayers, there would nevertheless be no prohibition against a federal tax on the income derived from the land, since a tax on such income is not the same as the tax on the source of the income, the land. " We agree with the Government that Indians are citizens, and that, in ordinary affairs of life, not governed by treaties or remedial legislation, they are subject to the payment of income taxes as are other citizens. We also agree that, to be valid, exemptions to tax laws should be clearly expressed. But we cannot agree that taxability of respondents in these circumstances is unaffected by the treaty, the trust patent, or the Allotment Act. The courts below held that imposition of the tax here in question is inconsistent with the Government's promise to transfer the fee "free of all charge or incumbrance whatsoever." Although this statutory provision is not expressly couched in terms of nontaxability, this Court has said that "Doubtful expressions are to be resolved in favor of the weak and defenseless people who are the wards of the nation, dependent upon its protection and good faith. Hence, in the words of Chief Justice Marshall:" "The language used in treaties with the Indians should never be construed to their prejudice. If words be made use of which are susceptible of a more extended meaning than their plain import as connected with the tenor of the treaty, they should be considered as used only in the latter sense." "Worcester v. State of Georgia, 6 Pet. 515," Carpenter v. Shaw,,. Thus, the general words "charge or incumbrance" might well be sufficient to include taxation. But Congress, in an amendment to the General Allotment Act, gave additional force to respondents' position. Section 6 of that Act was amended to include a proviso -- "That the Secretary of the Interior may, in his discretion, and he is authorized, whenever he shall be satisfied that any Indian allottee is competent and capable of managing his or her affairs at any time to cause to be issued to such allottee a patent in fee simple, and thereafter all restrictions as to sale, incumbrance, or taxation of said land shall be removed and said land shall not be liable to the satisfaction of any debt contracted prior to the issuing of such patent. . . . " The Government argues that this amendment was directed solely at permitting state and local taxation after a transfer in fee, but there is no indication in the legislative history of the amendment that it was to be so limited. The fact that this amendment antedated the federal income tax by 10 years also seems irrelevant. The literal language of the proviso evinces a congressional intent to subject an Indian allotment to all taxes only after a patent in fee is issued to the allottee. This, in turn, implies that, until such time as the patent is issued, the allotment shall be free from all taxes, both those in being and those which might in the future be enacted. The first opinion of an Attorney General touching on this question seemed to construe the language of the amendment to Section 6 as exempting from the income tax income derived from restricted allotments. And even without such a clear statutory basis for exemption, a later Attorney General advised that he was -- "[U]nable, by implication, to impute to Congress under the broad language of our Internal Revenue Acts an intent to impose a tax for the benefit of the Federal Government on income derived from the restricted property of these wards of the nation -- property the management and control of which rests largely in the hands of officers of the Government charged by law with the responsibility and duty of protecting the interests and welfare of these dependent people. In other words, it is not lightly to be assumed that Congress intended to tax the ward for the benefit of the guardian. " Two of these opinions were published as Treasury Decisions. On the basis of these opinions and decisions, and a series of district and circuit court decisions, it was said by Felix S. Cohen, an acknowledged expert in Indian law, that "[i]t is clear that the exemption accorded tribal and restricted Indian lands extends to the income derived directly therefrom." These relatively contemporaneous official and unofficial writings are entitled to consideration. The Government makes much of a subsequent Attorney General's opinion, which expressly overruled an earlier opinion on the authority of Superintendent of Five Civilized Tribes v. Commissioner.. That case is distinguishable from the case at hand. It involved what the Court characterized as "income derived from investment of surplus income from land," or income on income, which Cohen termed "reinvestment income." The purpose of the allotment system was to protect the Indians' interest, and "to prepare the Indians to take their place as independent, qualified members of the modern body politic." Board of Commissioners v. Seber,,. To this end, it is necessary to preserve the trust and income derived directly therefrom, but it is not necessary to exempt reinvestment income from tax burdens. It is noteworthy that the Superintendent case did not involve an attempt to tax the land "surplus." The wisdom of the congressional exemption from tax embodied in Section 6 of the General Allotment Act is manifested by the facts of the instant case. Respondent's timber constitutes the major value of his allotted land. The Government determines the conditions under which the cutting is made. Once logged off, the land is of little value. The land no longer serves the purpose for which it was by treaty set aside to his ancestors, and for which it was allotted to him. It can no longer be adequate to his needs and serve the purpose of bringing him finally to a state of competency and independence. Unless the proceeds of the timber sale are preserved for respondent, he cannot go forward when declared competent with the necessary chance of economic survival in competition with others. This chance is guaranteed by the tax exemption afforded by the General Allotment Act and the solemn undertaking in the patent. It is unreasonable to infer that, in enacting the income tax law, Congress intended to limit or undermine the Government's undertaking. To tax respondent under these circumstances would, in the words of the court below, be, "at the least, a sorry breach of faith with these Indians." The judgment of the Court of Appeals is Affirmed.

Income from the sale by the Government of standing timber on allotted forest land on the Quinaielt Indian Reservation held in trust by the Government for a noncompetent Quinaielt Indian may not be subjected to a capital gains tax consistently with applicable treaty and statutory provisions and the Government's role as trustee and guardian for such Indian. . (a) Though Indians are citizens, and are subject to income taxes, it cannot be said that, in the circumstances of this case, the taxability of this Indian is unaffected by the treaty with the Quinaielt Indians, the General Allotment Act, or the trust patent under which this land is held in trust for the Indian. . (b) The provision of § 5 of the General Allotment Act of 1887 that lands on Indian reservations allotted to individual Indians and held in trust for them by the Government shall ultimately be conveyed to them in fee simple discharged of the trust and "free of all charge or incumbrance whatsoever" might well be construed as exempting such lands from taxation. . (c) The provision of § 6 of the General Allotment Act, as amended, that, when a patent in fee simple has been issued to an Indian allottee, "all restrictions as to . . . taxation of said land shall be removed" implies that, until such time as the patent is issued, the allotment shall be free from all taxes. . (d) Superintendent of Five Civilized Tribes v. Commissioner,, distinguished. P.. (e) Since the purpose of the General Allotment Act is to enable Indian allottees to attain a state of competency and independence, and since that purpose would be defeated by imposition of the tax here proposed, it is unreasonable to infer that, in enacting the income tax law, Congress intended to destroy the tax exemption afforded by the General Allotment Act. P.. 220 F.2d 349 affirmed.

1955_22

https://www.oyez.org/cases/1955/22

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court. This case raises an issue of coverage under the Fair Labor Standards Act, as amended by the Portal-to-Portal Act of 1947 with respect to work performed before or after the direct or productive labor for which the worker is primarily paid. The precise question is whether workers in a battery plant must be paid as a part of their "principal" activities for the time incident to changing clothes at the beginning of the shift and showering at the end, where they must make extensive use of dangerously caustic and toxic materials, and are compelled by circumstances, including vital considerations of health had hygiene, to change clothes and to shower in facilities which state law requires their employer to provide, or whether these activities are "preliminary" or "postliminary" within the meaning of the Portal-to-Portal Act, and therefore not to be included in measuring the work time for which compensation is required under the Fair Labor Standards Act. The Secretary of Labor, contending that these activities are so covered, brought this action in the United States District Court for the Middle District of Tennessee to enjoin petitioners from violating the overtime and recordkeeping requirements of Sections 7 and 11(c) of the Fair Labor Standards Act of 1938, as amended, in the employment of production workers, and from violating Section 15(a)(1) of the Act by making interstate shipments of the goods produced by such workers. The District Court gave judgment for the plaintiff, and the Court of Appeals for the Sixth Circuit affirmed. 215 F.2d 171, 172. Because of the importance of the interpretation of the portal-to-portal provisions in the administration of the Fair Labor Standards Act, and because of a conflict between the circuits on the subject, Mitchell v. King Packing Co., 216 F.2d 618, we granted certiorari in both cases, 349 U.S. 914. There is no question of backpay involved here, because the Court limited its judgment to prospective relief. Nor is the question of changing clothes and showering under normal conditions involved, because the Government concedes that these activities ordinarily constitute "preliminary" or "postliminary" activities excluded from compensable work time as contemplated in the Act. It contends, however, that such activities in the circumstances of this case are an integral and indispensable part of the production of batteries, the "principal activity" in which these employees were engaged, and are therefore compensable under the relevant provisions of the Act. The petitioners own and operate a plant where they are engaged in manufacturing automotive-type wet storage batteries which they sell in interstate commerce. All of the production employees, such as those with whom we are here concerned, customarily work with or near the various chemicals used in the plant. These include lead metal, lead oxide, lead sulphate, lead peroxide, and sulphuric acid. Some of these are in liquid form. some are in powder form, and some are solid. In the manufacturing process, some of the materials go through various changes and give off dangerous fumes. Some are spilled or dropped, and thus become a part of the dust in the air. In general, the chemicals permeate the entire plant and everything and everyone in it. Lead and its compounds are toxic to human beings. Regular exposure to atmosphere containing 1.5 milligrams or more of lead per 10 cubic meters is regarded by the medical profession as hazardous and involving the possibility of lead intoxication or lead poisoning. In battery plants, such as this one, it is "almost impossible," it was testified, to keep lead concentration in the air "within absolutely safe limits," and, in petitioners' plant, "lead oxide was on the floor and in the air and on the plates which employees handled." Abnormal concentrations of lead were discovered in the bodies of some of petitioners' employees, and petitioners' insurance doctor recommended that such employees be segregated from their customary duties. The primary ways in which lead poisoning is contracted are by inhalation and ingestion, e.g., by taking in particles through the nose or mouth, an open cut or sore, or any other body cavity. The risk is "very great," and even exists outside the plant, because the lead dust and lead fumes which are prevalent in the plant attach themselves to the skin, clothing, and hair of the employees. Even the families of battery workers may be placed in some danger if lead particles are brought home in the workers' clothing or shoes. Sulphuric acid in the plant is also a hazard. It is irritating to the skin, and can cause severe burns. When the acid contacts clothing, it causes disintegration or rapid deterioration. Moreover, the effects of sulphuric acid make the employee more susceptible than he would otherwise be to contamination by particles of lead and lead compounds. Petitioners, like other manufacturers, try to minimize these hazards by plant ventilation, but industrial and medical experts are in agreement that ventilation alone is not sufficient to avoid the dangers of lead poisoning. Safe operation also requires the removal of clothing and showering at the end of the work period. This has become a recognized part of industrial hygiene programs in the industry, and the state law of Tennessee requires facilities for this purpose. Tenn.Code Ann. (Williams 1934), 1952 Supp., Section 5788.15. In addition, the Tennessee Workmen's Compensation Act, Tenn.Code Ann. (Williams 1934), 1952 Supp., Sections 6851-6901, which covers petitioners, makes lead poisoning a compensable occupational disease, Section 6852(d). In order to comply with this statute, petitioners carry insurance, under Section 6895, to protect against liability, and the insurance carrier would not accept the insurance risk if defendants refused to have showering and clothes-changing facilities for their employees. Accordingly, in order to make their plant as safe a place as is possible under the circumstances and thereby increase the efficiency of its operation, petitioners have equipped it with shower facilities and a locker room with separate lockers for work and street clothing. Also, they furnish without charge old but clean work clothes which the employees wear. The cost of providing their own work clothing would be prohibitive for the employees, since the acid causes such rapid deterioration that the clothes sometimes last only a few days. Employees regularly change into work clothes before the beginning of the productive work period, and shower and change back at the end of that period. Petitioners issued no written instructions to employees on this subject, but the employees testified and the foreman declared in a signed statement that, "In the afternoon, the men are required by the company to take a bath because lead oxide might be absorbed into the blood stream. It protects the company and the employee both." Petitioners do not record or pay for the time which their employees spend in these activities, which was found to amount to thirty minutes a day, ten minutes in the morning and twenty minutes in the afternoon, for each employees. They do not challenge the concurrent findings of the courts below that the clothes-changing and showering activities of the employees are indispensable to the performance of their productive work, and integrally related thereto. They do contend that these activities fall without the concept of "principal activity," and that, being performed off the production line and before or after regular shift hours, they are beyond the protection of the Fair Labor Standards Act. The trial court held that these activities "are made necessary by the nature of the work performed"; that they fulfill "mutual obligations" between petitioners and their employees; that they "directly benefit" petitioners in the operation of their business, and that they "are so closely related to other duties performed by [petitioners'] employees as to be an integral part thereof, and are therefore included among the principal activities of said employees." It concluded that the time thereby consumed is not excluded from coverage by Section 4 of the Portal-to-Portal Act, but constitutes time worked within the meaning of the Fair Labor Standards Act. The Court of Appeals affirmed, likewise holding that the term "principal activity of activities" in Section 4 embraces all activities which are "an integral and indispensable part of the principal activities," and that the activities in question fall within this category. With this conclusion, we agree. The Portal-to-Portal Act was designed primarily to meet an "existing emergency" resulting from claims which, if allowed in accordance with Anderson v. Mt. Clemens Pottery Co.,, would have created "wholly unexpected liabilities, immense in amount and retroactive in operation." This purpose was fulfilled by the enactment of Section 2. The trial court specifically limited the effect of this judgment to services rendered after the judgment becomes final. We are not therefore concerned with the provisions of Section 2, which is inapplicable to actions relating to activities of employees performed after May 14, 1947. The language of Section 4 is not free from ambiguity, and the legislative history of the Portal-to-Portal Act becomes of importance. That Act originated in a House bill, which had no provision comparable to Section 4, but rather gave similar treatment to retroactive and prospective claims, i.e., excluding coverage except by contract or custom in the industry. H.R.Rep. No. 326, 80th Cong., 1st Sess. 12. The Conference Report stated that the language of Section 4 follows the Senate bill. S.Rep. No. 48, 80th Cong., 1st Sess. 48. In the Senate, the colloquy between several Senators and Senator Cooper, a sponsor of the bill and a member of the three-man subcommittee that held hearings for the Committee on the Judiciary which reported it, demonstrates that the Senate intended the activities of changing clothes and showering to be within the protection of the Act if they are an integral part of and are essential to the principal activities of the employees. There is some conflicting history in the House, but the Senate discussion is more clear-cut and, because the Section originated in that body is more persuasive. In 1949, Section 3(o) was added to the Act. Both sides apparently take comfort from it, but the position of the Government is strengthened by it, since its clear implication is that clothes changing and washing, which are otherwise a part of the principal activity, may be expressly excluded from coverage by agreement. The congressional understanding of the scope of Section 4 is further marked by the fact that the Congress also enacted Section 16(c) at the same time, after hearing from the Administrator his outstanding interpretation of the coverage of certain preparatory activities closely related to the principal activity and indispensable to its performance. On the whole ,it is clear, we think, that, while Congress intended to outlaw claims prior to 1947 for wages based on all employee activities unless provided for by contract or custom of the industry, including, of course, activities performed before or after regular hours of work, it did not intend to deprive employees of the benefits of the Fair Labor Standards Act where they are an integral part of and indispensable to their principal activities. Had Congress intended the result urged by petitioner, the very different provisions of Sections 2 and 4 would have been unnecessary; Section 2 could have been given prospective, as well as retroactive, effect. We therefore conclude that activities performed either before or after the regular work shift, on or off the production line, are compensable under the portal-to-portal provisions of the Fair Labor Standards Act if those activities are an integral and indispensable part of the principal activities for which covered workmen are employed and are not specifically excluded by Section 4(a)(1). We find no difficulty in fitting the facts of this case to that conclusion, because it would be difficult to conjure up an instance where changing clothes and showering are more clearly an integral and indispensable part of the principal activity of the employment than in the case of these employees. The judgment is Affirmed

Workers in a plant manufacturing wet storage batteries, in which extensive use is made of dangerously caustic and toxic materials, are compelled by vital considerations of health and hygiene and by other considerations to change clothes before and after work and to shower after work in facilities which state law requires their employer to provide. Held: changing clothes and showering are parts of their "principal," rather than their "preliminary" or "postliminary," activities, within the meaning of § 4(a)(2) of the Portal-to-Portal Act, and the time spent in these activities must be counted in measuring the worktime for which compensation is required by the Fair Labor Standards Act. . (a) Activities performed either before or after the regular work shift, on or off the production line, are compensable under the portal-to-portal provisions of the Fair Labor Standards Act if those activities are an integral and indispensable part of the principal activities for which covered workmen are employed, and are not specifically excluded by § 4(a)(1). P.. (b) The conclusion here reached is supported by the legislative history of the Portal-to-Portal Act and by other provisions of the Act and amendments thereto. . (c) On the facts of this case, changing clothes and showering by these employees clearly are integral and indispensable parts of the principal activity of their employment. ,. 215 F.2d 171 affirmed.

1955_58

https://www.oyez.org/cases/1955/58

MR. JUSTICE FRANKFURTER delivered the opinion of the Court. On November 10, 1954, the United States Attorney for the Southern District of New York filed an application under the Immunity Act of 1954, 68 Stat. 745, 18 U.S.C. (Supp. II) § 3486, for an order requiring petitioner to testify before a grand jury. The Immunity Act, in its pertinent portions, provides: "(c) Whenever in the judgment of a United States attorney the testimony of any witness, or the production of books, papers, or other evidence by any witness, in any case or proceeding before any grand jury or court of the United States involving any interference with or endangering of, or any plans or attempts to interfere with or endanger, the national security or defense of the United States by treason, sabotage, espionage, sedition, seditious conspiracy, violations of chapter 115 of title 18 of the United States Code, violations of the Internal Security Act of 1950 (64 Stat. 987), violations of the Atomic Energy Act of 1946 (60 Stat. 755), as amended, violations of sections 212(a)(27), (28), (29) or 241(a)(6), (7) or 313(a) of the Immigration and Nationality Act (66 Stat. 182-186; 204-206; 240-241), and conspiracies involving any of the foregoing, is necessary to the public interest, he, upon the approval of the Attorney General, shall make application to the court that the witness shall be instructed to testify or produce evidence subject to the provisions of this section, and upon order of the court such witness shall not be excused from testifying or from producing books, papers, or other evidence on the ground that the testimony or evidence required of him may tend to incriminate him or subject him to a penalty or forfeiture. But no such witness shall be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he is compelled, after having claimed his privilege against self-incrimination, to testify or produce evidence, nor shall testimony so compelled be used as evidence in any criminal proceeding (except prosecution described in subsection (d) hereof) against him in any court." "(d) No witness shall be exempt under the provision of this section from prosecution for perjury or contempt committed while giving testimony or producing evidence under compulsion as provided in this section." In his application, the United States Attorney alleged the following facts. On November 3, 1954, petitioner, pursuant to subpoena, appeared before a duly constituted grand jury of the Southern District of New York which was investigating matters concerned with attempts to endanger the national security by espionage and conspiracy to commit espionage. The grand jury asked him a series of questions relating to his knowledge of such activities, to his and other persons' participation in such activities, and to his and other persons' membership in the Communist Party. Petitioner, invoking the privilege against self-incrimination, refused to answer the questions. The United States Attorney also asserted that he deemed the testimony necessary to the public interest of the United States, and annexed a letter from the Attorney General of the United States approving the application. The United States Attorney, in compliance with a request of the district judge, filed an affidavit asserting his own good faith in filing the application. Petitioner, contesting the application, attacked the constitutionality of the Act and urged that, if the immunity statute be held constitutional, the District Court should, in the exercise of its discretion, deny the application. He filed an affidavit setting forth in detail experiences with agents of the Department of Justice and congressional investigating committees and other information in support of his plea for an exercise of discretion by the District Court. The Government, in reply, filed affidavits denying some of the allegations set forth in petitioner's affidavit. On January 31, 1955, the District Court sustained the constitutionality of the statute. 128 F. Supp. 617. Its order, dated February 8, 1955, instructed petitioner "to answer the questions propounded to him before the Grand Jury and to testify and produce evidence with respect to such matters under inquiry before said Grand Jury. . . ." Petitioner appealed from this order, but the Court of Appeals for the Second Circuit dismissed the appeal on the authority of Cobbledick v. United States,. Petitioner again refused to answer the questions which the District Court had ordered him to answer. He was then brought before the District Court and, on stipulation that he had refused to obey the order of the court of February 8, he was convicted of contempt and sentenced to six months' imprisonment unless he should purge himself of the contempt. Petitioner appealed to the Court of Appeals for the Second Circuit, which affirmed the judgment of the District Court. 221 F.2d 760. The importance of the questions at issue, in view of the differences between the legislation sustained in Brown v. Walker,, and the Act under review, led us to bring the case here. 349 U.S. 951. Four major questions are raised by this appeal: is the immunity provided by the Act sufficiently broad to displace the protection afforded by the privilege against self-incrimination? Assuming that the statutory requirements are met, does the Act give the district judge discretion to deny an application for an order requiring a witness to answer relevant questions put by the grand jury, and, if so, is the court thereby required to exercise a function that is not an exercise of "judicial Power"? Did Congress provide immunity from state prosecution for crime, and, if so, is it empowered to do so? Does the Fifth Amendment prohibit compulsion of what would otherwise be self-incriminating testimony no matter what the scope of the immunity statute? It is relevant to define explicitly the spirit in which the Fifth Amendment's privilege against self-incrimination should be approached. This command of the Fifth Amendment ("nor shall any person . . . be compelled in any criminal case to be a witness against himself. . . .") registers an important advance in the development of our liberty -- "one of the great landmarks in man's struggle to make himself civilized." Time has not shown that protection from the evils against which this safeguard was directed is needless or unwarranted. This constitutional protection must not be interpreted in a hostile or niggardly spirit. Too many, even those who should be better advised, view this privilege as a shelter for wrongdoers. They too readily assume that those who invoke it are either guilty of crime or commit perjury in claiming the privilege. Such a view does scant honor to the patriots who sponsored the Bill of Rights as a condition to acceptance of the Constitution by the ratifying States. The Founders of the Nation were not naive or disregardful of the interests of justice. The difference between them and those who deem the privilege an obstruction to due inquiry has been appropriately indicated by Chief Judge Magruder: "Our forefathers, when they wrote this provision into the Fifth Amendment of the Constitution, had in mind a lot of history which has been largely forgotten today. See VIII Wigmore on Evidence (3d ed.1940) § 2250 et seq.; Morgan, The Privilege Against Self-Incrimination, 34 Minn.L.Rev. 1 (1949). They made a judgment and expressed it in our fundamental law, that it were better for an occasional crime to go unpunished than that the prosecution should be free to build up a criminal case, in whole or in part, with the assistance of enforced disclosures by the accused. The privilege against self-incrimination serves as a protection to the innocent, as well as to the guilty, and we have been admonished that it should be given a liberal application. Hoffman v. United States, . . .,. . . . If it be thought that the privilege is outmoded in the conditions of this modern age, then the thing to do is to take it out of the Constitution, not to whittle it down by the subtle encroachments of judicial opinion." Maffie v. United States, 209 F.2d 225, 227. Nothing new can be put into the Constitution except through the amendatory process. Nothing old can be taken out without the same process. No doubt, the constitutional privilege may, on occasion, save a guilty man from his just deserts. It was aimed at a more far-reaching evil -- a recurrence of the Inquisition and the Star Chamber, even if not in their stark brutality. Prevention of the greater evil was deemed of more importance than occurrence of the lesser evil. Having had much experience with a tendency in human nature to abuse power, the Founders sought to close the doors against like future abuses by law-enforcing agencies. As no constitutional guarantee enjoys preference, so none should suffer subordination or deletion. It is appropriate to read the conviction expressed in a memorable address by Senator Albert J. Beveridge to the American Bar Association in 1920, a time when there was also manifested impatience with some of the restrictions of the Constitution in the presumed interest of security. His appeal was to the Constitution -- to the whole Constitution, not to a mutilating selection of those parts only which for the moment find favor. To view a particular provision of the Bill of Rights with disfavor inevitably results in a constricted application of it. This is to disrespect the Constitution. It is in this spirit of strict, not lax, observance of the constitutional protection of the individual that we approach the claims made by petitioner in this case. The attack on the Immunity Act as violating the Fifth Amendment is not a new one. Sixty years ago, this Court considered, in Brown v. Walker,, the constitutionality of a similar Act, the Act of February 11, 1893, 27 Stat. 443. In that case, Brown, auditor for a railroad company, had been subpoenaed to testify before a grand jury which was investigating charges that officers and agents of the company had violated the Interstate Commerce Act. Invoking the privilege against self-incrimination, he refused to answer certain questions concerning the operations and the rebate policy of the railroad. On an order to show cause before the United States District Court for the Western District of Pennsylvania, he was adjudged in contempt. His petition for a writ of habeas corpus to the Circuit Court for the Western District of Pennsylvania was dismissed. Petitioner appealed to this Court, urging that the 1893 immunity statute was unconstitutional. The Court considered and rejected petitioner's arguments, holding that a statute which compelled testimony but secured the witness against a criminal prosecution which might be aided directly or indirectly by his disclosures did not violate the Fifth Amendment's privilege against self-incrimination, and that the 1893 statute did provide such immunity. "While the constitutional provision in question is justly regarded as one of the most valuable prerogatives of the citizen, its object is fully accomplished by the statutory immunity, and we are, therefore, of opinion that the witness was compellable to answer. . . ." 161 U.S. at. Petitioner, however, attempts to distinguish Brown v. Walker. He argues that this case is different from Brown v. Walker because the impact of the disabilities imposed by federal and state authorities and the public in general -- such as loss of job, expulsion from labor unions, state registration and investigation statutes, passport eligibility, and general public opprobrium -- is so oppressive that the statute does not give him true immunity. This, he alleges, is significantly different from the impact of testifying on the auditor in Brown v. Walker, who could the next day resume his job with reputation unaffected. But, as this Court has often held, the immunity granted need only remove those sanctions which generate the fear justifying invocation of the privilege: "The interdiction of the Fifth Amendment operates only where a witness is asked to incriminate himself -- in other words, to give testimony which may possibly expose him to a criminal charge. But if the criminality has already been taken away, the Amendment ceases to apply." Hale v. Henkel,,. Here, since the Immunity Act protects a witness who is compelled to answer to the extent of his constitutional immunity, he has, of course, when a particular sanction is sought to be imposed against him, the right to claim that it is criminal in nature. Again, the petitioner seeks to distinguish this case from Brown v. Walker by claiming that, under the Immunity Act of 1954, the district judge to whom the United States Attorney must apply for an order instructing him to testify has discretion in granting the order, and thus has discretion in granting the immunity which automatically follows from the order. Petitioner cites the language of the statute, the legislative history, and miscellaneous other authorities in support of his construction. The Government contends that the court has no discretion to determine whether the public interest would best be served by exchanging immunity from prosecution for testimony, that its only function is to order a witness to testify if it determines that the case is within the framework of the statute. We are concerned here only with § (c), and therefore need not pass on this question with respect to §§ (a) and (b) of the Act. A fair reading of § (c) does not indicate that the district judge has any discretion to deny the order on the ground that the public interest does not warrant it. We agree with District Judge Weinfeld's interpretation of this section: "The most that can be said for the legislative history is that it is, on the whole, inconclusive. Certainly it contains nothing that requires the court to reject the construction which the statutory language clearly requires. Especially is this so where the construction contended for purports to raise a serious constitutional question as to the role of the judiciary under the doctrine of separation of powers. The Supreme Court has repeatedly warned" "if a serious doubt of constitutionality is raised, it is a cardinal principle that this Court will first ascertain whether a construction of the statute is fairly possible by which the question may be avoided. " "Indeed, the Court has stated that words may be strained 'in the candid service of avoiding a serious constitutional doubt.' Here, there is no need to strain words. It requires neither torturing of language nor disregard of a clear legislative policy to avoid the constitutional question advanced by the witness. Indeed, to reach the constitutional issue would require straining of language. In such circumstances, the court's duty is plainly to avoid the constitutional question." 128 F. Supp. at 627-628. Since the Court's duty under § (c) is only to ascertain whether the statutory requirements are complied with by the grand jury, the United States Attorney, and the Attorney General, we have no difficulty in concluding that the district court is confined within the scope of "judicial Power." Interstate Commerce Commission v. Brimson,. Petitioner further argues that the immunity is not constitutionally sufficient so long as a witness is subject to the very real possibility of state prosecution. He urges that the statute does not, and constitutionally could not, grant such immunity. The immunity portion of the statute contains two parts. The first prohibits prosecutions and is worded virtually in the terms of the 1893 Act. The second makes explicit that the compelled testimony shall not be used against the witness in any proceeding in any court. Such a clause was construed in Adams v. Maryland,, to apply to state courts. In Brown v. Walker, it was urged that the prohibition against prosecution did not grant protection against prosecution in the state courts. First finding that Congress could constitutionally provide such immunity, the Court then interpreted the statute: "The act in question contains no suggestion that it is to be applied only to the Federal courts. It declares broadly that" "no person shall be excused from attending and testifying . . . before the Interstate Commerce Commission . . . on the ground . . . that the testimony . . . required of him may tend to criminate him," "etc." "But no person shall be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter or thing concerning which he may testify," "etc. It is not that he shall not be prosecuted for or on account of any crime concerning which he may testify, which might possibly be urged to apply only to crimes under the Federal law and not to crimes, such as the passing of counterfeit money, etc., which are also cognizable under state laws; but the immunity extends to any transaction, matter or thing concerning which he may testify, which clearly indicates that the immunity is intended to be general, and to be applicable whenever and in whatever court such prosecution may be had." 161 U.S. at. The Report of the Committee on the Judiciary of the House of Representatives supports the broad interpretation of the Act before us: "Even though the power of Congress to prohibit a subsequent State prosecution is doubtful, such a constitutional question should not prevent the enactment of the recommended bill. The language of the amendment . . . is sufficiently broad to ban a subsequent State prosecution if it be determined that the Congress has the constitutional power to do so. In addition, the amendment recommended provides the additional protection -- as set forth in the Adams case, by outlawing the subsequent use of the compelled testimony in any criminal proceeding -- State or Federal." "By the use of these two distinct concepts, the committee believes that the fullest protection that can be afforded the witness will be achieved." H.R.Rep. No. 2606, 83d Cong., 2d Sess. 7. Petitioner questions the constitutional power of Congress to grant immunity from state prosecution. Congressional abolition of state power to punish crimes committed in violation of state law presents a more drastic exercise of congressional power than that which we considered in Adams. In that case, only the use of the compelled testimony, not prosecution itself, was prohibited. Here, the State is forbidden to prosecute. But it cannot be contested that Congress has power to provide for national defense and the complementary power "To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof." U.S.Const., Art. I, § 8, cl. 18. The Immunity Act is concerned with the national security. It reflects a congressional policy to increase the possibility of more complete and open disclosure by removal of fear of state prosecution. We cannot say that Congress' paramount authority in safeguarding national security does not justify the restriction it has placed on the exercise of state power for the more effective exercise of conceded federal power. We have already, in the name of the Commerce Clause, upheld a similar restriction on state court jurisdiction, Brown v. Walker, 161 U.S. at, and we can find no distinction between the reach of congressional power with respect to commerce and its power with respect to national security. See also Hines v. Davidowitz,. Petitioner also urges that, if Brown v. Walker is found nondistinguishable and controlling, then that case should be reconsidered and overruled. He also urges upon us a "return" to a literal reading of the Fifth Amendment. Brown v. Walker was the second case to deal with an immunity statute. Four years previously, in Counselman v. Hitchcock,, a unanimous Court had found constitutionally inadequate the predecessor to the 1893 statute because the immunity granted was incomplete, in that it merely forbade the use of the testimony given, and failed to protect a witness from future prosecution based on knowledge and sources of information obtained from the compelled testimony. It was with this background that the 1893 statute, providing complete immunity from prosecution, was passed, and that Brown v. Walker was argued and decided. As in Counselman, appellant's numerous arguments were presented by James C. Carter, widely acknowledged as the leader of the American bar. The Court was closely divided in upholding the statute, and the opinions reflect the thoroughness with which the issues were considered. Since that time, the Court's holding in Brown v. Walker has never been challenged; the case and the doctrine it announced have consistently and without question been treated as definitive by this Court in opinions written, among others, by Holmes and Brandeis, JJ. See, e.g., McCarthy v. Arndstein,,; Heike v. United States,,. The 1893 statute has become part of our constitutional fabric, and has been included "in substantially the same terms, in virtually all of the major regulatory enactments of the Federal Government." Shapiro v. United States,,. For a partial list of these statutes, see id. at, n. 4. Moreover, the States, with one exception -- a case decided prior to Brown v. Walker -- have, under their own constitutions, enunciated the same doctrine, 8 Wigmore, Evidence (3d ed.), § 2281, and have passed numerous statutes compelling testimony in exchange for immunity in the form either of complete amnesty or of prohibition of the use of the compelled testimony. For a list of such statutes, see 8 Wigmore, Evidence (3d ed.), § 2281, n. 11 (pp. 478-501) and Pocket Supplement thereto, § 2281, n. 11 (pp. 147-157). We are not dealing here with one of the vague, undefinable, admonitory provisions of the Constitution whose scope is inevitably addressed to changing circumstances. The privilege against self-incrimination is a specific provision of which it is peculiarly true that "a page of history is worth a volume of logic." New York Trust Co. v. Eisner,,. For the history of the privilege establishes not only that it is not to be interpreted literally, but also that its sole concern is, as its name indicates, with the danger to a witness forced to give testimony leading to the infliction of "penalties affixed to the criminal acts. . . ." Boyd v. United States,,. We leave Boyd v. United States unqualified, as it was left unqualified in Brown v. Walker. Immunity displaces the danger. Once the reason for the privilege ceases, the privilege ceases. We reaffirm Brown v. Walker, and, in so doing, we need not repeat the answers given by that case to the other points raised by petitioner. The judgment of the Court of Appeals is Affirmed.

Pursuant to subpoena, petitioner appeared before a federal grand jury which was investigating attempts to endanger the national security by espionage and conspiracy to commit espionage. Invoking the privilege against self-incrimination, he refused to answer questions relating to his knowledge of such activities, to his and other persons' participation in such activities, and to his and other persons' membership in the Communist Party. Under the Immunity Act of 1954, 18 U.S.C. § 2486(c), the United States Attorney, with the approval of the Attorney General, applied to a Federal District Court for an order requiring petitioner to testify before the grand jury. The Court issued such an order; petitioner persisted in his refusal to testify, and he was convicted of contempt and sentenced to imprisonment. Held: The Act is constitutional, and the conviction is sustained. . 1. The Act does not violate the Fifth Amendment, because the immunity which it provides against prosecutions, penalties and forfeitures is sufficiently broad to displace the protection afforded by the privilege against self-incrimination. . 2. Assuming that the statutory requirements are met, subsection (c) does not give a Federal District Court discretion to deny an application for an order requiring a witness to answer relevant questions put by a grand jury, and therefore it does not impose on the Court a nonjudicial function. . 3. The Act provides immunity from state prosecution for crime; and, in doing so, it does not exceed the constitutional power of Congress. . 4. Brown v. Walker,, reaffirmed and followed. . 221 F.2d 760, affirmed.

1955_530

https://www.oyez.org/cases/1955/530

MR. JUSTICE REED delivered the opinion of the Court. This case, as stated in the brief for the United Automobile, Aircraft, and Agricultural Implement Workers of America, presents the question whether or not a State may enjoin, through its labor statute, the Wisconsin Employment Peace Act, St.1953, § 111.01 et seq., union conduct of a kind which may be an unfair labor practice under the National Labor Relations Act, as amended. Appellant concedes that a State may punish violence arising in labor relation controversies under its generally applicable criminal statutes. It does not admit or deny the charged violence. The union considers the coercion immaterial in this case. Its position is that a State may not exercise this police power through an agency that is concerned only with labor relations. The argument is that a State Board will use this power to stop force and violence in order to further state labor policy, thus creating a conflict with the federal policy as developed by the National Labor Relations Board. The union argues that Wisconsin has no jurisdiction to enjoin the alleged conduct under its labor act because such conduct would be an unfair labor practice under the National Labor Relations Act. This controversy arose out of the failure of appellant and the Kohler Company to reach an accord concerning a new collective bargaining agreement. As the parties were unable to agree, Kohler's production workers struck and picketed the premises of the company. Ten days later, Kohler filed a complaint with the Wisconsin Employment Relations Board charging appellant and others with committing unfair labor practices within the meaning of the Wisconsin Employment Peace Act. It was alleged that appellant's members had engaged in mass picketing, thereby obstructing ingress to and egress from the Kohler plant; interfered with the free and uninterrupted use of public ways; prevented persons desiring to be employed by Kohler from entering the plant; and coerced employees who desired to work, and threatened them and their families with physical injury. The State Board found the allegations to be true, and issued an order that directed the union and certain of its members to cease all such activities. The order appears below.3 Without change of substance it was enforced by a Wisconsin Circuit Court, and the State Supreme Court affirmed that judgment. 269 Wis. 578, 70 N.W.2d 191. As the appeal raised an important question of federalism, we noted probable jurisdiction. 350 U.S. 957. The Kohler Company is subject to the National Labor Relations Act. It seems agreed, and we think correctly in view of the findings of fact, that the alleged conduct of the union in coercing employees in the exercise of their rights is a violation of § 8(b)(1) of that Act. Since there is power under the Act to protect employees against violence from labor organizations by assuring their right to refrain from concerted labor activities, the National Labor Board might have issued an order similar to that of the State Board. The provisions of the National Labor Relations Act, as amended, cover the labor relations of the Kohler Company. Labor Board v. Jones & Laughlin Steel Corp.,,. These provisions may be assumed to include the coercion not only of strikers, but also of other persons seeking employment with the plant. By virtue of the Commerce Clause, art. 1, § 8, cl. 3, Congress has power to regulate all labor controversies in or affecting interstate commerce, such as are here involved. If the congressional enactment occupies the field, its control by the Supremacy Clause, art. 6, cl. 2, supersedes or, in the current phrase, preempts state power. Kelly v. Washington,,. In the 1935 Act, § 10(a), the Board was empowered to prevent unfair labor practices. By § 10(a), this power was made "exclusive." 49 Stat. 449, 453. In the Taft-Hartley amendments of 1947, the word "exclusive" was omitted, but the phrase "shall not be affected by any other means of adjustment or prevention that has been or may be established by agreement, code, law, or otherwise" was re-enacted without significant change. The omission was explained in the Conference Report. Yet, under the 1935 Wagner Act, this Court ruled that Wisconsin, under its same Labor Peace Act, could enjoin union conduct of the kind here involved. Allen-Bradley Local v. Wisconsin Board,. At that time, however, the federal Act made no provision for enjoining union activities. With the passage of the Taft-Hartley Act in 1947, the Congress recognized that labor unions also might commit unfair labor practices to the detriment of employees, and prohibited, among other practices, coercion of employees who wish to refrain from striking. See note 5 supra. Appellant urges that this amendment eliminated the State's power to control the activities now under consideration through state labor statutes. It seems obvious that § 8(b)(1) was not to be the exclusive method of controlling violence even against employees, much less violence interfering with others approaching an area where a strike was in progress. No one suggests that such violence is beyond state criminal power. The Act does not have such regulatory pervasiveness. The state interest in law and order precludes such interpretation. Senator Taft explained that the federal prohibition against union violence would allow state action. Appellant is of the view that such references were "to the general state criminal law against violence and coercion, not to state labor relations statutes." But this cannot be correct, since Allen-Bradley Local v. Wisconsin Board, the leading case dealing with violence under this same Wisconsin statute, was well known to Congress. The fact that the Labor Management Act covered union unfair practices for the first time does not make the Allen-Bradley case obsolete. Orders which originate in state boards and become effective through the state judiciary should give more careful protection to the rights of labor than the purely judicial orders of a court. There is no reason to reexamine the opinions in which this Court has dealt with problems involving federal-state jurisdiction over industrial controversies. They have been adequately summarized in Weber v. Anheuser-Busch, Inc.,,. As a general matter, we have held that a State may not, in the furtherance of its public policy, enjoin conduct "which has been made an "unfair labor practice" under the federal statutes." Id. at, and cases cited. But our post-Taft-Hartley opinions have made it clear that this general rule does not take from the States power to prevent mass picketing, violence, and overt threats of violence. The dominant interest of the State in preventing violence and property damage cannot be questioned. It is a matter of genuine local concern. Nor should the fact that a union commits a federal unfair labor practice while engaging in violent conduct prevent States from taking steps to stop the violence. This conclusion has been explicit in the opinions cited in note 12 The States are the natural guardians of the public against violence. It is the local communities that suffer most from the fear and loss occasioned by coercion and destruction. We would not interpret an act of Congress to leave them powerless to avert such emergencies without compelling directions to that effect. We hold that Wisconsin may enjoin the violent union conduct here involved. The fact that Wisconsin has chosen to entrust its power to a labor board is of no concern to this Court. Affirmed.

An employer which was subject to the National Labor Relations Act filed a complaint with the Wisconsin Employment Relations Board charging appellant union and others with committing unfair labor practices within the meaning of the Wisconsin Employment Peace Act, which practices were also unfair labor practices under the National Labor Relations Act, as amended. The employer alleged that, during a strike, members of the union had engaged in mass picketing, thereby obstructing ingress to and egress from the employer's plant; interfered with the free and uninterrupted use of public highways; prevented persons who desired to be employed from entering the plant; coerced employees who desired to work, and threatened them and their families with physical injury. The State Board found the allegations to be true and issued an order directing the union and certain of its members to cease all such activities. This order was enforced by a Wisconsin State Court. Held: the order of the State Board is valid, and the judgment of the State Court enforcing it is affirmed. . (a) Section 8(b)(1) of the National Labor Relations Act, as amended, is not the exclusive method of controlling violence even against employees, much less violence interfering with others approaching an area where a strike is in progress, and the Federal Act does not so occupy the field as to prevent a State from enjoining such violence. . (b) The fact that a union commits a federal unfair labor practice while engaging in violent conduct does not prevent a State from taking steps to stop the violence. P.. (c) A different result is not required by the fact that the State acted under a state labor relations statute, rather than under a general state law against violence and coercion, nor by the fact that the State has chosen to entrust its power to a labor board. . 269 Wis. 578, 70 N.W.2d 191, affirmed.

1955_17

https://www.oyez.org/cases/1955/17

MR. JUSTICE HARLAN delivered the opinion of the Court. The question presented in this case is whether under the Natural Gas Act, 52 Stat. 821, 15 U.S.C. § 717 et seq., a regulated natural gas company furnishing gas to a distributing company under a long-term contract, may, without the consent of the distributing company, change the rate specified in the contract simply by filing a new rate schedule with the Federal Power Commission. The pertinent provisions of the Act are set forth in the margin. Respondent Mobile Gas Service Corporation (Mobile), a distributor of natural gas to domestic and industrial users in Mobile, Alabama, acquires its gas from petitioner United Gas Pipe Line Company (United), a "natural gas company" subject to regulation under the Act. In 1946 the Ideal Cement Company (Ideal), planning to construct a cement plant in the city provided it could be assured a supply of gas at a sufficiently low rate, obtained from Mobile an agreement to furnish gas for a 10-year term at 12 cents per MCF (thousand cubic feet). Mobile, in turn, before entering into a contract with Ideal, obtained from United a 10-year contract to supply gas for resale to Ideal at the equivalent of 10.7 cents per MCF, a rate substantially lower than that for other gas furnished by United. This contract was filed with the Federal Power Commission as an amendment to the general supply contracts between Mobile and United, and, with the approval of the Commission, became a part of United's filed schedules of rates and contracts. In June, 1953, United, without the consent of Mobile, filed new schedules with the Commission which purported to increase the rate on gas for resale to Ideal to 14.5 cents per MCF, a rate more closely approximating that for other gas furnished to Mobile by United. Claiming that United could not thus unilaterally change the contract rate, Mobile petitioned the Commission to reject United's filing. The Commission denied the petition, holding that, under § 4(d) of the Act, the new rate, being a non-suspendible industrial rate, automatically became effective 30 days after filing, and would remain in effect unless and until the Commission should, after investigation under § 4(e), determine the new rate to be unlawful. Mobile paid the new rate until April 15, 1955, when United, with Commission approval, accepted an assignment to it of Mobile's contract with Ideal. This assignment made the pending investigation into the lawfulness of the new rate moot, since, in the Commission's view, its determination on that matter would have no retroactive effect. Thus, the only question before us is whether United property collected from Mobile the difference between the old 10.7-cent rate and the new 14.5-cent rate during the period from July 25, 1953 (when the new rate purportedly went into effect), to April 15, 1955 (when United took over the Ideal contract) -- a sum aggregating approximately $240,000. On Mobile's petition for review, the Court of Appeals for the Third Circuit (Hastie, J., dissenting) reversed the Commission's order, directed it to reject United's filing of the new schedule insofar as it purported to increase the rate in question, and held Mobile entitled to a return of the amounts paid in excess of the contract rate. 215 F.2d 883. Both the Commission and United, which had intervened in the Court of Appeals, petitioned for certiorari, which we granted because of the importance of this question in the administration of the Natural Gas Act. 348 U.S. 950. For the reasons discussed below, we hold that the Natural Gas Act does not give natural gas companies the right to change their rate contracts by their own unilateral action. The question presented is solely one of the proper interpretation of the Natural Gas Act, there being no claim that the statute, if interpreted to permit a natural gas company unilaterally to change its contracts, would be unconstitutional. Cf. Midland Realty Co. v. Kansas City P. & L. Co.,. The Act requires natural gas companies to file all rates and contracts with the Commission, § 4(c), and authorizes the Commission to modify any rate or contract which it determines to be "unjust, unreasonable, unduly discriminatory, or preferential," § 5(a). Changes in previously filed rates or contracts must be filed with the Commission at least 30 days before they are to go into effect, § 4(d), and, except in the case of industrial rates, the Commission may suspend the operation of the new rate pending a determination of its reasonableness, § 4(e). If a decision has not been reached before the period of suspension expires, a maximum of five months, the filed rate must be allowed to go into effect, but the Commission's order may be made retroactive to that date. In construing the Act, we should bear in mind that it evinces no purpose to abrogate private rate contracts as such. To the contrary, by requiring contracts to be filed with the Commission, the Act expressly recognizes that rates to particular customers may be set by individual contracts. In this respect, the Act is in marked contrast to the Interstate Commerce Act, which in effect precludes private rate agreements by its requirement that the rates to all shippers be uniform, a requirement which made unnecessary any provision for filing contracts. See Armour Packing Co. v. United States,. The Commission, in its brief, recognizes this basic difference between the two Acts, and notes the differing natures of the industries which gave rise to it. The vast number of retail transactions of railroads made policing of individual transactions administratively impossible; effective regulation could be accomplished only by requiring compliance with a single schedule of rates applicable to all shippers. On the other hand, only a relatively few wholesale transactions are regulated by the Natural Gas Act, and these typically require substantial investment in capacity and facilities for the service of a particular distributor. Recognizing the need these circumstances create for individualized arrangements between natural gas companies and distributors, the Natural Gas Act permits the relations between the parties to be established initially by contract, the protection of the public interest being afforded by supervision of the individual contracts, which, to that end, must be filed with the Commission and made public. The provision of the Natural Gas Act directly in issue here is § 4(d), which provides that "no change shall be made by any natural gas company in any such [filed] rate . . . or contract . . . except after thirty days' notice to the Commission," which notice is to be given by filing new schedules showing the changes and the time they are to go into effect. It is argued that this provision authorizes a natural gas company to change its rate contracts simply by filing a new schedule of rates, to go into effect in no less than thirty days. On its face, however, § 4(d) is simply a prohibition, not a grant of power. It does not purport to say what is effective to change a contract, any more than § 4(c) purports to define what constitutes a "contract" that may be filed with the Commission. The section says only that a change cannot be made without the proper notice to the Commission; it does not say under what circumstances a change can be made. Absent the Act, a unilateral announcement of a change to a contract would, of course, be a nullity, and we find no basis in the language of § 4(d) for inferring that the mere imposition of a "filing and notice" requirement was intended to make effective action which would otherwise be of no effect at all. In short, § 4(d), on its face, indicates no more than that otherwise valid changes cannot be put into effect without giving the required notice to the Commission. To find in the section a further purpose to empower natural gas companies to change their contracts unilaterally requires reading into it language that is neither there nor reasonably to be implied. It is argued, however, that a different conclusion is compelled when § 4(d) is read with the other provisions of the Act. Petitioners attempt to characterize the Act as setting up two separate and distinct "procedures" for changing rates: (1) the "hearing and order" procedure of § 5(a), under which the Commission may determine existing rates to be unreasonable and order changes to be made; and (2) the "filed-rate" procedure of § 4(d) and (e), under which the natural gas company may initiate changes, in which event, the Commission's only concern is with the reasonableness of the new rate. These are said to be complementary and mutually exclusive procedures, the choice between which -- since both expressly relate to changes in "contracts" as well as other rates -- depends solely on who is seeking the change, and not on whether the rate sought to be changed is embodied in a contract. From this characterization of the procedures, petitioners conclude that, when a natural gas company initiates a rate change under § 4(d), the proceedings are governed exclusively by § 4(d) and (e), and hence the Commission's only power is that which it has under § 4(e) to set aside the new rate if that is found to be unlawful. The major defect of this argument is that it assumes the answer to the very question in issue -- whether natural gas companies are empowered to "initiate" unilateral contract changes under § 4(d). That the so-called "filed-rate" procedure is applicable to changes in contracts as well as other rates proves only that contracts may be changed, not that they may be changed unilaterally. Moreover, the very premise that §§ 4(d) and (e) and 5(a) are alternative rate-changing "procedures" is itself based on a misconception of the structure of the Act. These sections are simply parts of a single statutory scheme under which all rates are established initially by the natural gas companies, by contract or otherwise, and all rates are subject to being modified by the Commission upon a finding that they are unlawful. The Act merely defines the review powers of the Commission and imposes such duties on natural gas companies as are necessary to effectuate those powers; it purports neither to grant nor to define the initial rate-setting powers of natural gas companies. The powers of the Commission are defined by §§ 4(e) and 5(a). The basic power of the Commission is that given it by § 5(a) to set aside and modify any rate or contract which it determines, after hearing, to be "unjust, unreasonable, unduly discriminatory, or preferential." This is neither a "rate-making" nor a "rate-changing" procedure. It is simply the power to review rates and contracts made in the first instance by natural gas companies and, if they are determined to be unlawful, to remedy them. Section 5(a) would, of its own force, apply to all the rates of a natural gas company, whether long established or newly changed, but, in the latter case, the power is further implemented by § 4(e). All that § 4(e) does, however, is to add to this basic power, in the case of a newly changed rate or contract (except "industrial" rates), the further powers (1) to preserve the status quo pending review of the new rate by suspending its operation for a limited period, and (2) thereafter to make its order retroactive, by means of the refund procedure, to the date the change became effective. The scope and purpose of the Commission's review remain the same -- to determine whether the rate fixed by the natural gas company is lawful. The limitations imposed on natural gas companies are set out in §§ 4(c) and 4(d). The basic duties are the filing requirements: § 4(c) requires schedules showing all rates and contracts in force to be filed with the Commission, and § 4(d) requires all changes in such schedules likewise to be filed. In addition, § 4(d) imposes the further requirement that the changes be filed at least thirty days before they are to go into effect. It may readily be seen that these requirements are no more than are necessary to implement §§ 4(e) and 5(a): the filing requirements are obviously necessary to permit the Commission to exercise its review functions, and the requirement of 30-days' advance notice of changes is essential to afford the Commission a reasonable period in which to determine whether to exercise its suspension powers under § 4(e). The relationship of these sections thus affords no support to petitioners' characterization of § 4(d) and (e) as establishing a rate-changing "procedure" -- a "proceeding" before the Commission "initiated" by a natural gas company filing a "proposed" change. Section 4(d) provides not for the filing of "proposals," but for notice to the Commission of any "change . . . made by" a natural gas company, and the change is effected, if at all, not by an order of the Commission but solely by virtue of the natural gas company's own action. If the purported change is one the natural gas company has the power to make, the "change" is completed upon compliance with the notice requirement, and the new rate has the same force as any other rate -- it can be set aside only upon being found unlawful by the Commission. It is thus no more a "proposed" rate than any other rate, all of which are equally subject to Commission review. Likewise, no "proceeding" is "initiated" by a § 4(d) filing. A proceeding to review the new rate may be initiated under § 4(e), but, if so, it is initiated by the Commission in the same manner as a proceeding under § 5(a) to review any other rate, that is, upon complaint or its own motion. The only difference is the interim suspension power given by § 4(e), but that in no way affects the character of the proceeding, which remains, like a § 5(a) proceeding, simply a review by the Commission of a rate established by the natural gas company. In short, the Act provides no "procedure" either for making or changing rates; it provides only for notice to the Commission of the rates established by natural gas companies and for review by the Commission of those rates. The initial rate-making and rate-changing powers of natural gas companies remain undefined, and unaffected by the Act. All of the relevant provisions of the Act can thus be fully explained as simply defining and implementing the powers of the Commission to review rates set initially by natural gas companies, and there is nothing to indicate that they were intended to do more. Admittedly, the Act presumes a capacity in natural gas companies to make rates and contracts and to change them from time to time, but nowhere in the Act is either power defined. The obvious implication is that, except as specifically limited by the Act, the rate-making powers of natural gas companies were to be no different from those they would possess in the absence of the Act: to establish ex parte, and change at will, the rates offered to prospective customers, or to fix by contract, and change only by mutual agreement, the rate agreed upon with a particular customer. No more is necessary to give full meaning to all the provisions of the Act: consistent with this, § 4(d) means simply that no change -- neither a unilateral change to an ex parte rate nor an agreed-upon change to a contract -- can be made by a natural gas company without the proper notice to the Commission. Hence, there is nothing in the structure or purpose of the Act from which we can infer the right, not otherwise possessed and nowhere expressly given by the Act, of natural gas companies unilaterally to change their contracts. Our conclusion that the Natural Gas Act does not empower natural gas companies unilaterally to change their contracts fully promotes the purposes of the Act. By preserving the integrity of contracts, it permits the stability of supply arrangements which all agree is essential to the health of the natural gas industry. Conversion by consumers, particularly industrial users, to the use of natural gas may frequently require substantial investments which the consumer would be unwilling to make without long-term commitments from the distributor, and the distributor can hardly make such commitments if its supply contracts are subject to unilateral change by the natural gas company whenever its interests so dictate. The history of the Ideal contract furnishes a case in point. On the other hand, denying to natural gas companies the power unilaterally to change their contracts in no way impairs the regulatory powers of the Commission, for the contracts remain fully subject to the paramount power of the Commission to modify them when necessary in the public interest. The Act thus affords a reasonable accommodation between the conflicting interests of contract stability, on the one hand, and public regulation, on the other. It may be noted also that this interpretation, while precluding natural gas companies from unilaterally changing their contracts simply because it is in their private interests to do so, does not deprive them of an avenue of relief when their interests coincide with the public interest. Section 5(a) authorizes the Commission to investigate rates not only "upon complaint of any State, municipality, State commission, or gas distributing company," but also "upon its own motion." Thus, while natural gas companies are understandably not given the same explicit standing to complain of their own contracts as are those who represent the public interest or those who might be discriminated against, there is nothing to prevent them from furnishing to the Commission any relevant information and requesting it to initiate an investigation on its own motion. And if the Commission, after hearing, determines the contract rate to be so low as to conflict with the public interest, it may under § 5(a) authorize the natural gas company to file a schedule increasing the rate. The prior decisions of this Court cited by petitioners as requiring an opposite result are readily distinguishable. In Armour Packing Co. v. United States,, a rate contract between a railroad and a shipper at the filed rates in effect at the time the contract was made was held not to justify payment at the contract rate for shipments made after the filed rates for shipments of that character had been increased by the railroad. The very basis for that decision, however, was the requirement of the Interstate Commerce Act that rates to all shippers be uniform and comply with the single tariff filed with the Commission, there being no provision under that Act for the filing of individual contracts. That is, the Interstate Commerce Act, by its own force, precluded contracts for rates different from those applicable to other shippers. The Natural Gas Act, on the other hand, recognizes the need for private contracts of varying terms, and expressly provides for the filing of such contracts as a part of the rate schedules. No contention is made here that the fact that the Mobile contract was at a rate different from that to other customers in itself made the contract illegal, or that -- as held in Armour -- United could not lawfully have complied with the contract had it wanted to. In Midland Realty Co. v. Kansas City Power & Light Co.,, the Court held only that a statute interpreted by the state court as authorizing unilateral contract changes by a public utility was not unconstitutional. On the other hand, in Wichita Railroad & Light Co. v. Public Utilities Commission of Kansas,, this Court interpreted a Kansas statute, not yet fully construed by the state court, as not giving such a power to a public utility, and, to the extent that that decision rested upon an original interpretation of similar statutory language, it affords strong support for our interpretation of the Natural Gas Act. The only two Courts of Appeals that have squarely ruled on this question, those for the District of Columbia and Third Circuits, have concluded that neither the Natural Gas Act nor the virtually identical provisions of the Federal Power Act authorize unilateral contract changes. The Court of Appeals for the Fifth Circuit, however, although distinguishing its decision on a procedural ground, has indicated a contrary conclusion. The parties have also referred us to numerous state court decisions construing state statutes of varying degrees of similarity to the Natural Gas Act, some holding that unilateral contract changes were authorized and others holding that they were not. Taken as a whole, the state decisions prove little more than that the question is an open one, and afford little guidance to the proper interpretation of the Federal Act. From our conclusion that the Natural Gas Act gives a natural gas company no power to change its contracts unilaterally, it follows that the new schedule filed by United was a nullity insofar as it purported to change the rate set by its contract with Mobile, and that the contract rate remained the only lawful rate. There can be no doubt of the unauthorized filing under its the unauthorized filing under its general powers to issue orders "necessary or appropriate to carry out the provisions of this Act," § 16, and its failure to do so and its order "permitting" the new rates to become effective were in error. Any amounts paid by Mobile in excess of the contract rates on the basis of the erroneous order of the Commission were therefore unlawfully collected, and United is obligated to make restitution of the excess payments. Cf. Baltimore & Ohio R. Co. v. United States,. Affirmed.

Under the Natural Gas Act, a regulated natural gas company furnishing gas to a distributing company under a long-term contract filed with the Federal Power Commission may not, without the consent of the distributing company, change the rate specified in the contract simply by filing a new rate schedule with the Commission under § 4(d) of the Act. . (a) Unlike the Interstate Commerce Act, which requires uniform rates, the Natural Gas Act expressly recognizes that rates to particular customers may be set initially by individual contracts filed with the Commission. . (b) Authority for natural gas companies to change their contract rates unilaterally is not conferred by § 4(d) of the Act, which provides that "no change shall be made by any natural gas company in any such [filed] rate . . . or contract . . . except after thirty days' notice to the Commission," given by filing new schedules showing the changes and the time they are to go into effect. . (c) The Act neither grants nor defines the initial rate-setting powers of natural gas companies; it merely defines the review powers of the Commission and imposes such duties on natural gas companies as are necessary to effectuate those powers. . (d) There is nothing in the structure or purpose of the Act from which can be inferred any right, not otherwise possessed and nowhere expressly given by the Act, of natural gas companies unilaterally to change their contracts. . (e) The conclusion here reached fully promotes the purposes of the Act. . (f) Armour Packing Co. v. United States,, and Midland Realty Co. v. Kansas City Power & Light Co.,, distinguished. Pp. 345-. (g) The new schedule filed by the natural gas company in this case was a nullity insofar as it purported to change the rate set by its contract, and the contract rate remained the only lawful rate. P.. (h) Under its general power to issue order "necessary or appropriate to carry out the provisions of this Act," the Commission had authority to reject the unauthorized filing of a new schedule of rates by the natural gas company, and the Commission's failure to do so and its order "permitting" the new rates to become effective were in error. P.. (i) Any amounts paid by the distributing company in excess of the contract rates were unlawfully collected, and the natural gas company is obligated to make restitution of the excess payments. P.. 215 F.2d 883 affirmed.

1955_227

https://www.oyez.org/cases/1955/227

MR. JUSTICE BURTON delivered the opinion of the Court. The question before us is whether, in the case of an employer subject to the National Labor Relations Act, as amended, a state court may enjoin peaceful picketing of the employer's premises, undertaken by its employees and their union for the purpose of obtaining recognition of that union as the employees' bargaining representative, when the union holds cards authorizing such representation concededly signed by a majority of the employees eligible to be represented, but has filed none of the data or affidavits described in § 9(f), (g), and (h) of that Act, as amended. For the reasons hereafter stated, our answer is in the negative. In 1953, the respondent, Arkansas Oak Flooring Company, a Delaware corporation with its main office in Pine Bluff, Arkansas, owned and operated a sawmill and flooring plant in Alexandria, Louisiana. The company was there engaged in interstate commerce and subject to the National Labor Relations Act, as amended. At the same time, District 50, United Mine Workers of America, here called the "union," was an unincorporated labor organization which undertook to organize the company's eligible employees at its Alexandria plant. The union, however, did not file with the Secretary of Labor any of the financial or organizational data described in § 9(f) and (g) of the National Labor Relations Act, as amended, nor, with the National Labor Relations Board, any of the non-Communist affidavits described in § 9(h) of that Act. It contended that the company, nevertheless, should recognize it as the collective bargaining representative of the Alexandria plant employees because it was authorized by more than a majority of such employees to represent them. Although for four years there had been no labor organization representing the plant employees, this union, by February 24, 1954, held applications for membership from 174 of the 225 eligible employees. Such applicants had elected officers and stewards and had authorized the union organizer to request the company to recognize the union as their collective bargaining representative. On February 24, the organizer accordingly presented that request to the assistant superintendent of the plant. The latter, in the absence of any higher officer of the company, replied that the union was not recognized either by the National Labor Relations Board or by him, and that, if negotiations were desired, the union organizer should call the company's office at Pine Bluff. On March 1, the petitioning employees struck for recognition of the union and set up a peaceful picket line of three employees. Two were placed in front of the plant and one at the side. They carried signs stating "This Plant is on Strike" or "We want Recognition, District 50 UMWA." On March 2, respondent sought a restraining order and injunction in the Ninth Judicial District for the Parish of Rapides, Louisiana. That court promptly issued an order restraining the above-described picketing by 11 named employees, the union and its organizer. The order was obeyed, but the strike continued. On March 12 and 15, evidence was introduced, including, by that date, 179 applications for membership in the union, each of which authorized the union to represent the signer in negotiations and in the making of agreements as to wages, hours and conditions of work. The parties to the proceeding stipulated that each of those applications was signed by an employee of respondent. In the face of that record, the court nevertheless converted its restraining order into a temporary injunction and the defendants, who are the petitioners herein, appealed to the Supreme Court of Louisiana. While that appeal was pending, the trial court, on the same record, made its injunction permanent. Petitioners appealed that decision to the Supreme Court of Louisiana, and the two appeals were consolidated. There, the permanent injunction was sustained, one judge concurring specially and another dissenting, in part, on an issue not material here. 227 La. 1109, 81 So. 2d 413. The State Supreme Court's ground for sustaining the injunction was that the union, which sought to be recognized, had failed to file with the Secretary of Labor the financial and other data required by § 9(f) and (g), and had failed to file with the Labor Board the non-Communist affidavits required by § 9(h). The court held that the union, by failing to comply with § 9(f), (g) and (h), had precluded its certification by the Board, and that, accordingly, neither the employees nor the union had a right to picket the plant to induce the company to recognize the noncomplying union. The court, agreeing with respondent's theory, took the position that such recognition would be illegal and that picketing to secure it therefore was subject to restraint by a state court. Rehearing was denied. Because of the significance of that decision in relation to the National Labor Relations Act, as amended, we granted certiorari and invited the Solicitor General to file a brief setting forth the views of the National Labor Relations Board. 350 U.S. 860. Such a brief was filed favoring a reversal. There is no doubt that, if the union had filed the data and affidavits required by § 9(f), (g) and (h), the complaint, under the circumstances of this case, would have had to be dismissed by the state court for lack of jurisdiction, and that, if an injunction were sought through the National Labor Relations Board, the request would have had to be denied on the merits. Under those circumstances, the Board would have had jurisdiction of the issue to the exclusion of the state court. Garner v. Teamsters Union,, and see Weber v. Anheuser-Busch, Inc.,. In the absence of any bona fide dispute as to the existence of the required majority of eligible employees, the employer's denial of recognition of the union would have violated § 8(a)(5) of the Act. The issue before us thus turns upon the effect of the union's choice not to file the information and affidavits described in § 9(f), (g) and (h). The state court misconceived that effect. The union's failure to file was not a confession of guilt of anything. It was merely a choice not to make public certain information. The Act prescribes no fine or penalty, in the ordinary sense, for failure to file the specified data and affidavits. The Act does not even direct that they be filed. The nearest to such a direction in the Act is the statement, in § 9(g), that it shall be "the obligation" of all labor organizations to file annual reports "bringing up to date the information required to be supplied in the initial filing by subsection (f)(A) of this section, and to file with the Secretary of Labor and furnish to its members annually financial reports in the form and manner prescribed in subsection (f)(B)." However, neither subsection (f)(A) nor (f)(B) of § 9 requires any initial filing to be made. Each merely describes what is required to be filed in the event that a labor organization elects to seek the advantages offered by subsection (f). Congress seeks to induce labor organizations to file the described data and affidavits by making various benefits of the Act strictly contingent upon such filing. See New Jersey Carpet Mills, Inc., 92 N.L.R.B. 604, 610. In particular, Congress makes the services of the Labor Board available to labor organizations only upon their filing of the specified data and affidavits. By its noncompliance with § 9(f), (g) and (h), a union does not exempt itself from other applicable provisions of the Act. What, then, is the precise status of a labor organization that elects not to file some or all of the data or affidavits in question? It is significant that the effect of noncompliance is the same whether one or more of the filings are omitted. Accordingly, it simplifies the issue to assume a situation where a union has filed the non-Communist affidavits specified in § 9(h), but has chosen not to disclose the information called for by § 9(f)(A)(2) and (3) as to the salaries of its officers, or the manner in which they have been elected. There is no provision stating that, under those circumstances, the union may not represent an appropriate unit of employees if a majority of those employees give it authority so to do. Likewise, there is no statement precluding their employer from voluntarily recognizing such a noncomplying union as their bargaining representative. Section 8(a)(5) declares it to be an unfair labor practice for an employer "to refuse to bargain collectively with the representatives of his employees, subject to the provisions of section 9(a)." (Emphasis supplied.) Section 9(a), which deals expressly with employee representation, says nothing as to how the employees' representative shall be chosen. See Lebanon Steel Foundry v. Labor Board, 76 U.S.App.D.C. 100, 103, 130 F.2d 404, 407. It does not make it a condition that the representative shall have complied with § 9(f), (g), or (h), or shall be certified by the Board, or even by eligible for such certification. Likewise, § 7, which deals with the employees' rights to self-organization and representation, makes no reference to any need that the employees' chosen representative must have complied with § 9(f), (g), or (h). Section 7 provides -- "Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities except to the extent that such right may be affected by an agreement requiring membership in a labor organization as a condition of employment as authorized in section 8(a)(3)." 61 Stat. 140, 29 U.S.C. § 157. Subsections (f), (g), and (h) of § 9 merely describe advantages that may be gained by compliance with their conditions. The very specificity of the advantages to be gained and the express provision for the loss of these advantages imply that no consequences other than those so listed shall result from noncompliance. The noncompliance of the union with § 9(f), (g), and (h) in the instant case precludes any right of the union to seek certification of its status by the Labor Board. Such elimination of the Board does not, however, eliminate the applicability of the National Labor Relations Act, as amended, and does not settle the issue as to the right of the state court to enjoin the employees and their union from peacefully picketing the employer's plant for the purpose of securing recognition. The industrial relations between the company and its employees nonetheless affect interstate commerce and come within the field occupied by the National Labor Relations Act, as amended. The Labor Board is but an agency through which Congress had authorized certain industrial relations to be supervised and enforced. The Act goes further. The instant employer, employees and union are controlled by its applicable provisions and all courts, state as well as federal, are bound by them. Section 7 recognizes the right of the instant employees "to bargain collectively through representatives of their own choosing," and leaves open the manner of choosing such representatives when certification does not apply. The employees have exercised that right through the action of substantially more than a majority of them authorizing the instant union to represent them. Section 9(a) provides that representatives "designated or selected for the purposes of collective bargaining by the majority of the employees in a unit appropriate for such purposes shall be the exclusive representatives of all the employees in such unit for the purposes of collective bargaining in respect to rates of pay, wages, hours of employment, or other conditions of employment. . . ." That fits this situation precisely. It does not require the designated labor organization to disclose the salaries of its officers, or even to file non-Communist affidavits. Under those sections and by virtue of the conceded majority designation of the union, the employer is obligated to recognize the designated union. Upon the employer's refusal to do so, the union, because of its noncompliance with § 9(f), (g), and (h), cannot resort to the Labor Board. It can, however, take other lawful action, such as that engaged in here. The company can, if it so wishes, lawfully recognize the union as the employees' representative. That being so, there is no reason why the employees, and their union under their authorization, may not, under § 13, strike, and, under § 7, peacefully picket the premises of their employer to induce it thus to recognize their chosen representative. See West Tex. Utilities Co. v. Labor Board, 87 U.S.App.D.C. 179, 185, 184 F.2d 233, 239, and the other cases cited in note 6 supra. Such being the case, the state court is governed by the federal law which has been applied to industrial relations, like these, affecting interstate commerce and the state court erred in enjoining the peaceful picketing here practiced. A "State may not prohibit the exercise of rights which the federal Acts protect." Weber v. Anheuser-Busch, Inc.,,, and see Garner v. Teamsters Union,,. The judgment of the Supreme Court of Louisiana, accordingly, is reversed and the case is remanded to it for further proceedings not inconsistent with this opinion. Reversed and remanded.

In the case of an employer subject to the National Labor Relations Act, as amended, a state court may not enjoin peaceful picketing of the employer's premises, undertaken by its employees and their union for the purpose of obtaining recognition of the union as the employees' bargaining representative, when the union holds cards authorizing such representation concededly signed by a majority of the employ eligible to be represented -- even though the union has not filed with the Secretary of Labor any of the financial or organizational data described in § 9(f) and (g) of the Act, nor with the National Labor Relations Board any of the non-Communist affidavits described in § 9(h) of the Act. . (a) By its noncompliance with § 9 (f), (g) and (h), a union makes itself ineligible for certain advantages and services offered by the Act, but it does not exempt itself from other applicable provisions of the Act. . (b) Section 8(a)(5) declares it to be an unfair labor practice for an employer "to refuse to bargain collectively with the representatives of his employees, subject to the provisions of" § 9(a); but the latter section does not make it a condition that the representative shall have complied with § 9(f), (g), or (h), or shall be certified by the Board, or even be eligible for such certification. . (c) Likewise, § 7, which deals with the employees' rights to self-organization and representation, makes no reference to any need that the employees' chosen representative must have complied with § 9 (f), (g), or (h). . (d) Subsections (f), (g), and (h) of § 9 merely describe certain advantages that may be gained by compliance with their conditions, and the express provision for the loss of these advantages implies that no other consequences shall result from noncompliance. P.. (e) In this case, noncompliance of the union with § 9 (f), (g), and (h) precludes any right of the union to seek certification of its status by the Board; but the employer, employees and union are controlled by the applicable provisions of the Act, and all courts, state and federal, are bound by them. . (f) Under §§ 7 and 9 (a), and by virtue of the conceded majority designation of the union, the employer is obligated to recognize the union, and the union can take lawful action, such as striking and peaceful picketing, to induce the employer to do so. . (g) That being so, the State cannot enjoin the peaceful picketing here practiced. P.. 227 La. 1109, 81 So. 2d 413, reversed and remanded.

1955_323

https://www.oyez.org/cases/1955/323

MR. JUSTICE BURTON delivered the opinion of the Court. The question before us is whether the accused, who is under a sentence of death, imposed by a Pennsylvania court and jury for murder committed during the course of an armed robbery, was tried under such prejudicial circumstances and improper influences that he was denied the due process of law guaranteed by the Fourteenth Amendment to the Constitution of the United States. The charges in this federal habeas corpus proceeding are that an atmosphere of hysteria and prejudice prevailed at the state trial, including the prejudicial conduct and frequent presence in the courtroom of another judge of the same court who recently had presided over a trial of two associates of petitioner and which had resulted in a like conviction and sentence for the murder committed. For the reasons hereafter stated, we agree with the considered judgments of the state court, Pennsylvania ex rel. Darcy v. Claudy, 367 Pa. 130, 79 A.2d 785, the Federal District Court, 130 F. Supp. 270, and the Court of Appeals, 224 F.2d 504, holding that the accused was not denied due process of law. Late on December 22, 1947, petitioner Darcy and three associates, Foster, Zeitz, and Capone, armed with revolvers, held up a tavern in Feasterville, near Doylestown, Bucks County, Pennsylvania. During the robbery, two patrons of the tavern were shot and severely wounded. As petitioner and his companions left the scene, Zeitz fired at and killed a bystander, William Kelly. About a half hour later, petitioner and his companions committed another armed robbery in which shots also were fired but no one was injured. Before 2 a.m., they were arrested by Philadelphia police. While in that custody, they voluntarily admitted their participation not only in the above robberies but in seven others committed since November, 30. In these, a total of seven persons had been shot or otherwise injured. On January 5, 1948, petitioner and his three companions were brought to Bucks County, charged with the murder of William Kelly, and committed, without bail, to await action by the grand jury. On February 10, all four being present and all but one being represented by counsel of his own choice, they were severally indicted for murder. The District Attorney moved for a continuance because Foster was without counsel and because one prosecution witness was in a critical condition from the wound received at the time of the robbery. The continuance was granted. On March 1, counsel for petitioner and Capone moved for a severance and separate trials. Judge Keller of the nisi prius or trial court (Court of Oyer and Terminer and General Jail Delivery of Bucks County) suggested the advisability of a combination trial, but granted the motions when counsel insisted on their right to them. On March 3, Judge Boyer, of the same court, appointed two local attorneys to represent Foster. In March, defense counsel were advised that the Foster-Zeitz case would be called first, petitioner's case the following week, and then Capone's case. When it became apparent that the Foster-Zeitz trial, which began May 24, would continue into the week of June 1, the court directed the sheriff's office to notify the prospective jurors who had been summoned for June 1 not to appear until June 7. They were so notified, and, with one exception, did not appear for duty until the latter date. For the Foster-Zeitz and petitioner's trials, the prospective jurors waited outside the main courtroom, were called in individually, and were subjected to a searching examination on voir dire. While neither Foster, Zeitz, nor petitioner exercised all of his peremptory challenges, two extra venires were called in order to complete the two juries. No jurors sat in both cases. Once accepted, the respective juries were kept together during each trial under the supervision of court officials. The jurors were not permitted to see newspapers, listen to radios, or see television programs, and were kept free from any outside influence or contact. At no time during either the Foster-Zeitz trial or petitioner's trial was the courtroom filled to capacity, and at no time was there any need for the court to call for order. No outbursts, disturbances or untoward incidents occurred in the courtroom or elsewhere in the county. The proceedings were reported daily in the press and, on occasion, by radio. The reporting was factual, with some editorials. The news coverage diminished a few weeks after the robbery, increased and subsided again after the grand jury proceedings, and increased just before the trials. In Pennsylvania, the jury fixes the penalty for murder in the first degree. No question was raised as to identity or as to petitioner's participation in the robbery. The strategy of the defense in both trials was to seek to keep the punishment down to life imprisonment. On Friday, June 4, the jury in the Foster-Zeitz trial returned a verdict of guilty and fixed the penalty at death. After receiving the verdict, the trial judge, Judge Boyer, was, on June 5, quoted in the local newspaper as having said to that jury: "'I don't see how you could, under the evidence, have reached any other verdict. Your verdict may have a very wholesome effect on other young men in all vicinities who may come to realize the seriousness of the folly in which so many young men indulge in these days. The only hope of stemming the tide of such crime by youth is to enforce the law which you have indicated by your decision.'" 130 F. Supp. at 291-292. A few moments earlier, Judge Keller, in discharging the remainder of the May 24 panel, had, in the same courtroom, commended them for their satisfactory verdicts, the last one of which had been an acquittal on a charge of rape. On Monday, June 7, petitioner's trial began. The court opened at 10 a.m., with both Judge Boyer and Judge Keller presiding. As usual, miscellaneous business, unrelated to the impending trial, was first disposed of by the court. Petitioner was then arraigned. He pleaded not guilty and, upon Judge Keller's direction, the selection of the jury was commenced. At various times during petitioner's trial, although it was presided over by Judge Keller, Judge Boyer was in attendance, sitting either on the bench with Judge Keller or in the courtroom within the enclosure reserved for attorneys, the parties and the press. In this connection, the Federal District Court found that -- "By long established tradition in Bucks County, each morning and afternoon at the opening of court, both judges take the bench to entertain motions and other miscellaneous matters in the Criminal, Common Pleas -- law and equity -- and Orphans Court. Once this work is completed, one of the judges, if engaged in a trial in that court room, remains on the bench, the other judge leaving to perform duties in another court room or in chambers. The practice used in many Pennsylvania courts . . . was continued daily no matter what court was in session or the nature of the trial . . . [but] not on June 4, when Judge Boyer charged the jury [trying Foster and Zeitz], and . . . not on June 8 and 10." "The criminal docket . . . , a record of individual trials, shows both judges on the bench at 10:00 A.M. May 24 . . . 9:30 A.M. June 2 . . . 10:00 A.M. June 7. . . . The court reporter's notes of testimony show only one instance of Judge Boyer's taking any part whatsoever in the Darcy trial, i.e., during a sidebar discussion out of the hearing of the jury shortly after court convened on Saturday morning, June 12. . . . Under consideration was a difficult question of law on the admissibility of evidence of other offenses . . . in view of the Act of July 3, 1947, P.L. 1239, 19 P.S.Pa. § 711 note. Judge Boyer indicated his thinking on the matter. Upon objection by counsel, the discussion ended; Judge Keller ruled; Judge Boyer left the bench shortly after, and did not return during the remainder of the trial. It may be that, during the Foster-Zeitz trial, Judge Keller, shortly after 9:30 A.M. June 2 . . . , listened to but did not express any opinion during a similar discussion." "Honorable Hiram H. Keller . . . , who presided . . . throughout the trial, has certified . . . that, after the miscellaneous business was completed, 'On several occasions . . . , Judge Boyer remained for brief periods while evidence was presented . . . ', and that, with the exception of the incident [noted above], 'At no other time, during the course of the trial, did Judge Boyer assist, volunteer to assist, or make any suggestions to or otherwise aid the undersigned in the trial of this case.'" "The District Attorney . . . testified, and we find as a fact, that Judge Boyer did not at any time during the Darcy trial assist, attempt to assist, make any suggestion to, or in any other manner aid the Commonwealth in the prosecution of the case against David Darcy; that Judge Boyer did not pass any note or message of any kind to the District Attorney in connection with the trial for the use of the District Attorney or Judge Keller." "On several occasions during the Darcy trial -- not on Friday evening or during the charge of the court on Monday, June 14 -- Judge Boyer sat for brief intervals on a chair just inside the court room door from the judges' chambers, apparently listening to the proceedings. . . ." "During the Darcy trial, Judge Boyer did not at any time sit at or near the table reserved for the press, at or near the table reserved for the District Attorney; at no time did Judge Boyer sit on a chair next to or anywhere near a chair occupied by the District Attorney." "Throughout the trial, the only chairs occupied by the District Attorney or his assistant were at the table reserved for that purpose, or in chairs immediately in front of the table reserved for the press." "At no time other than that noted [above] did Judge Boyer take any part whatsoever in the proceedings of the Darcy trial." 130 F. Supp. at 296-297. On Monday, June 14, petitioner's case went to the jury. It returned a verdict of guilty, and fixed the penalty at death. The subsequent proceedings in this case, extending over eight years, are summarized in the margin. Those proceedings uniformly sustained the State, but we granted certiorari to review the charge now made by petitioner that he was denied due process. 350 U.S. 872. Petitioner's charge is that (a) the news coverage of the robbery and of the proceedings prior to his trial, including the Foster-Zeitz trial and Judge Boyer's reported remarks to the jury in that case, created such an atmosphere of hysteria and prejudice that it prevented him from having a fair trial, (b) notwithstanding that he was granted a severance, he was forced to go to trial within one week of the trial of his companions, Foster and Zeitz, and (c) in the light of (a) and (b) above, Judge Boyer's presence and participation in petitioner's trial prevented him from being fairly tried since Judge Boyer, in effect, acted as an "overseer judge" and effectively guided and influenced petitioner's jury. Petitioner has been given ample opportunity to prove that he has been denied due process of law. While this Court stands ready to correct violations of constitutional rights, it also holds that "it is not asking too much that the burden of showing essential unfairness be sustained by him who claims such injustice and seeks to have the result set aside, and that it be sustained not as a matter of speculation, but as a demonstrable reality." Adams v. United States ex rel. McCann,,. See also Buchalter v. New York,,; Stroble v. California,,. Justice Holmes, speaking for a unanimous Court in Holt v. United States,,, cautioned that, "If the mere opportunity for prejudice or corruption is to raise a presumption that they exist, it will be hard to maintain jury trial under the conditions of the present day." We have examined petitioner's allegations, the testimony, and documentary evidence in support thereof, and his arguments. We conclude that the most that has been shown is that, in certain respects, opportunity for prejudice existed. From this we are asked to infer that petitioner was prejudiced. The law recognizes that prejudice may infect any trial, and provides protection against it. For example, provision is made for the voir dire examination and for challenges of jurors who indicate that they may be prejudiced. In addition, a substantial number of peremptory challenges is allowed. This gives to each party a large discretion to exclude jurors deemed objectionable for any reason or no reason. Another protection is available through the severance of the trials of the defendants and through continuances of the respective trials. Still another means of protection is that of a change of venue for proper cause. In the instant case, notwithstanding the fact that competent counsel for petitioner did not use all of his peremptory challenges after a searching examination of prospective jurors on voir dire, and did not seek a continuance of the trial or a change of venue, petitioner asks this Court, in effect, to infer that the news coverage of the robbery and proceedings prior to petitioner's trial, including the Foster-Zeitz trial, created such an atmosphere of prejudice and hysteria that it was impossible to draw a fair and impartial jury from the community or to hold a fair trial. The failure of petitioner's counsel to exhaust the means provided to prevent the drawing of an unfair trial jury from a community allegedly infected with hysteria and prejudice against petitioner, while not dispositive, is significant. Here, the issue was not raised until almost three years after the trial, yet we are asked to read the news reports and the testimony as to other incidents and to find, contrary to the Supreme Court of Pennsylvania and two federal courts, that these reports and incidents did create such an atmosphere that it infected the jurors and deprived petitioner of a fair trial on the evidence presented to them. We see no justification in the record to warrant our so finding. On the other hand, the Federal District Court, familiar with the local conditions, has found, on the evidence before it, that petitioner's trial was conducted in a calm judicial manner, without any disturbances, and that the news coverage was "factual, with an occasional descriptive word or phrase, and, on occasion, words of compassion or commendation." 130 F. Supp. at 286. It has found that counsel for petitioner conducted a thorough voir dire examination. In all, 49 persons were challenged for cause or excused -- 14 for fixed opinion or bias. Petitioner used 10 of the 20 peremptory challenges allowed him, the Commonwealth only eight. The record shows that counsel for petitioner was informed almost three months before petitioner's trial that petitioner would be tried immediately after Foster and Zeitz, but he made no motion for a continuance or for a change of venue. Of the prospective jurors called for service at petitioner's trial, only one was found to have attended the Foster-Zeitz trial, and that person was challenged for cause. There is nothing in the record to show, as a "demonstrable reality," that petitioner was denied due process of law because of community hysteria and prejudice. The District Court's findings, sustained by the Court of Appeals and supported by the record, dispose of this aspect of the case. Nor do we conclude that petitioner was prevented from obtaining a fair jury trial by reason of Judge Boyer's commendatory remarks to the Foster-Zeitz trial jury, reported in the local press two days before petitioner's trial. At most, petitioner has shown that this created a possible opportunity for prejudice. There is no merit in petitioner's claim that he was "forced" to trial immediately after the Foster-Zeitz trial, or in his claim that the trial judge should have, sua sponte, changed the venue or continued the trial. See 130 F. Supp. at 292-295. Petitioner's remaining claim rests largely upon facts which the District Court has found against him. Petitioner alleges that, during the charge to the jury, Judge Boyer passed a note to the District Attorney, who immediately interposed an objection to Judge Keller's charge, and the latter allegedly corrected himself. Petitioner argues that the testimony of the District Attorney and his assistant that they had no recollection of such an incident is insufficient to offset the direct testimony of petitioner's witnesses that the incident did occur, that Judge Boyer did sit at the table reserved for the press, and that the District Attorney and his assistant sat immediately in front of Judge Boyer. The issue thus raised is largely one of credibility to be determined by the trier of the facts. Hawk v. Olson,,. The District Court's positive findings on this aspect of the case (at, supra) find support in the record. We are not justified in upsetting them. We also are asked to find that the presence of Judge Boyer on the bench at the beginning of each session of the court, his remaining on the bench after the miscellaneous business was disposed of, and his presence thereafter in the courtroom created such a prejudicial effect upon the jury that it became impossible for it to return a fair verdict and penalty. Except for the one incident where Judge Boyer participated in a sidebar conference out of the hearing of the jury, the District Court found that he did not participate in petitioner's trial. Petitioner's counsel objected to Judge Boyer's participation in the sidebar conference, and he left the bench shortly thereafter. Petitioner makes much of the fact that the majority opinion of the Court of Appeals states that Judge Boyer's conduct showed a "striking manifestation of extraordinary interest in the proceedings," and that the jury knew who he was and it was "very probable" they knew that he had just completed the Foster-Zeitz trial. 224 F.2d at 508. We agree with the Court of Appeals that petitioner attaches too much significance to Judge Boyer's conduct. Judge Boyer's presence on the bench, particularly in the light of the long established practice for both judges to sit on the bench at the beginning of each session to dispose of miscellaneous business, did not amount to a denial of due process. Nor did his subsequent presence on the bench or in the courtroom make out a denial of due process. Under the cases cited earlier, petitioner must show that he was prejudiced in some way by the judge's presence. Aside from the sidebar conference and the contested note-passing incident, petitioner relies upon Judge Boyer's statement to the Foster-Zeitz jury and his subsequent remarks made on June 11, in another case, in sentencing another Philadelphia youth, to show that Judge Boyer was "hostile" to petitioner, and that the jury recognized such hostility. But the remarks on June 11 could not have prejudiced petitioner's jury, since that jury had no access to any source of news that reported the incident. Petitioner thus is left with Judge Boyer's commendatory remark to the Foster-Zeitz trial jury. This, read in its proper context and examined in the light of Judge Keller's remarks made to the remainder of the jury panel, does not raise a substantial due process question. Petitioner seeks to have this Court speculate that the jurors knew that Judge Boyer had made this statement and that they were prejudiced by it or by Judge Boyer's presence. We can no more speculate on this aspect of the case than on the others. Petitioner's counsel must have been aware of Judge Boyer's statement and of its possible effect, if any, on the jury, and the possible effect of Judge Boyer's manifestation of interest. However, he took no action to prevent this possibility from infecting petitioner's trial. Accordingly, we may as well speculate that he did not deem it necessary to take any such action because the possibility of prejudice was too remote to justify it. It is not necessary for this Court to enter into such speculations. Petitioner has not sustained the burden resting upon him to show that his trial was essentially unfair in a constitutional sense and that the several courts which have reviewed it are all in error. The judgment of the Court of Appeals, therefore, is Affirmed.

Petitioner, a state prisoner under a sentence of death for murder committed during the course of an armed robbery, brought a habeas corpus proceeding in a Federal District Court, claiming that his conviction was obtained in violation of his rights to due process of law as guaranteed by the Fourteenth Amendment. He charged .that he was tried under prejudicial circumstances and improper influences in that an atmosphere of hysteria and prejudice prevailed at the state trial, including the prejudicial conduct and frequent presence in the courtroom of another judge of the same court, who recently had presided over a trial of two associates of petitioner which had resulted in a like conviction and sentence for the murder. Held: on the record in this case, petitioner was not denied due process of law. . (a) The burden was on petitioner to show such essential unfairness as vitiates his trial, and the burden must be sustained not as a matter of speculation, but as a demonstrable reality. P.. (b) The most that petitioner has shown is that, in certain respects, opportunity for prejudice existed. P.. (c) The record does not support the claim that the news coverage of the crime and of the proceedings prior to petitioner's trial created such an atmosphere of hysteria and prejudice as precluded a fair trial. . (d) There is no merit in petitioner's claim that he was "forced" to trial immediately after the trial of his associates, or in his claim that the trial judge, sua sponte, should have changed the venue or continued the trial. P.. (e) On the record in this case, the other judge's presence and conduct on the bench and in the courtroom were not so prejudicial as to deny due process. . (f) Petitioner has not sustained the burden of showing that his trial was essentially unfair in a constitutional sense. P.. 224 F.2d 504 affirmed.

1955_26

https://www.oyez.org/cases/1955/26

MR. JUSTICE MINTON delivered the opinion of the Court. Anderson, Clayton & Co., a Delaware corporation, was organized in 1929. Its capital structure consisted of preferred stock and 100,000 shares of common stock, the capital value of which was fixed at one dollar per share. By April 21, 1930, all of the common stock had been issued, in varying amounts, to the corporation's managing officials in consideration of their worth and responsibility to the company, which is engaged in the highly technical and skilled business of cotton merchandising. In 1931, a written agreement was entered into between the corporation and the common stockholders the purpose of which was to restrict the ownership of the common stock to the management group and to adjust the respective interests in the common stock among that group as responsibility changed. Accordingly, the agreement provided that the stock could not be disposed of except by written consent of the owners of 75% of the common stock. Upon the death of any party to the agreement, the corporation agreed to purchase the common stock of the deceased at its book value as of July 31 preceding the stockholder's death. One M. D. Anderson, one of the chief officers of the company, was originally issued 31,000 shares. During the development of the corporation, Mr. Anderson had transferred shares of his stock, pursuant to the agreement, to junior officials as they assumed more duties and responsibilities, until, at the time of his death in 1939, he owned 18,574 shares. These shares the corporation purchased at their book value of $50.79 per share. This stock was not retired, but was retained as treasury stock. While in the treasury, it could not be voted, nor were dividends paid on it. The company, in 1944, sold 6,500 of these shares to junior officials at the then book value of $112.68 per share. The difference between the price paid Anderson's estate and that received from the sale of the shares to the junior officials was $402,285, on which the United States imposed a long-term capital gains tax of $100,571.25. Respondent paid the tax and sued in the Court of Claims to recover the amount. The respondent took the position that no long-term capital gain resulted, because it was not dealing in its stock "as it might in the shares of another corporation," as contemplated in Treasury Regulations 111, § 29.22(a)-15. The Court of Claims,129 Ct.Cl. 295, 122 F. Supp. 837, agreed with respondent and entered judgment for recovery of the tax paid, with interest. We granted certiorari, 348 U.S. 936, because of the claim of conflict with decisions of the Courts of Appeals. The sole question, therefore, is whether, in the circumstances of this case, Treasury Regulations 111, § 29.22(a)-15 makes the sale of this treasury stock of the corporation a taxable transaction under § 22(a) of the Internal Revenue Code of 1939. Article 66 of Treasury Regulations 74, promulgated under the Revenue Act of 1928, provided that a corporation which purchases its own stock, holds it as treasury stock, and later sells it "realizes no gain or loss" from such transactions. This Court upheld that regulation as a proper one interpretive of the general terms of § 22(a) of the Internal Revenue Code. Helvering v. R. J. Reynolds Tobacco Co.,,. The present regulation was promulgated in 1934. Its effect was to remove the categorical exclusion of taxable gains or losses arising out of the purchase and sale by a corporation of its own stock accorded such transactions by Article 66 of Treasury Regulations 74. The amended regulation specifically excludes from tax consequences a corporation's sale of its stock upon original issue whether sold for more or less than par or stated value. On the other hand, the regulation specifically provides that tax consequences flow from the receipt by the corporation of its own stock as consideration for sales of its property or in satisfaction of indebtedness to it. With regard to all other dealings by a corporation in its own stock, whether or not tax consequences result depends generally upon the "real nature of the transaction, which is to be ascertained from all its facts and circumstances." The regulation provides further that, "if a corporation deals in its own shares as it might in the shares of another corporation," such dealings are considered, for tax purposes, as though the corporation were in fact dealing in the other corporation's stock. Thus, whether the transaction here in question is taxable depends, in the final analysis, on whether respondent corporation dealt with its shares of treasury stock "as it might" have dealt with another corporation's stock. The Court of Claims ruled, after a thorough examination of all of the facts and circumstances surrounding the transaction, that the corporation was not dealing in its shares as it might in the shares of another corporation. This conclusion is abundantly supported by the subsidiary findings, which are all supported by the evidence in this case. We agree with the Court of Claims. Here, the purchase and sale were made pursuant to a contract entered into without any shown purpose of advantageous investment. Instead, the purpose of the agreement was found to be to maintain the distribution of the stock among responsible and active members of the organization in a manner designed to reflect their worth to the corporation. Indicative of this singleness of purpose is the fact that some of the stock purchased from Mr. Anderson's estate was sold to the corporation's other executives at a price below that for which it was acquired. No consideration was given to the opportune time for purchase or sale. The purchase of Mr. Anderson's stock by the corporation was dictated by the terms of the contract upon the fortuitous circumstance of his death. Moreover, when purchased, the stock was lodged in the treasury. It could not be taken into account in any payment of dividends, nor voted in shareholder meetings, nor counted for the purpose of establishing a quorum. These unrecognized rights are all incident to the ownership of common stock of other corporations. It is thus clear that respondent was not dealing in its shares as it might in the shares of others. The Government urges that the crucial inquiry as to whether the transaction is taxable under the regulation depends for its answer upon whether the reacquired shares are resold or retired and new shares issued; since the shares were not retired, the resale at a price greater than cost results in a taxable gain under § 22(a) of the Code and the applicable regulation. The Government receives comfort for its position in the language of Commissioner v. Batten, Barton, Durstine & Osborn, Inc., 171 F.2d 474, 476, and Commissioner v. Landers Corp., 210 F.2d 188, 191. But we do not think formalities should be raised to such an important position. Moreover, the applicable regulation provides that tax consequences depend upon "the real nature of the transaction, which is to be ascertained from all its facts and circumstances," and not upon the sole circumstance that the stock is not retired. When viewed in its entirety, the instant transaction, limited to a wholly intracorporate purpose with no element of speculation or gain envisioned from dealing in its shares, does not constitute dealing by the corporation in its own shares as it might deal in the shares of another corporation within the meaning of the regulation. The judgment is Affirmed

Pursuant to a contract entered into without any shown purpose of advantageous investment, but solely for the purpose of maintaining the distribution of its common stock among responsible and active members of its organization in a manner designed to reflect their worth to it, a corporation purchased the shares of a deceased officer. These shares were not retired, but were retained as treasury stock. While in the treasury, they could not be voted nor counted for the purpose of establish a quorum, nor were dividends paid on them. Subsequently, they were resold at a profit to other officers of the corporation, pursuant to the contract. Held: in the circumstances of this case, Treasury Regulations 111, § 29.22(a)-15, does not make the sale of this treasury stock of the corporation a taxable transaction under § 22(a) of the Internal Revenue Code of 1939. . (a) On the record in this case, the corporation was not dealing in its shares as it might in the shares of another corporation, within the meaning of the Regulation. . (b) A different result is not required by the fact that the shares were not retired and new shares issued. P.. 129 Ct.Cl. 295, 122 F. Supp. 837, affirmed.

1955_102

https://www.oyez.org/cases/1955/102

PER CURIAM. The Interstate Commerce Commission brings an appeal from a three-judge district court, 49 U.S.C. § 305(g), that reversed an order of the ICC, 62 M.C.C. 413, directing appellee Contract Steel Carriers to cease operations as a common carrier by motor vehicle. 128 F. Supp. 25. Appellee holds licenses covering different areas surrounding Chicago, Houston, and St. Louis. As these are substantially in the same form, a single illustration will suffice. It covers contract carriage of "Steel articles, and such materials as are used or useful in highway construction projects, except cement, rock, sand, and gravel, over irregular routes, in connection with said carrier's presently authorized operations," "From points and places in the CHICAGO, ILL COMMERCIAL ZONE, as defined by the Commission in 1 M.C.C. 673, to points and places in Arkansas, Iowa, Kansas, Missouri, Oklahoma, and Texas, and return with no transportation for compensation." No. MC 96505 SUB 6. The facts are fully set out in the reports referred to above. In essence, they show that appellee, by active solicitation from 1951 to 1954 in the areas mentioned, had secured 69 contracts to serve shippers. These had been filed with the Commission, and there is no charge of any violation of the restrictions of the license or the requirements of individual contracts except that the appellee has held itself out by its actions to be a common carrier. The Commission found this holding out from an advertisement, run without legal advice and since discontinued, offering its transportation service without mentioning whether it was contract or common carriage. It was also charged that ". . . the great increase in the number of contracts held by it are attributable in large degree to aggressive sales activities and affirmative pre-contract traffic solicitation, which amounts to a public offer or holding out. In this connection, it is also asserted that defendant maintained an employee in Des Moines, Iowa, whose duties included the active solicitation of traffic. . . . There is evidence that business has been lost by interveners after a representative of defendant called upon receivers of steel in Iowa, leaving a copy of defendant's schedule of minimum rates and charges, and a copy of a blank contract to be executed by such shippers." 62 M.C.C. 413, 414-415. It was concluded by the Commission: "Although the facts here are meager in some respects, they reveal a pattern of extraordinary expansion in a period of approximately 8 months and an easy turnover of contracts thereafter. We believe that there is ample evidence to show that this expansion was brought about, to some extent at least, by indiscriminate solicitation and advertising, among other things." Id. at 421. In Craig Contract Carrier Application, 31 M.C.C. 705, 712, the ICC stated that the services of a contract carrier must be individual and specialized. A requirement of specialization is supported by respectable legislative history. See, e.g., 79 Cong.Rec. 5651. In this case, the ICC found that appellee had not sufficiently specialized its operation. However, we conclude that, if specialization is to be read into 49 U.S.C. § 303(a)(15) by the legislative history, it is satisfied here, since appellee hauls only strictly limited types of steel products under individual and continuing contractual agreements with a comparatively small number of shippers throughout a large area. We hold also that the fact that appellee has actively solicited business within the bounds of his license does not support a finding that it was "holding itself out to the general public." A contract carrier is free to aggressively search for new business within the limits of his license. Because the ICC's order is not supported by evidence in the record and is contrary to the definitions of contract and common carriers in § 303(14) and (15), we affirm the District Court. Affirmed.

l. If a requirement that the services of a "contract carrier by motor vehicle," within the meaning of 49 U.S.C. § 303(a)(15), must be individual and specialized is to be read into this section by its legislative history, the requirement was satisfied in this case, since this carrier hauls only strictly limited types of steel products under individual and continuing contractual agreements with a comparatively small number of shippers throughout a large area. P.. 2. The fact that this contract carrier has actively solicited business within the bounds of its license does not support a finding by the Interstate Commerce Commission that the carrier was "holding itself out to the general public" as a common carrier. . 128 F. Supp. 25 affirmed.

1955_5

https://www.oyez.org/cases/1955/5

MR. JUSTICE REED delivered the opinion of the Court. The United States brought this civil action under § 4 of the Sherman Act against E. I. du Pont de Nemours and Company. The complaint, filed December 13, 1947, in the United States District Court for the District of Columbia, charged du Pont with monopolizing, attempting to monopolize and conspiracy to monopolize interstate commerce in cellophane and cellulosic caps and bands in violation of § 2 of the Sherman Act. Relief by injunction was sought against defendant and its officers, forbidding monopolizing or attempting to monopolize interstate trade in cellophane. The prayer also sought action to dissipate the effect of the monopolization by divestiture or other steps. On defendant's motion under 28 U.S.C. § 1404(a), the case was transferred to the District of Delaware. After a lengthy trial, judgment was entered for du Pont on all issues. The Government's direct appeal here does not contest the findings that relate to caps and bands, nor does it raise any issue concerning the alleged attempt to monopolize or conspiracy to monopolize interstate commerce in cellophane. The appeal, as specifically stated by the Government, "attacks only the ruling that du Pont has not monopolized trade in cellophane." At issue for determination is only this alleged violation by du Pont of § 2 of the Sherman Act. During the period that is relevant to this action, du Pont produced almost 75% of the cellophane sold in the United States, and cellophane constituted less than 20% of all "flexible packaging material" sales. This was the designation accepted at the trial for the materials listed in Finding 280, Appendix A, this opinion, post, p.. The Government contends that, by so dominating cellophane production, du Pont monopolized a "part of the trade or commerce" in violation of § 2. Respondent agrees that cellophane is a product which constitutes "a "part" of commerce within the meaning of Section 2." Du Pont brief, pp. 16, 79. But it contends that the prohibition of § 2 against monopolization is not violated, because it does not have the power to control the price of cellophane or to exclude competitors from the market in which cellophane is sold. The court below found that the "relevant market for determining the extent of du Pont's market control is the market for flexible packaging materials," and that competition from those other materials prevented du Pont from possessing monopoly powers in its sales of cellophane. Finding 37. The Government asserts that cellophane and other wrapping materials are neither substantially fungible nor like priced. For these reasons, it argues that the market for other wrappings is distinct from the market for cellophane, and that the competition afforded cellophane by other wrappings is not strong enough to be considered in determining whether du Pont has monopoly powers. Market delimitation is necessary under du Pont's theory to determine whether an alleged monopolist violates § 2. The ultimate consideration in such a determination is whether the defendants control the price and competition in the market for such part of trade or commerce as they are charged with monopolizing. Every manufacturer is the sole producer of the particular commodity it makes, but its control in the above sense of the relevant market depends upon the availability of alternative commodities for buyers -- i.e., whether there is a cross-elasticity of demand between cellophane and the other wrappings. This interchangeability is largely gauged by the purchase of competing products for similar uses considering the price, characteristics and adaptability of the competing commodities. The court below found that the flexible wrappings afforded such alternatives. This Court must determine whether the trial court erred in its estimate of the competition afforded cellophane by other materials. The burden of proof, of course, was upon the Government to establish monopoly. See United States v. Aluminum Co. of America, 148 F.2d 416, 423, 427. This the trial court held the Government failed to do, upon findings of fact and law stated at length by that court. For the United States to succeed in this Court now, it must show that erroneous legal tests were applied to essential findings of fact or that the findings themselves were "clearly erroneous" within our rulings on Rule 52(a) of the Rules of Civil Procedure. See United States v. United States Gypsum Co.,,. We do not try the facts of cases de novo. Timken Roller Bearing Co. v. United States,,. Two additional questions were raised in the record and decided by the court below. That court found that, even if du Pont did possess monopoly power over sales of cellophane, it was not subject to Sherman Act prosecution, because (1) the acquisition of that power was protected by patents, and (2) that power was acquired solely through du Pont's business expertness. It was thrust upon du Pont. 118 F. Supp. at 213-218. Since the Government specifically excludes attempts and conspiracies to monopolize from consideration, a conclusion that du Pont has no monopoly power would obviate examination of these last two issues. I. Factual Background. -- For consideration of the issue as to monopolization, a general summary of the development of cellophane is useful. In the early 1900's, Jacques Brandenberger, a Swiss chemist, attempted to make tablecloths impervious to dirt by spraying them with liquid viscose (a cellulose solution available in quantity from wood pulp, Finding 361) and by coagulating this coating. His idea failed, but he noted that the coating peeled off in a transparent film. This first "cellophane" was thick, hard, and not perfectly transparent, but Brandenberger apparently foresaw commercial possibilities in his discovery. By 1908, he developed the first machine for the manufacture of transparent sheets of regenerated cellulose. The 1908 product was not satisfactory, but, by 1912, Brandenberger was making a saleable thin flexible film used in gas masks. He obtained patents to cover the machinery and the essential ideas of his process. It seems to be agreed, however, that the disclosures of these early patents were not sufficient to make possible the manufacture of commercial cellophane. The inadequacy of the patents is partially attributed to the fact that the essential machine (the Hopper) was improved after it was patented. But more significant was the failure of these patents to disclose the actual technique of the process. This technique included the operational data acquired by experimentation. In 1917, Brandenberger assigned his patents to La Cellophane Societe Anonyme and joined that organization. Thereafter, developments in the production of cellophane somewhat paralleled those taking place in artificial textiles. Chemical science furnished the knowledge for perfecting the new products. The success of the artificial products has been enormous. Du Pont was an American leader in the field of synthetics, and learned of cellophane's successes through an associate, Comptoir des Textiles Artificiel. In 1923, du Pont organized with La Cellophane an American company for the manufacture of plain cellophane. The undisputed findings are that: "On December 26, 1923, an agreement was executed between duPont Cellophane Company and La Cellophane by which La Cellophane licensed duPont Cellophane Company exclusively under its United States cellophane patents, and granted duPont Cellophane Company the exclusive right to make and sell in North and Central America under La Cellophane's secret processes for cellophane manufacture. DuPont Cellophane Company granted to La Cellophane exclusive rights for the rest of the world under any cellophane patents or processes duPont Cellophane Company might develop." Finding 24. Subsequently, du Pont and La Cellophane licensed several foreign companies, allowing them to manufacture and vend cellophane in limited areas. Finding 601. Technical exchange agreements with these companies were entered into at the same time. However, in 1940, du Pont notified these foreign companies that sales might be made in any country, and, by 1948, all the technical exchange agreements were canceled. Sylvania, and American affiliate of a Belgian producer of cellophane not covered by the license agreements above referred to, began the manufacture of cellophane in the United States in 1930. Litigation between the French and Belgian companies resulted in a settlement whereby La Cellophane came to have a stock interest in Sylvania, contrary to the La Cellophane-du Pont agreement. This resulted in adjustments as compensation for the intrusion into United States of La Cellophane that extended du Pont's limited territory. The details do not here seem important. Since 1934, Sylvania has produced about 25% of United States cellophane. An important factor in the growth of cellophane production and sales was the perfection of moisture-proof cellophane, a superior product of du Pont research and patented by that company through a 1927 application. Plain cellophane has little resistance to the passage of moisture vapor. Moisture-proof cellophane has a composition added which keeps moisture in and out of the packed commodity. This patented type of cellophane has had a demand with much more rapid growth than the plain. In 1931, Sylvania began the manufacture of moisture-proof cellophane under its own patents. After negotiations over patent rights, du Pont, in 1933, licensed Sylvania to manufacture and sell moisture-proof cellophane produced under the du Pont patents at a royalty of 2% of sales. These licenses, with the plain cellophane licenses from the Belgian company, made Sylvania a full cellophane competitor, limited on moisture-proof sales by the terms of the licenses to 20% of the combined sales of the two companies of that type by the payment of a prohibitive royalty on the excess. Finding 552. There was never an excess production. The limiting clause was dropped on January 1, 1945, and Sylvania was acquired in 1946 by the American Viscose Corporation with assets of over two hundred million dollars. Between 1928 and 1950, du Pont's sales of plain cellophane increased from $3,131,608 to $9,330,776. Moisture-proof sales increased from $603,222 to $89,850,416, although prices were continuously reduced. Finding 337. It could not be said that this immense increase in use was solely or even largely attributable to the superior quality of cellophane, or to the technique or business acumen of du Pont, though doubtless those factors were important. The growth was a part of the expansion of the commodity packaging habits of business, a by-product of general efficient competitive merchandising to meet modern demands. The profits, which were large, apparently arose from this trend in marketing, the development of the industrial use of chemical research and production of synthetics, rather than from elimination of other producers from the relevant market. That market is discussed later at p. 351 U.S. 394. Tables appearing at the end of this opinion (Appendix A, Findings 279-292, inclusive, post, pp. 405-410) show the uses of cellophane in comparison with other wrappings. See the discussion infra, p. et seq. II. The Sherman Act and the Courts. -- The Sherman Act has received long and careful application by this Court to achieve for the Nation the freedom of enterprise from monopoly or restraint envisaged by the Congress that passed the Act in 1890. Because the Act is couched in broad terms, it is adaptable to the changing types of commercial production and distribution that have evolved since its passage. Chief Justice Hughes wrote for the Court that, "As a charter of freedom, the act has a generality and adaptability comparable to that found to be desirable in constitutional provisions." Appalachian Coals, Inc. v. United States,,. Compare, on remedy, Judge Wyzanski in United States v. United Shoe Machinery Corp., 110 F. Supp. 295, 348. It was said in Standard Oil Co. v. United States,,, that fear of the power of rapid accumulations of individual and corporate wealth from the trade and industry of a developing national economy caused its passage. Units of traders and producers snowballed by combining into so-called "trusts." Competition was threatened. Control of prices was feared. Individual initiative was dampened. While the economic picture has changed, large aggregations or private capital, with power attributes, continue. Mergers go forward. Industries such as steel, automobiles, tires, chemicals, have only a few production organizations. A considerable size is often essential for efficient operation in research, manufacture and distribution. Judicial construction of anti-trust legislation has generally been left unchanged by Congress. This is true of the Rule of Reason. While it is fair to say that the Rule is imprecise, its application in Sherman Act litigation, as directed against enhancement of price or throttling of competition, has given a workable content to antitrust legislation. See note 18 infra. It was judicially declared a proper interpretation of the Sherman Act in 1911, with a strong, clear-cut dissent challenging its soundness on the ground that the specific words of the Act covered every contract that tended to restrain or monopolize. This Court has not receded from its position on the Rule. There is not, we think, any inconsistency between it and the development of the judicial theory that agreements as to maintenance of prices or division of territory are in themselves a violation of the Sherman Act. It is logical that some agreements and practices are invalid per se, while others are illegal only as applied to particular situations. Difficulties of interpretation have arisen in the application of the Sherman Act in view of the technical changes in production of commodities and the new distribution practices. They have called forth reappraisal of the effect of the Act by business and government. That reappraisal has so far left the problems with which we are here concerned to the courts, rather than to administrative agencies. Cf. Federal Trade Commission Act, 38 Stat. 721. It is true that Congress has made exceptions to the generality of monopoly prohibitions, exceptions that spring from the necessities or conveniences of certain industries or business organizations, or from the characteristics of the members of certain groups of citizens. But those exceptions express legislative determination of the national economy's need of reasonable limitations on cutthroat competition or prohibition of monopoly. "[W]here exceptions are made, Congress should make them." United States v. Line Material Co.,,. They modify the reach of the Sherman Act, but do not change its prohibition of other monopolies. We therefore turn to § 2 ( note 2 supra) to determine whether du Pont has violated that section by its dominance in the manufacture of cellophane in the before-stated circumstances. III. The Sherman Act, § 2 -- Monopolization. -- The only statutory language of § 2 pertinent on this review is: "Every person who shall monopolize . . . shall be deemed guilty. . . ." This Court has pointed out that monopoly at common law was a grant by the sovereign to any person for the sole making or handling of anything so that others were restrained or hindered in their lawful trade. Standard Oil Co. v. United States,,. However, as in England, it came to be recognized here that acts bringing the evils of authorized monopoly -- unduly diminishing competition and enhancing prices -- were undesirable, id. at, and were declared illegal by § 2. Id. at. Our cases determine that a party has monopoly power if it has, over "any part of the trade or commerce among the several states," a power of controlling prices or unreasonably restricting competition. Id. at. Senator Hoar, in discussing § 2, pointed out that monopoly involved something more than extraordinary commercial success, "that it involved something like the use of means which made it impossible for other persons to engage in fair competition." This exception to the Sherman Act prohibitions of monopoly power is perhaps the monopoly "thrust upon" one of United States v. Aluminum Co. of America, 148 F.2d 416, 429, left as an undecided possibility by American Tobacco Co. v. United States,. Compare United States v. United Shoe Machinery Corp., 110 F. Supp. 295, 342. If cellophane is the "market" that du Pont is found to dominate, it may be assumed it does have monopoly power over that "market." Monopoly power is the power to control prices or exclude competition. It seems apparent that du Pont's power to set the price of cellophane has been limited only by the competition afforded by other flexible packaging materials. Moreover, it may be practically impossible for anyone to commence manufacturing cellophane without full access to du Pont's technique. However, du Pont has no power to prevent competition from other wrapping materials. The trial court consequently had to determine whether competition from the other wrappings prevented du Pont from possessing monopoly power in violation of § 2. Price and competition are so intimately entwined that any discussion of theory must treat them as one. It is inconceivable that price could be controlled without power over competition, or vice versa. This approach to the determination of monopoly power is strengthened by this Court's conclusion in prior cases that, when an alleged monopolist has power over price and competition, an intention to monopolize in a proper case may be assumed. If a large number of buyers and sellers deal freely in a standardized product such as salt or wheat, we have complete or pure competition. Patents, on the other hand, furnish the most familiar type of classic monopoly. As the producers of a standardized product bring about significant differentiations of quality, design, or packaging in the product that permit differences of use, competition becomes, to a greater or less degree, incomplete, and the producer's power over price and competition greater over his article and its use, according to the differentiation he is able to create and maintain. A retail seller may have, in one sense, a monopoly on certain trade because of location, as an isolated country store or filling station, or because no one else makes a product of just the quality or attractiveness of his product, as, for example, in cigarettes. Thus, one can theorize that we have monopolistic competition in every nonstandardized commodity, with each manufacturer having power over the price and production of his own product. However, this power that, let us say, automobile or soft-drink manufactures have over their trademarked products is not the power that makes an illegal monopoly. Illegal power must be appraised in terms of the competitive market for the product. Determination of the competitive market for commodities depends on how different from one another are the offered commodities in character or use, how far buyers will go to substitute one commodity for another. For example, one can think of building materials as in commodity competition, but one could hardly say that brick competed with steel or wood or cement or stone in the meaning of Sherman Act litigation; the products are too different. This is the inter-industry competition emphasized by some economists. See Lilienthal, Big Business, c. 5. On the other hand, there are certain differences in the formulae for soft drinks, but one can hardly say that each one is an illegal monopoly. Whatever the market may be, we hold that control of price or competition establishes the existence of monopoly power under § 2. Section 2 requires the application of a reasonable approach in determining the existence of monopoly power just as surely as did § 1. This, of course, does not mean that there can be a reasonable monopoly. See notes 7 and | 7 and S. 377fn9|>9, supra. Our next step is to determine whether du Pont has monopoly power over cellophane -- that is, power over its price in relation to or competition with � 7 and S. 394� other commodities. The charge was monopolization of cellophane. The defense, that cellophane was merely a part of the relevant market for flexible packaging materials. IV. The Relevant Market. -- When a product is controlled by one interest, without substitutes available in the market, there is monopoly power. Because most products have possible substitutes, we cannot, as we said in Times-Picayune Pub. Co. v. United States,,, give "that infinite range" to the definition of substitutes. Nor is it a proper interpretation of the Sherman Act to require that products be fungible to be considered in the relevant market. The Government argues: "We do not here urge that in no circumstances may competition of substitutes negative possession of monopolistic power over trade in a product. The decisions make it clear at the least that the courts will not consider substitutes other than those which are substantially fungible with the monopolized product and sell at substantially the same price." But where there are market alternatives that buyers may readily use for their purposes, illegal monopoly does not exist merely because the product said to be monopolized differs from others. If it were not so, only physically identical products would be a part of the market. To accept the Government's argument, we would have to conclude that the manufactures of plain, as well as moisture-proof, cellophane were monopolists, and so with films such as Pliofilm, foil, glassine, polyethylene, and Saran, for each of these wrapping materials is distinguishable. These were all exhibits in the case. New wrappings appear, generally similar to cellophane -- is each a monopoly? What is called for is an appraisal of the "cross-elasticity" of demand in the trade. See Note, 54 Col.L.Rev. 580. The varying circumstances of each case determine the result. In considering what is the relevant market for determining the control of price and competition, no more definite rule can be declared than that commodities reasonably interchangeable by consumers for the same purposes make up that "part of the trade or commerce" monopolization of which may be illegal. As respects flexible packaging materials, the market geographically is nationwide. Industrial activities cannot be confined to trim categories. Illegal monopolies under § 2 may well exist over limited products in narrow fields where competition is eliminated. That does not settle the issue here. In determining the market under the Sherman Act, it is the use or uses to which the commodity is put that control. The selling price between commodities with similar uses and different characteristics may vary, so that the cheaper product can drive out the more expensive. Or the superior quality of higher priced articles may make dominant the more desirable. Cellophane costs more than many competing products, and less than a few. But, whatever the price, there are various flexible wrapping materials that are bought by manufacturers for packaging their goods in their own plants or are sold to converters who shape and print them for use in the packaging of the commodities to be wrapped. Cellophane differs from other flexible packaging materials. From some it differs more than from others. The basic materials from which the wrappings are made and the advantages and disadvantages of the products to the packaging industry are summarized in Findings 62 and 63. They are aluminum, cellulose acetate, chlorides, wood pulp, rubber hydrochloride, and ethylene gas. It will adequately illustrate the similarity in characteristics of the various products by noting here Finding 62 as to glassine. Its use is almost as extensive as cellophane, Appendix C, post, p. 412, and many of its characteristics equally or more satisfactory to users. It may be admitted that cellophane combines the desirable elements of transparency, strength, and cheapness more definitely than any of the others. Comparative characteristics have been noted thus: "Moisture-proof cellophane is highly transparent, tears readily but has high bursting strength, is highly impervious to moisture and gases, and is resistant to grease and oils. Heat sealable, printable, and adapted to use on wrapping machines, it makes an excellent packaging material for both display and protection of commodities." "Other flexible wrapping materials fall into four major categories: (1) opaque nonmoisture-proof wrapping paper designed primarily for convenience and protection in handling packages; (2) moisture-proof films of varying degrees of transparency designed primarily either to protect, or to display and protect, the products they encompass; (3) nonmoisture-proof transparent films designed primarily to display and to some extent protect, but which obviously do a poor protecting job where exclusion or retention of moisture is important; and (4) moisture-proof materials other than films of varying degrees of transparency (foils and paper products) designed to protect and display. " An examination of Finding 59, Appendix, B, post, p., will make this clear. But, despite cellophane's advantages, it has to meet competition from other materials in every one of its uses. Cellophane's principal uses are analyzed in 351 U.S. 377appa|>Appendix A, Findings 281 and 282. Food products are the chief outlet, with cigarettes next. The Government makes no challenge to Finding 283 that cellophane furnishes less than 7% of wrappings for bakery products, 25% for candy, 32% for snacks, 35% for meats and poultry, 27% for crackers and biscuits, 47% for fresh produce, and 34% for frozen foods. Seventy-five to eighty percent of cigarettes are wrapped in cellophane. Finding 292. Thus, cellophane shares the packaging market with others. The over-all result is that cellophane accounts for 17.9% of flexible wrapping materials, measured by the wrapping surface. Finding 280, Appendix A., post, p.. Moreover, a very considerable degree of functional interchangeability exists between these products, as is shown by the tables of 351 U.S. 377appa|>Appendix A and Findings 150-278. It will be noted, 351 U.S. 377appb|>Appendix B, that, except as to permeability to gases, cellophane has no qualities that are not possessed by a number of other materials. Meat will do as an example of interchangeability. Findings 205-220. Although du Pont's sales to the meat industry have reached 19,000,000 pounds annually, nearly 35%, this volume is attributed "to the rise of self-service retailing of fresh meat." Findings 212 and 283. In fact, since the popularity of self-service meats, du Pont has lost "a considerable proportion" of this packaging business to Pliofilm. Finding 215. Pliofilm is more expensive than cellophane, but its superior physical characteristics apparently offset cellophane's price advantage. While retailers shift continually between the two, the trial court found that Pliofilm is increasing its share of the business. Finding 216. One further example is worth noting. Before World War II, du Pont cellophane wrapped between 5 and 10% of baked and smoked meats. The peak year was 1933. Finding 209. Thereafter, du Pont was unable to meet the competition of Sylvania and of grease-proof paper. Its sales declined, and the 1933 volume was not reached again until 1947. Findings 209-210. It will be noted that grease-proof paper, glassine, waxed paper, foil and Pliofilm are used as well as cellophane, Finding 218. Findings 209-210 show the competition, and 215-216 the advantages, that have caused the more expensive Pliofilm to increase its proportion of the business. An element for consideration as to cross-elasticity of demand between products is the responsiveness of the sales of one product to price changes of the other. If a slight decrease in the price of cellophane causes a considerable number of customers of other flexible wrappings to switch to cellophane, it would be an indication that a high cross-elasticity of demand exists between them -- that the products compete in the same market. The court below held that the "[g]reat sensitivity of customers in the flexible packaging markets to price or quality changes" prevented du Pont from possessing monopoly control over price. 118 F. Supp. at 207. The record sustains these findings. See references made by the trial court in Findings 123-149. We conclude that cellophane's interchangeability with the other materials mentioned suffices to make it a part of this flexible packaging material market. The Government stresses the fact that the variation in price between cellophane and other materials demonstrates they are noncompetitive. As these products are all flexible wrapping materials, it seems reasonable to consider, as was done at the trial, their comparative cost to the consumer in terms of square area. This can be seen in Finding 130, 351 U.S. 377appc|>Appendix C. Findings as to price competition are set out in the margin. Cellophane costs two or three times as much, surface measure, as its chief competitors for the flexible wrapping market, glassine and grease-proof papers. Other forms of cellulose wrappings and those from other chemical or mineral substances, with the exception of aluminum foil, are more expensive. The uses of these materials, as can be observed by Finding 283 in 351 U.S. 377appa|>Appendix A, are largely to wrap small packages for retail distribution. The wrapping is a relatively small proportion of the entire cost of the article. Different producers need different qualities in wrappings, and their need may vary from time to time as their products undergo change. But the necessity for flexible wrappings is the central and unchanging demand. We cannot say that these differences in cost gave du Pont monopoly power over prices in view of the findings of fact on that subject. It is the variable characteristics of the different flexible wrappings and the energy and ability with which the manufacturers push their wares that determine choice. A glance at "Modern Packaging," a trade journal, will give, by its various advertisements, examples of the competition among manufacturers for the flexible packaging market. The trial judge visited the 1952 Annual Packaging Show at Atlantic City, with the consent of counsel. He observed exhibits offered by "machinery manufacturers, converters, and manufacturers of flexible packaging materials." He stated that these personal observations confirmed his estimate of the competition between cellophane and other packaging materials. Finding 820. From this wide variety of evidence, the Court reached the conclusion expressed in Finding 838: "The record establishes plain cellophane and moisture-proof cellophane are each flexible packaging materials which are functionally interchangeable with other flexible packaging materials and sold at same time to same customers for same purpose at competitive prices; there is no cellophane market distinct and separate from the market for flexible packaging materials; the market for flexible packaging materials is the relevant market for determining nature and extent of duPont's market control; and duPont has at all times competed with other cellophane producers and manufacturers of other flexible packaging materials in all aspects of its cellophane business." The facts above considered dispose also of any contention that competitors have been excluded by du Pont from the packaging material market. That market has many producers, and there is no proof du Pont ever has possessed power to exclude any of them from the rapidly expanding flexible packaging market. The Government apparently concedes as much, for it states that "lack of power to inhibit entry into this so-called market [i.e., flexible packaging materials], comprising widely disparate products, is no indicium of absence of power to exclude competition in the manufacture and sale of cellophane." The record shows the multiplicity of competitors and the financial strength of some with individual assets running to the hundreds of millions. Findings 66-72. Indeed, the trial court found that du Pont could not exclude competitors even from the manufacture of cellophane, Finding 727, an immaterial matter if the market is flexible packaging material. Nor can we say that du Pont's profits, while liberal (according to the Government 15.9% net after taxes on the 1937-1947 average), demonstrate the existence of a monopoly without proof of lack of comparable profits during those years in other prosperous industries. Cellophane was a leader over 17%, in the flexible packaging materials market. There is no showing that du Pont's rate of return was greater or less than that of other producers of flexible packaging materials. Finding 719. The "market" which one must study to determine when a producer has monopoly power will vary with the part of commerce under consideration. The tests are constant. That market is composed of products that have reasonable interchangeability for the purposes for which they are produced -- price, use and qualities considered. While the application of the tests remains uncertain, it seems to us that du Pont should not be found to monopolize cellophane when that product has the competition and interchangeability with other wrappings that this record shows. On the findings of the District Court, its judgment is Affirmed

In a civil action under § 4 of the Sherman Act, the Government charged that appellee had monopolized interstate commerce in cellophane in violation of § 2 of the Act. During the relevant period, appellee produced almost 75% of the cellophane sold in the United States; but cellophane constituted less than 20% of all flexible packaging materials sold in the United States. The trial court found that the relevant market for determining the extent of appellee's market control was the market for flexible packaging materials, and that competition from other materials in that market prevented appellee from possessing monopoly powers in its sales of cellophane. Accordingly, it dismissed the complaint. Held: the judgment is affirmed. . (a) The ultimate consideration in determining whether an alleged monopolist violates § 2 of the Sherman Act is whether the defendant controls prices and competition in the market for such part of trade or commerce as he is charged with monopolizing. P.. (b) A party has monopoly power contrary to § 2 of the Sherman Act if it has, over "any part of the trade or commerce among the several States," a power of controlling prices or unreasonably restricting competition. . (c) Determination of the competitive market for commodities depends upon how different from one another are the offered commodities in character or use, how far buyers will go to substitute one commodity for another. P.. (d) It is not a proper interpretation of the Sherman Act to require that products be fungible to be considered in the relevant market. P. 351 U.S. 394. (e) Where there are market alternatives that buyers may readily use for their purposes, illegal monopoly does not exist merely because the product said to be monopolized differs from others. P. 351 U.S. 394. (f) In considering what is the relevant market for determining the control of price and competition, no more definite rule can be declared than that commodities reasonably interchangeable by consumers for the same purposes make up that "part of the trade or commerce" monopolization of which may be illegal. P.. (g) Cellophane's interchangeability with numerous other materials suffices to make it a part of the market for flexible packaging materials. . (h) On the record in this case, it cannot be said that the variations in price between cellophane and other flexible packaging materials prevent them from being competitive or gave appellee monopoly power over prices. . (i) On the record in this case, it cannot be said that appellee has excluded competitors from the flexible packaging material market. . 118 F. Supp. 41 affirmed.

1955_54

https://www.oyez.org/cases/1955/54

MR. JUSTICE REED delivered the opinion of the Court. An indictment was found in the Southern District of Illinois against appellees Green and a local union. The jury adjudged them guilty under counts one and two thereof. The court sustained their separate motions in arrest of judgment, setting out in its order that its action was "solely" on the following grounds: "2. This court is without jurisdiction of the offense." "(b) The facts alleged in the Indictment failed to set forth an offense against the United States such as to give this Court jurisdiction." "(c) A proper construction of the statute in question clearly indicates that it does not cover the type of activity charged in this indictment; to interpret the Act in question as covering the type of activity charged in this Indictment is to extend the jurisdiction of this Court and the power of Congress beyond their Constitutional limits." Appeal was taken by the United States directly to this Court under 18 U.S.C. § 3731. We noted probate jurisdiction. 350 U.S. 813. The two counts in question were based upon alleged violations of 18 U.S.C. § 1951, popularly known as the Hobbs Act. The pertinent statutory provisions are subsections (a) and (b)(2) thereof, reading as follows: "(a) Whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do, or commits or threatens physical violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section shall be fined not more than $10,000 or imprisoned not more than twenty years, or both." "(b) . . ." "(2) The term 'extortion' means the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right." Each of the two counts charged appellees with acts of extortion under § 1951 directed against a different employer. The extortions alleged consisted of attempts to obtain from the particular employer "his money, in the form of wages to be paid for imposed, unwanted, superfluous and fictitious services of laborers commonly known as swampers, in connection with the operation of machinery and equipment then being used and operated by said [employer] in the execution of his said contract for maintenance work on said levee, the attempted obtaining of said property from said [employer] as aforesaid being then intended to be accomplished and accomplished with the consent of said [employer], induced and obtained by the wrongful use, to-wit, the use for the purposes aforesaid, of actual and threatened force, violence and fear made to said [employer], and his employees and agents then and there being: in violation of Section 1951 of Title 18, United States Code." Appellees each filed motions for acquittal, or, in the alternative, for a new trial. These the trial court specifically denied. The opinion of the trial court, 135 F.Supp. 162, says nothing as to failure of evidence to support the allegations of the indictment, or as to trial errors. Instead, the court relied upon the absence of criminality in the acts charged, and it was therefore logical for the trial court to deny acquittal and new trial. The court thought persuasive our recent cases which held union efforts to secure "made work" for their members were not unfair labor practices. From its view that extortion as defined in the Hobbs Act covers only the taking of property from another for the extortioner's personal advantage, the necessity to arrest the judgment followed. Rule 34, Fed.Rules Crim.Proc. We do not agree with that interpretation of the section. The Hobbs Act was passed after this Court had construed § 2 of the Federal Anti-Racketeering Act of 1934, 48 Stat. 979, in United States v. Local 807,. Subsection (a) of § 2 barred, with respect to interstate commerce, exaction of valuable considerations by force, violence or coercion, "not including, however, the payment of wages by a bona fide employer to a bona fide employee." We held in Local 807 that this exception covered members of a city truck drivers' union offering superfluous services to drive arriving trucks to their city destination with intent, if the truck owners refused offer, to exact the wages by violence. In the Hobbs Act, 60 Stat. 420, carried forward as 18 U.S.C. § 1951, which amended the Anti-Racketeering Act, the exclusion clause involved in the Local 807 decision was dropped. The legislative history makes clear that the new Act was meant to eliminate any grounds for future judicial conclusions that Congress did not intend to cover the employer-employee relationship. The words were defined to avoid any misunderstanding. Title II of the Hobbs Act provides that the provisions of the Act shall not affect the Clayton Act, §§ 6 and 20, 38 Stat. 731, 738; the Norris-LaGuardia Act, 47 Stat. 70; the Railway Labor Act, 44 Stat. 577; or the National Labor Relations Act, 49 Stat. 449. There is nothing in any of those Acts, however, that indicates any protection for unions or their officials in attempts to get personal property through threats of force or violence. Those are not legitimate means for improving labor conditions. If the trial court intended by its references to the Norris-LaGuardia and Wagner Acts to indicate any such labor exception, which we doubt, it was in error. Apparently what the court meant is more clearly expressed by its statement, set out in the last paragraph of note 2 above, that the charged acts would be criminal only if they were used to obtain property for the personal benefit of the union or its agent, in this case, Green. This latter holding is also erroneous. The city truckers in the Local 807 case similarly were trying by force to get jobs and pay from the out-of-state truckers by threats and violence. The Hobbs Act was meant to stop just such conduct. And extortion as defined in the statute in no way depends upon having a direct benefit conferred on the person who obtains the property. It is also stated in the opinion below that to interpret the Act as covering the activity charged would "extend the jurisdiction of the Court, and the power of Congress beyond their Constitutional limits." 135 F. Supp. at 162. The same language is in the order. Since, in our view, the legislation is directed at the protection of interstate commerce against injury from extortion, the court's holding is clearly wrong. We said in the Local 807 case that racketeering affecting interstate commerce was within federal legislative control. 315 U.S. at. Cf. Cleveland v. United States,,; Mitchell v. C. W. Vollmer & Co.,. On this appeal, the record does not contain the evidence upon which the court acted. The indictment charges interference with commerce by extortion in the words of the Act's definition of that crime. We rule only on the allegations of the indictment, and hold that the acts charged against appellees fall within the terms of the Act. The order in arrest of judgment is reversed, and the cause remanded to the District Court. It is so ordered.

Obstruction of interstate commerce or an attempt to do so through the wrongful use by a labor union or its agents of actual or threatened force, violence or fear, in an attempt to compel an employer to pay "wages" to members of the union for imposed, unwanted, superfluous, and fictitious "services," is a violation of the Hobbs Act, 18 U.S.C. § 1951. . (a) The coverage of 18 U.S.C. § 1951 is not confined to attempts to obtain money or other property for the extortioner's personal advantage; it applies also to attempts by a union or its agents to get jobs and pay for its members by threats and violence. . (b) The legislative history of the Act shows that it was intended to cover the employer-employee relationship. . (c) A different result is not required by the provision of Title II of the Hobbs Act that it should not affect the Clayton Act, the Norris-LaGuardia Act, the Railway Labor Act, or the National Labor Relations Act, since there is nothing in those Acts indicating any protection for unions or their officials in attempts to get personal property through threats of force or violence. . (d) Since this legislation is directed at the protection of interstate commerce against injury from extortion, it is within the power of Congress. . 135 F. Supp. 162, reversed.

1955_74

https://www.oyez.org/cases/1955/74

MR. JUSTICE HARLAN delivered the opinion of the Court. On February 1, 1949, Leslie Salt Company, being in need of funds to meet maturing bank loans and for working capital, borrowed $3,000,000 from the Mutual Life Insurance Company of New York and $1,000,000 from the Pacific Mutual Life Insurance Company. As evidence of the indebtedness, Leslie Salt delivered to each insurance company its "3 1/4% Sinking Fund Promissory Note Due February 1, 1964" in these amounts. The question presented is whether these instruments are subject to the documentary stamp taxes laid on "all bonds, debentures, or certificates of indebtedness issued by any corporation . . . " under §§ 1800 and 1801 of the Internal Revenue Code of 1939. The Commissioner of Internal Revenue held the tax applicable, considering the two instruments to be "debentures" within the meaning of § 1801. However, in a tax recovery suit instituted by Leslie Salt following payment of the tax under protest and the Commissioner's denial of a refund, the District Court and the Court of Appeals held the instruments not to be "debentures" or otherwise subject to stamp taxes. We brought the case here, 349 U.S. 951, to resolve the uncertainty left by lower court decisions as to whether § 1801 applies to corporate notes of this type. Except as to amounts and payees, the two instruments in question were in identical terms, having these principal features: (1) each instrument carried the promissory note description already indicated; (2) each had a maturity of 15 years; (3) each carried interest of 3 1/4% payable August 1 and February 1 of each year on the unpaid balance; and (4) each was subject to the terms of an underlying agreement containing elaborate provisions for the protection of the note holders. Among those provisions was one under which each insurance company could require Leslie Salt to convert its note, which was typewritten on ordinary white paper, into a series of new notes in denominations of $1,000 or multiples thereof, "either in registered form without coupons or in coupon form, and in printed or in fully engraved form." This option has not been exercised by either note holder. These transactions with the two insurance companies constituted a variety of "private placement," a method of corporate financing which, because of its economies and conveniences, has become popular since the enactment of the Securities Act of 1933. The Government claims that these notes are taxable under § 1801 either as "debentures" or "certificates of indebtedness." The taxpayer, on the other hand, contends that these terms, undefined in the statute, do not include notes of the type here in issue. Taking the statute in light of its legislative and administrative history, we agree with the taxpayer's contention. "Debentures" and "certificates of indebtedness", along with other kinds of corporate securities, have been subject to stamp taxes since 1898, except for the period between 1902 and 1914. "Promissory notes" were also subject to stamp duties from 1898 to 1901 and from 1914 until 1924, when the tax was repealed; it has never been reenacted. The tax on "promissory notes," however, was always carried in a section separate from that containing the tax on "bonds, debentures, or certificates of indebtedness," and was always at a rate lower than the tax on those instruments. Since promissory notes, debentures, and certificates of indebtedness all serve the same basic purpose -- that is, as evidence of a debt -- this former legislative distinction between promissory notes and the other instruments assumes significance in determining whether the present notes are taxable. For, unless the earlier statutes were intended to impose two taxes on the same instrument, which we should not assume, or the present tax on debentures and certificates of indebtedness is broader in scope than that in effect in 1924, of which there is no indication, it would seem to follow that these notes should not now be taxed if they can be said to fall within the class of "promissory notes" on which the tax was repealed. The Government argues that the repealed promissory note provision related only to ordinary short-term paper customarily used in day-to-day commercial transactions, and that it did not embrace notes, like those here involved, of large amounts, long maturity, and secured by an elaborate underlying agreement. See General Motors Acceptance Corp. v. Higgins, 161 F.2d 593, 595. The existence of these features, however, does not render either of the Leslie Salt instruments any the less a promissory note, as each was captioned. Nor do we find anything in the earlier legislation or in its history which satisfies us that this type of note would not have been taxable at the lower rate provided in the promissory note section of the former statute. See Niles-Bement-Pond Co. v. Fitzpatrick, 213 F.2d 305, 308-310. Moreover, the administrative interpretations of the Treasury, discussed below, affirmatively indicate that they would have been considered taxable under that section. But, even assuming that these notes could not fairly be called "promissory notes," it does not follow that they must therefore be regarded as "debentures" or "certificates of indebtedness." That depends upon the meaning of those terms in the statute, and upon whether these notes, regardless of their descriptive caption, have the essential characteristics of "debentures" or "certificates of indebtedness" as those terms are used in the statute. General Motors Acceptance Corp. v. Higgins, supra; Niles-Bement-Pond Co. v. Fitzpatrick, supra. And, in determining the scope of the statute, which has remained substantially unchanged since its first enactment, the Treasury's interpretations of it are entitled to great weight. White v. Winchester Country Club,,. The administrative history of the statute establishes that, until 1947, when the General Motors case, supra, was decided, only those instruments were considered subject to the "debenture" tax which were issued (1) in series, (2) under a trust indenture, and (3) in registered form or with coupons attached. In other words, that tax was considered to apply only to marketable corporate securities as that term is generally understood. Conversely, corporate promissory notes lacking any of those features, such as those issued by respondent, were taxed at the lower promissory note rate until that tax was repealed in 1924, and were not taxed thereafter until the Government's success in the General Motors case in 1947. As early as 1918, the Treasury, in distinguishing instruments taxable at the "bond" and "debenture" rate from those taxable at the lower "promissory note" rate, then still in force, drew the line as follows: "(3) Instruments containing the essential features of a promissory note, but issued by corporations in numbers under a trust indenture, either in registered form or with coupons attached, embodying provisions for acceleration of maturity in the event of any default by the obligor, for optional registration in the case of bearer bonds, for authentication by the trustee, and sometimes for redemption before maturity, or similar provisions, are bonds within the meaning of the statute, whether called bonds, debentures, or notes. However, a short-term instrument, although issued by a corporation under a trust indenture, may be regarded as a note if every instrument of such issue both (a) is payable to bearer and incapable of registration and (b) lacks interest coupons and so requires presentation upon each payment of interest." T.D. 2713, May 14, 1918, 20 Treas.Dec.Int.Rev. 358 (1918). When Congress, in 1918, amended the existing statute by adding the language "and all instruments, however termed, issued by any corporation with interest coupons or in registered form, known generally as corporate securities . . . ," still found in § 1801, the Treasury recognized that this was, in effect, an enactment of its prior restrictive interpretation. The regulations which followed the repeal in 1924 of the tax on promissory notes did not purport to enlarge the scope of the tax on "bonds" or "debentures"; the Treasury adhered to the same interpretation issued under the previous statute. The regulations were amended in 1941 to the less specific, but not inconsistent, form under which the present notes were taxed. Finally, explicit recognition that the attempt to tax notes not having the features of marketable corporate securities was a departure from prior Treasury practice is found in a ruling by the Commissioner of Internal Revenue that General Motors would not be applied retroactively: "The Bureau has for a considerable period of time held that an instrument termed 'note,' not in registered form and issued without interest coupons, is not subject to the stamp tax upon issuance or transfer. Because of this long and uniform holding of the Bureau and the consequent reliance of corporations on these rulings, it has been concluded that, under the authority contained in section 3791(b) of the Internal Revenue Code, the decision in General Motors Acceptance Corporation v. Higgins, supra, will not be applied retroactively, except that any tax which has been paid on the issuance or transfer of instruments falling within the scope of the decision will not be refunded." Cum.Bull.1948-2, M.T. 32, p. 160. The term "certificate of indebtedness" has a similar administrative background. Since 1920, the Treasury has considered certificates of indebtedness as akin to bonds and debentures, including "only instruments having the general character of investment securities, as distinguished from instruments evidencing debts arising in ordinary transaction between individuals. . . ." Sales Tax Rulings, L.O. 909, December 1920 ST. 1-20-85; Regs. 55 (Art. 14), October 26, 1920, 22 T.D.Int.Rev. 502 (1920). The essence of an "investment security" is, of course, marketability, and this basic feature the Leslie Salt notes did not have. The Treasury itself has acknowledged that promissory notes lacking this quality have never been taxed as "certificates of indebtedness," Cum.Bull.1948-2, M.T. 32, p. 160 (supra, p.), and none of the lower court cases, including General Motors, supra, have regarded instruments such as the Leslie Salt notes as being certificates of indebtedness. Moreover, it may be observed that, in the stamp tax sections of the Internal Revenue Code of 1954, the words "certificates of indebtedness," consistently with this administrative history, have been eliminated as a separate taxable category of corporate instruments, and are employed simply as a term of art embracing all the instruments taxed, that is, "bonds," "debentures" and other instruments in registered form or with coupons. Internal Revenue Code of 1954, §§ 4311, 4381, 68A Stat. 514, 523, 26 U.S.C. 4311, 4381. In contrast to the position it had consistently taken throughout the many years preceding the decision in the General Motors case, the Treasury now argues "that Congress intended in Section 1801 to cover all long-term debt obligations supported by elaborate protective covenants, and that this is so regardless of the details of the papers used, the language by which the transaction was consummated or the nature of the purchaser's business." This contention seems to stem from the belief that, had the "private placement" method of financing been as widely known in 1924 as it is now, Congress would not have repealed the promissory note tax in its entirety, as it did. But, if that be so, it is nevertheless for Congress, not the courts, to change the statute. We must deal with the statute as we find it, and if these instruments are neither "debentures" nor "certificates of indebtedness," they may not be taxed under the present statute. These taxes are based not upon the nature of the transaction involved, but upon the character of the instruments employed. As long ago as 1873, this Court said: "The liability of an instrument to a stamp duty, as well as the amount of such duty, is determined by the form and face of the instrument, and cannot be affected by proof of facts outside of the instrument itself." United States v. Isham, 17 Wall. 496,. There are persuasive reasons for construing "debentures" and "certificates of indebtedness" in accordance with the Treasury's original interpretation of those terms in this statute's altogether comparable predecessors. In Norwegian Nitrogen Products Co. v. United States,,, Mr. Justice Cardozo said: "administrative practice, consistent and generally unchallenged, will not be overturned except for very cogent reasons if the scope of the command is indefinite and doubtful. United States v. Moore,,; Logan v. Davis,,; Brewster v. Gage,,; Fawcus Machine Co. v. United States,; Interstate Commerce Comm'n v. New York, N.H. & H. R. Co.,. . . . The practice has peculiar weight when it involves a contemporaneous construction of a statute by the men charged with the responsibility of setting its machinery in motion, of making the parts work efficiently and smoothly while they are yet untried and new." Against the Treasury's prior longstanding and consistent administrative interpretation, its more recent ad hoc contention as to how the statute should be construed cannot stand. Moreover, that original interpretation has had both express and implied congressional acquiescence through the 1918 amendment to the statute, which has ever since continued in effect, and through Congress' having let the administrative interpretation remain undisturbed for so many years. See Corn Products Refining Co. v. Commissioner,,; Norwegian Nitrogen Products Co. v. United States, supra, at. Still further, it is an interpretation which is in accord with the generally understood meaning of the term "debentures." Cf. First Nat. Bank of Cincinnati v. Flershem,,. "The words of the statute [a stamp tax statute] are to be taken in the sense in which they will be understood by that public in which they are to take effect." United States v. Isham, supra, 17 Wall. at. Construing the statute as we have, we conclude that the Leslie Salt notes are neither "debentures" nor "certificates of indebtedness" within its meaning. The fact that the agreement underlying these notes provides for the substitution of instruments which might qualify as debentures does not render these notes taxable, for, until debentures are in existence, the "debenture" tax cannot be imposed. We hold these notes are not subject to stamp taxes under the statute. Affirmed.

In 1949, a corporation in need of funds to meet maturing bank loans and for working capital borrowed $3,000,000 from one insurance company and $1,000,000 from another for 15 years, giving each a single typewritten instrument entitled "3 1/4% Sinking Fund Promissory Note Due February 1, 1964." Each note was subject to the terms of an underlying agreement containing elaborate provisions for the protection of the note holders and a provision under which each insurance company could require the borrower to convert its note into a series of new notes in denominations of $1,000 or multiples thereof, "either in registered form without coupons or in coupon form, and in printed or in fully engraved form." This option had not been exercised by either note holder. Held: these two notes are not subject to the documentary stamp taxes laid under §§ 1800 and 1801 of the Internal Revenue Code of 1939 on "all bonds, debentures, or certificates of indebtedness issued by any corporation. . . ." . (a) It is significant that the stamp tax which was levied on "promissory notes" for many years, but which has been repealed, was always carried in a separate section from that containing the tax on "bonds, debentures, or certificates of indebtedness," and was always at a lower rate than the tax on the latter instruments. P.. (b) That these notes are for large amounts and of long maturity and are secured by an elaborate underlying agreement does not prevent them from being promissory notes, nor does anything in the earlier legislation or its history indicate that this type of note would not have been taxable at the lower rate provided in the promissory note section of the former statute. P.. (c) Even if these notes could not fairly be called "promissory notes," it does not follow that they must be regarded as "debentures" or "certificates of indebtedness." P.. (d) The administrative history of the statute establishes that, until 1947, when General Motors Acceptance Corp. v. Higgins, 161 F.2d 593, was decided, the Treasury considered no instruments subject to the "debenture" tax except those which were issued (1) in series, (2) under trust indentures, and (3) in registered form or with coupons attached. . (e) Since 1920, the Treasury has considered "certificates of indebtedness" as akin to bonds and debentures, and as including "only instruments having the general character of investment securities," which these notes do not have. . (f) The stamp taxes on "debentures" and "certificates of indebtedness" are based upon the character of the instruments employed, not upon the nature of the transactions involved, and an instrument which is neither a "debenture" nor a "certificate of indebtedness" does not become such merely because it evidences a long term debt obligation supported by elaborate protective covenants. . (g) In new of the Treasury's prior longstanding and consistent administrative interpretation of the terms "debentures" and "certificates of indebtedness" and the fact that Congress has let that administrative interpretation remain undisturbed for many years, the Treasury's present ad hoc contention that those terms should now be construed as including the notes here involved cannot stand. . (h) The fact that the agreement underlying these notes provides for the substitution of instruments which might qualify as "debentures" does not render these notes taxable as "debentures." P.. 218 F.2d 91 affirmed.

1955_448

https://www.oyez.org/cases/1955/448

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court. This is a direct appeal by the Government under the Expediting Act, 32 Stat. 823, 15 U.S.C. § 29, as amended by 62 Stat. 869, from a decision of the District Court for the Southern District of New York, interpreting the scope of the exemption from the antitrust laws provided by "fair trade" legislation. Appellee, a Maryland corporation with its home office in New York, is the largest drug wholesaler in the United States. Operating through 74 wholesale divisions located in 35 states, it sells drugstore merchandise of various brands to retailers, principally drugstores, substantially throughout the nation. For the fiscal year ended March 31, 1954, its sales of all drug products amounted to $338,000,000. Appellee is also a manufacturer of its own line of drug products, the total sales of which amounted to $11,000,000 for the year ended March 31, 1954. Its manufacturing operation is conducted through a single manufacturing division, McKesson Laboratories, located at Bridgeport, Connecticut. This division, like each of appellee's wholesale divisions, has a separate headquarters and a separate staff of employees, but none of the 75 divisions is separately incorporated. All are component parts of the same corporation, and are responsible to the corporation's president and board of directors. Appellee distributes its own brand products to retailers through two channels: (1) directly to retailers, and (2) through independent wholesalers. The major portion of its brand products is distributed to retailers through its own wholesale divisions. Appellee also makes direct sales to important retailers through its manufacturing division. Most of appellee's sales to independent wholesalers are made by its manufacturing division, but its wholesale divisions sold approximately $200,000 of McKesson brand products to other wholesalers during the fiscal year ended June 30, 1952. To the extent possible under state law, appellee requires all retailers of its brand products to sell them at "fair trade" retail prices fixed by appellee. These prices are set forth in published schedules of wholesale and retail prices. Appellee also has "fair trade" agreements with 21 independent wholesalers who buy from its manufacturing division. Sixteen of these independents compete with appellee's wholesale divisions. The other 5 compete with the manufacturing division for sales to chain drugstores located in their trading areas. On June 6, 1951, in accordance with appellee's "fair trade" policy, a vice president in charge of merchandising notified appellee's wholesale divisions that -- "None of our wholesale divisions will sell any McKesson labeled products to any wholesaler who has not entered into a fair trade contract with McKesson Laboratories." As a result, 73 of the independent wholesalers who had been dealing with McKesson wholesale divisions entered into "fair trade" agreements with McKesson by which they bound themselves in reselling its brand products to adhere to the wholesale prices fixed by it. Each of these independent wholesalers is in direct competition with the McKesson wholesale division from which it buys. The Government, under Section 4 of the Sherman Act, brought this civil action for injunctive relief against appellee in the District Court. The complaint charged that appellee's "fair trade" agreements with independent wholesalers with whom it was in competition constituted illegal price fixing in violation of Section 1 of the Act. Appellee admitted the contracts, but claimed that they were exempted from the Sherman Act by the Miller-Tydings Act and the McGuire Act. The Government moved for summary judgment on the ground that these Acts do not immunize McKesson's agreements with other wholesalers, since they expressly exclude from their exemption from the antitrust laws contracts "between wholesalers" or "between persons, firms, or corporations in competition with each other." The district judge denied the motion. He recognized that price fixing is illegal per se under the Sherman Act, but announced that, in "fair trade" cases, "[n]o inflexible standard should be laid down to govern in advance." He was "unwilling at this stage of case law development of legislatively sanctioned resale price fixing" to apply the per se rule "in fair trade situations absent a factual showing of illegality." Such a showing, he said, could not be made "simply by pointing to some restraint of competition." The "true test of legality" of "fair trade" agreements between a producer-wholesaler and independent wholesalers, the court held, "is whether some additional restraint destructive of competition is occasioned." The case then proceeded to trial before another district judge, who concurred in the "ruling that fair trade price fixing by a producer-wholesaler was not per se illegal under the Sherman Act," and held that the Government's evidence did not establish an "additional restraint" within the meaning of the test previously enunciated in the case. He ordered the complaint dismissed, and the Government took a direct appeal under the Expediting Act. We noted probable jurisdiction. The issue presented is a narrow one of statutory interpretation. The Government does not question the so-called vertical "fair trade" agreements between McKesson and retailers of McKesson brand products. It challenges only appellee's price-fixing agreements with independent wholesalers with whom it is in competition. Section 1 of the Sherman Act provides: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. . . . " It has been held too often to require elaboration now that price fixing is contrary to the policy of competition underlying the Sherman Act, and that its illegality does not depend on a showing of its unreasonableness, since it is conclusively presumed to be unreasonable. It makes no difference whether the motives of the participants are good or evil; whether the price fixing is accomplished by express contract or by some more subtle means; whether the participants possess market control; whether the amount of interstate commerce affected is large or small; or whether the effect of the agreement is to raise or to decrease prices. In United States v. Socony-Vacuum Oil Co.,, in holding price-fixing agreements to be illegal per se, this Court said: "Congress has not left with us the determination of whether or not particular price-fixing schemes are wise or unwise, healthy or destructive. . . . [T]he Sherman Act, so far as price-fixing agreements are concerned, establishes one uniform rule applicable to all industries alike. " And it has been said by this Court: "A distributor of a trademarked article may not lawfully limit by agreement, express or implied, the price at which or the persons to whom its purchaser may resell, except as the seller moves along the route which is marked by the Miller-Tydings Act. " The question before us is whether the price-fixing agreements challenged herein move along that route. If they do not, they are illegal per se. There is no basis for supposing that Congress, in enacting the Miller-Tydings and McGuire Acts, intended any change in the traditional per se doctrine. The District Court was plainly in error in attempting to create a category of agreements which are outside the exemption of those Acts but which should nevertheless be spared from application of the per se rule. In the Miller-Tydings Act, passed as a rider to a District of Columbia revenue bill, Congress was careful to state that its exemption of certain resale price maintenance contracts from the prohibitions of the antitrust laws "shall not make lawful any contract or agreement, providing for the establishment or maintenance of minimum resale prices on any commodity herein involved, between manufacturers, or between producers, or between wholesalers, or between brokers, or between factors, or between retailers, or between persons, firms, or corporations in competition with each other. " (Emphasis supplied.) Fifteen years later, Congress attached an almost identical proviso to the McGuire Act. We are to take the words of these statutes "in their normal and customary meaning." Schwegmann Bros. v. Calvert Corp.,,. Appellee is admittedly a wholesaler with resale price maintenance contracts with 94 other wholesalers who are in competition with it. Thus, even if we read the proviso so that the words "in competition with each other" modify "between wholesalers," the agreements in question would seem clearly to be outside the statutory exemption. Appellee concedes that the proviso does not exempt a contract between two competing independent wholesalers fixing the price of a brand product produced by neither of them. Yet it urges that what would be illegal if done between competing independent wholesalers becomes legal if done between an independent wholesaler and a competing wholesaler who is also the manufacturer of the brand product. This is so, appellee maintains, because, in contracting with independent wholesalers, it acted solely as a manufacturer selling to buyers, rather than as a competitor of these buyers. But the statutes provide no basis for sanctioning the fiction of McKesson, the country's largest drug wholesaler, acting only as a manufacturer when it concludes "fair trade" agreements with competing wholesalers. These were agreements "between wholesalers." Any doubts which might otherwise be raised as to the propriety of considering a manufacturer-wholesaler as a "wholesaler" are dispelled by the last phrase of the proviso in question, which continues the proscription against price-fixing agreements "between persons, firms, or corporations in competition with each other." Congress thus made as plain as words can make it that, without regard to categories or labels, the crucial inquiry is whether the contracting parties compete with each other. If they do, the Miller-Tydings and McGuire Acts do not permit them to fix resale prices. The Court stated in Schwegmann Bros. v. Calvert Corp.,,, that this proviso "expressly continues the prohibitions of the Sherman Act against 'horizontal' price fixing by those in competition with each other at the same functional level. " Since appellee competes "at the same functional level" with each of the 94 wholesalers with whom it has price-fixing agreements, the proviso prevents these agreements from falling within the statutory exemption. Appellee argues that a brief colloquy on the Senate floor between a supporter of the McGuire Act and an inquiring Senator Shortly before the Act was passed should dictate a meaning contrary to that revealed by the Act's plain language. But, at best, the statement was inconclusive. And the Senator whose statement is relied on was not in charge of the bill, nor was he a member of any committee that had considered it. Moreover, the McGuire Act was not a Senate bill, having been passed by the House of Representatives prior to this Senate discussion. There is nothing in the proceedings of the House to indicate that the meaning for which appellee contends should be given to the Act. Similarly, except to show congressional concern that the prohibition against "horizontal" price-fixing be continued, the Senate and House debates on the proviso in the Miller-Tydings Act are of little assistance with respect to the problem before us. The court below did not rely on the legislative history, finding it to be "unedifying and unilluminating." We agree with this appraisal, but are not troubled by it, since the language of the proviso in question is unambiguous. It excludes from the exemption from the per se rule of illegality resale price maintenance contracts between firms competing on the same functional level. Both the Government and appellee press upon us economic arguments which could reasonably have caused Congress to support their respective positions. We need not concern ourselves with such speculation. Congress has marked the limitations beyond which price fixing cannot go. We are not only bound by those limitations, but we are bound to construe them strictly, since resale price maintenance is a privilege restrictive of a free economy. Cf. United States v. Masonite Corp.,,. The judgment of the District Court dismissing the complaint must, therefore, be reversed and the case remanded for further proceedings not inconsistent with this opinion. Reversed and remanded.

Appellee is the largest drug wholesaler in the United States, and sells to retailers in many states. It also manufactures its own line of brand-name drugs, which it sells to retailers and to independent wholesalers in many states. It refused to sell its brand products to independent wholesalers which had not entered into agreements that, in wholesaling appellee's products, they would adhere to the wholesale prices fixed by appellee. As a result, many independent wholesalers which were in direct competition with appellee's wholesaling operations signed such agreements. Held: such price-fixing agreements were not exempted from the prohibitions of § 1 of the Sherman Act by the "fair-trade" provisions of the Miller-Tydings Act or the McGuire Act. . (a) Such price-fixing agreements are illegal per se under § 1 of the Sherman Act unless they are within the exemptions of the Miller-Tydings Act or the McGuire Act. . (b) The exemptions of the Miller-Tydings Act and the McGuire Act are expressly made inapplicable to agreements "between wholesalers" or "between persons, firms, or corporations in competition with each other," and these words must be taken in their normal and customary meaning. . (c) Appellee is admittedly a "wholesaler" with resale price maintenance contracts with many other "wholesalers" who are in competition with it, and it cannot be brought within the exemptions of the Miller-Tydings Act or the McGuire Act by resort to a fiction that it acts only as a manufacturer when it concludes such agreements with competing wholesalers. P.. (d) Even if appellee were not properly considered a "wholesaler," it would not be within the exemptions of the Miller-Tydings Act or the McGuire Act, because the price-fixing agreements here involved are "between persons, firms, or corporations in competition with each other" within the meaning of those Acts. . (e) This restrictive language is unambiguous, and a different result is not required by the legislative history of the McGuire Act. . (f) These limitations must be construed strictly, since resale price maintenance is a privilege restrictive of a free economy. . Reversed and remanded.

1955_35

https://www.oyez.org/cases/1955/35

MR. JUSTICE FRANKFURTER delivered the opinion of the Court. Because of conflicting constructions by the Courts of Appeals for the Second and Third Circuits of § 235(a) of the Immigration and Nationality Act of 1952, 66 Stat. 163, 198, we brought these cases here. 349 U.S. 904; 349 U.S. 927. They were heard in sequence, and, since minor differences in their facts are irrelevant to the problems now before us, they may be disposed of in one opinion. Section 235(a) provides that any immigration officer "shall have power to require by subpoena the attendance and testimony of witnesses before immigration officers . . . relating to the privilege of any person to enter, reenter, reside in, or pass through the United States or concerning any matter which is material and relevant to the enforcement of this Act and the administration of the Service, and to that end may invoke the aid of any court of the United States." The controlling issue presented by these cases is whether this section empowers an immigration officer to subpoena a naturalized citizen who is the subject of an investigation by the Service where the purpose of the investigation is to determine if good cause exists for the institution of denaturalization proceedings under § 340(a) of the Act. In No. 35, the District Director of the Immigration and Naturalization Service at Philadelphia, in accordance with § 340.11 of the Service's regulation, instituted an investigation of respondent for the aforementioned purpose. In furtherance of this inquiry into the legality of Minker's naturalization, the Director subpoenaed him to give testimony at the offices of the Service. Prior to the required date of his appearance, he moved to quash the subpoena in the United States District Court for the Eastern District of Pennsylvania upon the ground, inter alia, that it was unauthorized by the Act. This motion was denied, In re Minker, 118 F. Supp. 264, and no appeal was taken. When respondent thereafter failed to obey the subpoena, the District Court, on application of the District Director, ordered respondent to appear before the Service and testify. He disregarded this order. After a hearing, he was adjudged in contempt for so doing and fined $500. The Court of Appeals for the Third Circuit reversed, holding that, while the power to subpoena under § 235(a) was available for investigations directed toward denaturalization proceedings, respondent, as a putative defendant in such a proceeding, was not a "witness" within the meaning of the section, and the Service was, therefore, without power to subpoena him. 217 F.2d 350. In No. 47, each petitioner was served with a subpoena issued by the officer in charge of the Immigration and Naturalization Service at Syracuse, New York. The subpoenas commanded petitioners' appearance and testimony, and required them to produce specified documents. They appeared with documents as ordered, but refused to be sworn or to testify. Thereupon an application for an order of compliance was made by the Service in the United States District Court for the Northern District of New York; but the court, denying the Service's authority, refused to compel petitioners to appear and give testimony. Application of Barnes, 116 F. Supp. 464. On appeal, to the Court of Appeals for the Second Circuit, this judgment was reversed. 219 F.2d 137. The court held that § 235(a) of the Act permitted the immigration officer to subpoena the petitioners in furtherance of the Service's investigation of them under § 340.11 of the regulations. The decision assumed, although the court did not discuss the question, that each petitioner, even though a subject of investigation, was a "witness" within the meaning of § 235(a). This brings us to an examination of the scope of § 235(a). It had its genesis in § 16 of the Immigration Act of 1917, 39 Stat. 874, 885, which dealt with the examination of entering aliens by the Immigration Service. With respect to subpoenas, the section provided: "Any commissioner of immigration or inspector in charge shall also have power to require by subpoena the attendance and testimony of witnesses before said inspectors and the production of books, papers, and documents touching the right of any alien to enter, reenter, reside in, or pass through the United States, and to that end may invoke the aid of any court of the United States. . . ." Obviously, this provision strictly defined the purposes for which officers of the Service could subpoena witnesses. It did not give them power to issue subpoenas as aids in investigating potential naturalization offenses. The 1952 Act in § 235(a) retained the substance of this language in § 16. But the word "alien" was changed to "person," and additional language extended the subpoena power to "any matter which is material and relevant to the enforcement of this Act and the administration of the Service." If the additional clause, following the portion "relating to the privilege of any person to enter, reenter, reside in, or pass through the United States," had merely read "and any other matter which is material and relevant," the doctrine of ejusdem generis would appropriately be invoked to limit the subpoena power to an investigation pertaining to questions of admission and deportation. The comprehensive addition of the clause "or concerning any matter which is material and relevant to the enforcement of this Act and the administration of the Service," precludes such narrowing reading. "Act" encompasses the full range of subjects covered by the statute. The Immigration and Nationality Act of 1952 brought together in one statute the previously atomized subjects of immigration, nationality, and naturalization. The unqualified use of the word "Act" in § 235(a), if read as ordinary English, embraces all of these subjects, even though § 235(a) is itself in the immigration title of the statute. But "the title of a statute and the heading of a section cannot limit the plain meaning. . . ." Brotherhood of Railroad Trainmen v. Baltimore & Ohio R. Co.,,. Throughout this statute, the word "Act" is given its full significance. The word embraces the entire statute. On the other hand, when only a particular title is referred to, it is designated as such, and when the reference is to a section, that word is employed. No justification appears for treating "Act" in § 235(a) as meaning "section." Thus far, the Second and Third Circuits are in agreement. We come then to the question upon which the two Courts of Appeals part ways in their construction of § 235(a), namely, whether Salvatore and Joseph Falcone, in the one case, and Abraham Minker, in the other, although each the subject of a denaturalization investigation under § 340.11 of the regulations, were "witnesses" within the meaning of the power given to "any immigration officer" to require "by subpoena the attendance and testimony of witnesses" before immigration officers. If the answer to the question merely depended upon whether, as a matter of allowable English usage, the word "witness" may fairly describe a person in the position of Minker and the Falcones, it could not be denied that the word could as readily be deemed to cover persons in their position as not. In short, the word is patently ambiguous: it can fairly be applied to anyone who gives testimony in a proceeding, although the proceeding immediately or potentially involves him as a party, or it may be restricted to the person who gives testimony in another's case. It is pertinent to note the breadth of § 235(a) not only with respect to the type of investigation in which a subpoena may be issued ("any matter which is material and relevant to the enforcement of this Act"), but also with respect to the member of the Service empowered to issue it. The power is granted "any immigration officer," who, in turn, is defined in § 101(a)(18) of the Act as "any employee or class of employees of the Service or of the United States designated by the Attorney General, individually or by regulation, to perform the functions of an immigration officer specified by this Act or any section thereof." This extensive delegated authority reinforces the considerations inherent in the nature of the power sought to be exercised that make for a restrictive reading of the Janus-faced word "witness." The subpoena power "is a power capable of oppressive use, especially when it may be indiscriminately delegated and the subpoena is not returnable before a judicial officer. . . . True, there can be no penalty incurred for contempt before there is a judicial order of enforcement. But the subpoena is in form an official command, and, even though improvidently issued, it has some coercive tendency, either because of ignorance of their rights on the part of those whom it purports to command or their natural respect for what appears to be an official command or because of their reluctance to test the subpoena's validity by litigation." Cudahy Packing Co., Ltd. v. Holland,,. These concerns, relevant to the construction of this ambiguously worded power, are emphatically pertinent to investigations that constitute the first step in proceedings calculated to bring about the denaturalization of citizens. See Schneiderman v. United States,; Baumgartner v. United States,. This may result in "loss of both property and life, or of all that makes life worth living." Ng Fung Ho v. White,, . In such a situation, where there is doubt, it must be resolved in the citizen's favor. E specially must we be sensitive to the citizen's rights where the proceeding is nonjudicial because of "[t]he difference in security of judicial over administrative action. . . ." Ng Fung Ho v. White, supra, at. These considerations of policy, which determined the Court's decisions in requiring judicial as against administrative adjudication of the issue of citizenship in a deportation proceeding and those defining the heavy criterion of proof to be exacted by the lower courts from the Government before decreeing denaturalization, are important guides in reaching decision here. They give coherence to law, and are fairly to be assumed as congressional presuppositions unless, by appropriate explicitness, the lawmakers make them inapplicable. Cf. Bell v. United States,,. It does not bespeak depreciation of official zeal, nor does it bring into question disinterestedness, to conclude that compulsory ex parte administrative examinations, untrammeled by the safeguards of a public adversary judicial proceeding, afford too ready opportunities for unhappy consequences to prospective defendants in denaturalization suits. These general considerations find specific reinforcement in the language of other provisions of the Act, wherein the person who is the subject of an investigation is referred to with particularity. The most striking example of this is to be found in § 335 and its legislative history, which pertains to the investigation of an alien who petitions for naturalization. Section 335(b) provides: "The Attorney General shall designate employees of the Service to conduct preliminary examinations upon petitions for naturalization. . . . For such purposes, any such employee so designated is hereby authorized to take testimony concerning any matter touching or in any way affecting the admissibility of any petitioner for naturalization, to administer oaths, including the oaths of the petitioner for naturalization and the oaths of petitioner's witnesses to the petition for naturalization, and to require by subpoena the attendance and testimony of witnesses, including petitioner. . . ." Contrast this with § 335(b)'s predecessor, § 333(a) of the Nationality Act of 1940, 54 Stat. 1137, 1156: ". . . any such designated examiner is hereby authorized to take testimony concerning any matter touching or in any way affecting the admissibility of any petitioner for naturalization, to subpoena witnesses, and to administer oaths, including the oath of the petitioner to the petition for naturalization and the oath of petitioner's witnesses. " Other examples of Congress' careful differentiation between a witness who is not the subject of an investigation and the person who is may be found in §§ 236(a), 242(b), and 336(d) of the 1952 Act. All these considerations converge to the conclusion that Congress has not provided with sufficient clarity that the subpoena power granted by § 235(a) extends over persons who are the subject of denaturalization investigations; therefore, Congress is not to be deemed to have done so impliedly. Since this is so, we are not called upon to consider whether Congress may employer an immigration officer to secure evidence, under the authority of a subpoena, from a citizen who is himself the subject of an investigation directed toward his denaturalization. The judgment in No. 35 is affirmed; in No. 47, the judgment is reversed.

Section 235 (a) of the Immigration and Nationality Act of 1952 provides that "any immigration officer . . . shall have power to require by subpoena the attendance and testimony of witnesses before immigration officers . . . relating to the privilege of any person to enter, reenter, reside in, or pass through the United States or concerning any matter which is material and relevant to the enforcement of the Act and the administration of the Service. . . ." Held: this section does not empower an immigration officer to subpoena a naturalized citizen who is the subject of an investigation by the Service to testify in an administrative proceeding before such officer where the purpose of the investigation is to determine whether good cause exists for the institution of denaturalization proceedings against such citizen under § 340(a) of the Act. . (a) In the clause, "concerning any matter which is material and relevant to the enforcement of this Act," the word "Act" embraces the entire statute, and may not be construed as referring only to a particular title or section thereof. . (b) In this context, the word "witnesses" is ambiguous, and it must be construed as not including a citizen who is himself the subject of a denaturalization investigation. . 217 F.2d 350 affirmed. 219 F.2d 137 reversed.

1955_281

https://www.oyez.org/cases/1955/281

MR. JUSTICE CLARK delivered the opinion of the Court. The question for decision in this case is whether the president and principal negotiator of a labor union is a "representative" of employees within the meaning of § 302(b) of the Labor Management Relations Act of 1947, 61 Stat. 136, 29 U.S.C. § 141. That section makes it unlawful for "any representative of any employees" to receive money or other thing of value from the employer. The District Court, 128 F. Supp. 128, held that respondent Joseph P. Ryan was a "representative" within the meaning of § 302(b), but the Court of Appeals for the Second Circuit reversed, Judge Hand dissenting. 225 F.2d 417. Because of the importance of this question in the administration of the Act, we granted certiorari, 350 U.S. 860. Ryan was president of The International Longshoremen's Association (ILA) during the years 1950 and 1951. The ILA and its affiliated groups were the recognized collective bargaining agents for longshore labor in the Port of New York, and bargained through a wage scale committee of which Ryan was a member. He signed the agreements negotiated during that period. J. Arthur Kennedy & Son, Inc., and Daniels & Kennedy, Inc., were concerns engaged in stevedoring operations; their employees were members of the ILA, and they were bound by the agreements negotiated with that union by the New York Shipping Association. The District Court found that James C. Kennedy, president of both Kennedy companies, had given Ryan $1,000 in December of each year from 1946 through 1951, and $500 in April, 1951. These findings are not disputed. Ryan was indicted under § 302(b) for accepting the one 1950 and two 1951 payments. He was found guilty and sentenced to six months' imprisonment on each of the three counts, the sentences to run concurrently, and fined $2,500. The Court of Appeals reversed solely on its interpretation of the term "representative" in § 302(b) of the LMRA. It concluded that the term had a technical meaning in labor legislation and was limited to "the exclusive bargaining representative" of the employees, which, in this case, was the ILA itself. Since the section applied only to the "representative," payments to Ryan individually were not covered, even though, as president of the representative union, he was a member of its wage scale committee and signed all negotiated agreements. We do not decide whether any official of a union is ex officio a representative of employees under § 302. We believe, however, that respondent's relationship brings him within that term. The LMRA provides that the term "representative" shall have "the same meaning as when used in the National Labor Relations Act as amended by this Act." § 501(3). The pertinent definition appears in § 2(4) of the NLRA: "The term representatives' includes any individual or labor organization." 49 Stat. 449, 450, 29 U.S.C. §§ 151, 152(4). The Board has held that employees may choose to elect an individual as exclusive or sole bargaining representative. The Court of Appeals, laying much stress on these holdings, assumes that the possibility of such a one-man exclusive bargaining representative, though extremely rare, is the only reason for the inclusion of the word "individual" in this definition. We cannot accept such an anomalous view. It is obvious that any labor organization, even when serving as an exclusive bargaining representative, can negotiate, speak, and act only through individuals. All collective bargaining is conducted by individuals who represent labor and management. Many limitations or prohibitions upon labor organization action can be effective only if there are corresponding limitations or prohibitions on the individuals who act for the labor organization. Congress, we believe, placed the identical limitations on both individuals and organizations by terming both "representatives" of employees in § 2(4). We agree with Judge Hand that, in using the term "representative," Congress intended that it include any person authorized by the employees to act for them in dealings with their employers. Considering the precise words of the statute -- "any representative of any employees" -- it is plain that their literal meaning strongly suggests that they were meant to include someone in the position of respondent Ryan who represented employees both as a union president and principal negotiator. And this interpretation is strengthened by a consideration of the full text of § 302. Paragraphs (a) and (b) of § 302 make it unlawful for any employer to offer, or any representative to accept, money or other thing of value. Paragraph (c) lists five exceptions to these broad prohibitions. The first exempts payments as compensation for services "to any representative who is an employee" of the employer. Thus, it is clear that § 302 anticipates that a "representative" may be an individual. Of the remaining four exceptions, one could apply only to unions but each of the other three could apply as readily to individuals. Further, a narrow reading of the term "representative" would substantially defeat the congressional purpose. In 1946, Congress was disturbed by the demands of certain unions that the employers contribute to "welfare funds" which were in the sole control of the union or its officers and could be used as the individual officers saw fit. The United Mine Workers' demand that mine operators create a welfare fund for the union by contributing 10 cents for each ton of coal mined, caused the Congress to act. The Case Bill, N.R.4908, 79th Cong., 2d Sess., which regulated welfare funds in a manner similar to § 302, was enacted in 1949, but was vetoed by the President. The following year, the Taft-Hartley Act containing § 302 was passed over another veto. But, if "representative" means only the "exclusive bargaining representative," the explicit limitations on welfare funds in § 302(c)(5) may be easily evaded. Payments made directly to union officials, or to other individuals as trustees, would apparently be excluded from § 302. Thus, a narrow construction would frustrate the primary intent of Congress. Nor can it be contended that, in this legislation, Congress was aiming solely at the welfare fund problem. Such a suggestion is supported neither by the legislative history nor the structure of the section. The arrangement of § 302 is such that the only reference to welfare funds is contained in § 302(c)(5). If Congress intended to deal with that problem alone, it could have done so directly, without writing a broad prohibition in subsections (a) and (b) and five specific exceptions thereto in subsection (c), only the last of which covers welfare funds. As the statute reads, it appears to be a criminal provision, malum prohibitum, which outlaws all payments, with stated exceptions, between employer and representative. The legislative history supports these conclusions. As passed by the House of Representatives, the Hartley Bill forbade employer contributions to union welfare funds, and made it an unfair labor practice to give favors to "any person in a position of trust in a labor organization. . . ." H.R.3020, 80th Cong., 1st Sess., § 8(a)(2). The scope of this bill was enlarged when it reached the Senate to include, in the words of Senator Taft, a "case where the union representative is shaking down the employer. . . ." 93 Cong.Rec. 4746. The resulting Senate amendment made it criminal both for the employer and the "representative" of employees to engage in such practices. It is not disputed that the plain language of the Senate version of the bill brought within its coverage any individual who dealt with an employer on behalf of two or more of the latter's employees concerning employment matters. As passed by the Senate, § 302 contained a special definition of the term "representative." The Joint Conference Committee substituted for it the definition of that term in the NLRA, as amended. § 501(3). This substitution was among those described by the Joint Conference Committee Report as "minor clarifying changes." H.R.Conf.Rep. No. 510, 80th Cong., 1st Sess. at 67. We cannot read this history as supporting the conclusion that the scope of § 302 was limited by the Joint Conference to include only the "exclusive bargaining representative" of employees. Such a change would have drastically reduced the scope of the section, and could hardly be described as a "minor clarifying" change. Certainly, in the face of this legislative history, we should not reduce the legislation to a practical nullity. It is insisted that this interpretation clashes with the use of the term "representative" in various sections of the NLRA. In the majority of the examples given, the scope of the term is made clear by other words in the provisions themselves. But further, the provision in the LMRA that "representative" shall have its NLRA meaning is no more applicable to § 302 than to any other section of the LMRA, and, in several other sections of that Act, it is patent that "representative" cannot be construed to include only the exclusive bargaining representative. For example, § 204(a) refers to "employers and employees and their representatives," and § 211(a) refers to "interested representatives of employers, employees, and the general public." There are other examples, but these are sufficient. If the severely restricted construction contended for the word "representative" is inapplicable to one section of the LMRA, there is no compulsion to apply it to any other section. We conclude, therefore, that § 302 prohibits payments by employers to individuals who represent employees in their relations with the employers. The judgment is reversed Reversed and remanded.

Within the meaning of § 302(b) of the Labor Management Relations Act, which makes it unlawful for "any representative of any employees" to receive money or other thing of value from the employer, an individual who was the president and principal negotiator of a labor union is a "representative" of employees. . (a) The term "representative" in § 302(b) is not limited to "the exclusive bargaining representative" of the employees, but includes any person authorized by the employees to act for them in dealings with their employers. (b) A narrow reading of the term "representative" would substantially defeat the purpose of the Act. . (c) In this legislation, Congress was not aiming solely at the welfare fund problem. P.. (d) The legislative history supports the construction here given § 302(b). . (e) The provision in the Labor Management Relations Act that the term "representative" shall have the meaning that it has in the National Labor Relations Act does not require that the term, as used in § 302, be construed to include only the exclusive bargaining representative. . 225 F.2d 417 reversed and remanded.

1955_94

https://www.oyez.org/cases/1955/94

MR. JUSTICE REED delivered the opinion of the Court. The Federal Communications Commission issued, on August 19, 1948, a notice of proposed rulemaking under the authority of 47 U.S.C. §§ 303(r), 311, 313 and 314 (Communications Act of 1934, as amended, 47 U.S.C. § 301 et seq.). It was proposed, so far as is pertinent to this case, to amend Rules 3.35, 3.240, and 3.636 relating to Multiple Ownership of standard, FM and television broadcast stations. Those rules provide that licenses for broadcasting stations will not be granted if the applicant, directly or indirectly, has an interest in other stations beyond a limited number. The purpose of the limitations is to avoid overconcentration of broadcasting facilities. As required by 5 U.S.C. § 1003(b), the notice permitted "interested" parties to file statements or briefs. Such parties might also intervene in appeals. 47 U.S.C. § 402(d) and (e). Respondent, licensee of a number of radio and television stations, filed a statement objecting to the proposed changes, as did other interested broadcasters. Respondent based its objections largely on the fact that the proposed rules did not allow one person to hold as many FM and television stations as standard stations. Storer argued that such limitations might cause irreparable financial damage to owners of standard stations if an obsolescent standard station could not be augmented by FM and television facilities. In November, 1953, the Commission entered an order amending the Rules in question without significant changes from the proposed forms. A review was sought in due course by respondent in the Court of Appeals for the District of Columbia Circuit under 5 U.S.C. § 1034, 47 U.S.C. § 402(a), and 5 U.S.C. § 1009(a), (c). Respondent alleged it owned or controlled, within the meaning of the Multiple Ownership Rules, seven standard radio, five FM radio, and five television broadcast stations. It asserted that the Rules complained of were in conflict with the statutory mandates that applicants should be granted licenses if the public interest would be served and that applicants must have a hearing before denial of an application. 47 U.S.C. § 309(a) and (b). Respondent also claimed: "The Rules, in considering the ownership of one (1%) percent or more of the voting stock of a broadcast licensee corporation as equivalent to ownership, operation or control of the station, are unreasonable and bear no rational relationship to the national Anti-Trust policy." This latter claim was important to respondent because, allegedly, 20% of its voting stock was in scattered ownership, and was traded in by licensed dealers. This stock was thus beyond its control. Respondent asserted it was a "party aggrieved" and a "person suffering legal wrong" or adversely affected under the several statutes that authorize review of FCC action. See notes 2 3 and | 3 and S. 192fn4|>4, supra. It stated its injuries from the Rules thus: "Storer is adversely affected and aggrieved by the Order of the Commission adopted on November 25, 1953, amending the Multiple Ownership Rules, in that:" "(a) Storer is denied the right of a full and fair hearing to determine whether its ownership of an interest in more than seven (7) standard radio and five (5) television broadcast stations, in light of and upon a showing of all material circumstances, will thereby serve the public interest, convenience and necessity." "(b) The acquisition of Storer's voting stock by the public under circumstances beyond the control of Storer, may and could be violative of the Multiple Ownership rules, as amended, and result in a forfeiture of licenses now held by Storer, with resultant loss and injury to Storer and to all other Storer stockholders." On the day the amendments to the Rules were adopted, a pending application of Storer for an additional television station at Miami was dismissed on the basis of the Rules. While the question of respondent's right to appeal has not been raised by either party or by the Court of Appeals, our jurisdiction is now mooted. It may be considered. Federal Communications Commission v. National Broadcasting Co.,,. Jurisdiction depends upon standing to seek review, and upon ripeness. If respondent could not rightfully seek review from the order adopting the challenged regulations, it must await action to its disadvantage under them, and neither the Court of Appeals nor this Court has jurisdiction of the controversy. Under the above-cited Code sections, review of Commission action is granted any party aggrieved or suffering legal wrong by that action. We think respondent had standing to sue at the time it exercised its privilege. The process of rulemaking was complete. It was final agency action, 5 U.S.C. § 1001(c) and (g), by which Storer claimed to be "aggrieved." When the authority to appeal was substantially the same, we held that an appellant who complained of the grant of a license to a competitor because it would reduce its own income had standing to appeal against a contention, admittedly sound, that such economic injury to appellant was not a proper issue before the Commission. We said: "Congress had some purpose in enacting section 402(b)(2). It may have been of opinion that one likely to be financially injured by the issue of a license would by the only person having a sufficient interest to bring to the attention of the appellate court errors of law in the action of the Commission in granting the license. It is within the power of Congress to confer such standing to prosecute an appeal." Federal Communications Comm'n v. Sanders Bros. Radio Station,,. We added that such an appellant could raise any relevant question of law in respect to the order. Again, in Columbia Broadcasting System v. United States,, this Court considered the problem of standing to review Commission action under the then existing § 402(a), 48 Stat. 1093, and the Urgent Deficiencies Act, 38 Stat. 219. CBS there sought review of the adoption of Chain Broadcasting Regulations by the Commission. Against the contention that the adoption of regulations did not command CBS to do or refrain from doing anything (dissent, 316 U.S. at), this Court held that the order promulgating regulations was reviewable because it presently affected existing contractual relationships. It said: "The regulations are not any the less reviewable because their promulgation did not operate of their own force to deny or cancel a license. It is enough that failure to comply with them penalizes licensees, and appellant, with whom they contract. If an administrative order has that effect, it is reviewable, and it does not cease to be so merely because it is not certain whether the Commission will institute proceedings to enforce the penalty incurred under its regulations for non-compliance." Id. at. The Court said that the regulations "presently determine rights." Id. at. "Appellant's standing to maintain the present suit in equity is unaffected by the fact that the regulations are not directed to appellant and do not, in terms, compel action by it or impose penalties upon it because of its action or failure to act. It is enough that, by setting the controlling standards for the Commission's action, the regulations purport to operate to alter and affect adversely appellant's contractual rights and business relations with station owners whose applications for licenses the regulations will cause to be rejected and whose licenses the regulations may cause to be revoked." Id. at. See Federal Communications Commission v. American Broadcasting Co.,,, and E; Dorado Oil Works v. United States,,. The regulations here under consideration presently aggrieve the respondent. The Commission exercised a power of rulemaking which controls broadcasters. The Rules now operate to control the business affairs of Storer. Unless it obtains a modification of this declared administrative policy, Storer cannot enlarge the number of its standard of FM stations. It seems, too, that the note to Rule 3.636 ( n 1, supra) endangers Storer's stations as alleged in its petition for review. See this opinion, supra, p., at (b). Commission hearings are affected now by the Rules. Storer cannot cogently plan its present or future operations. It cannot plan to enlarge the number of its standard or FM stations, and, at any moment, the purchase of Storer's voting stock by some member of the public could endanger its existing structure. These are grievances presently restricting Storer's operations. In the light of the legislation allowing review of the Commission's actions, we hold that Storer has standing to bring this action. In its petition for review, Storer prayed the court to vacate the provisions of the Multiple Ownership Rules insofar as they denied to an applicant already controlling the allowable number of stations a "full and fair hearing" to determine whether additional licenses to the applicant would be in the public interest. The Court of Appeals struck out, as contrary to § 309(a) and (b) of the Communications Act ( n 5, supra), the words italicized in Rule 3.636 ( n 1, supra) and the similar words in Rules 3.35 and 3.240. The case was remanded to the Commission with directions to eliminate these words. 95 U.S.App.D.C. 97, 220 F.2d 204. We granted certiorari, 350 U.S. 816 . The Commission asserts that its power to make regulations gives it the authority to limit concentration of stations under a single control. It argues that rules may go beyond the technical aspects of radio, that rules may validly give concreteness to a standard of public interest, and that the right to a hearing does not exist where an applicant admittedly does not meet those standards, as there would be no facts to ascertain. The Commission shows that its regulations permit applicants to seek amendments and waivers of, or exceptions to, its Rules. It adds: "This does not mean, of course, that the mere filing of an application for a waiver . . . would necessarily require the holding of a hearing, for, if that were the case, a rule would no longer be a rule. It means only that it might be an abuse of discretion to fail to hear a request for a waiver which showed, on its face, the existence of circumstances making application of the rule inappropriate." Respondent defends the position of the Court of Appeals. It urges that an application cannot be rejected under 47 U.S.C. § 309 without a "full hearing" to applicant. We agree that a "full hearing" under § 309 means that every party shall have the right to present his case or defense by oral or documentary evidence, to submit rebuttal evidence, and to conduct such cross-examination as may be required for a full and true disclosure of the facts. Cf. 5 U.S.C. § 1006(c). Such a hearing is essential for wise and just application of the authority of administrative boards and agencies. We do not read the hearing requirement, however, as withdrawing from the power of the Commission the rulemaking authority necessary for the orderly conduct of its business. As conceded by Storer, "Section 309(b) does not require the Commission to hold a hearing before denying a license to operate a station in ways contrary to those that the Congress has determined are in the public interest. " The challenged Rules contain limitations against licensing not specifically authorized by statute. But that is not the limit of the Commission's rulemaking authority. 47 U.S.C. § 154(i) and § 303(r) grant general rulemaking power not inconsistent with the Act or law. This Commission, like other agencies, deals with the public interest. Scripps-Howard Radio v. Federal Communications Commission,,. Its authority covers new and rapidly developing fields. Congress sought to create regulation for public protection with careful provision to assure fair opportunity for open competition in the use of broadcasting facilities. Accordingly, we cannot interpret § 309(b) as barring rules that declare a present intent to limit the number of stations consistent with a permissible "concentration of control." It is but a rule that announces the Commission's attitude on public protection against such concentration. The Communications Act must be read as a whole and with appreciation of the responsibilities of the body charged with its fair and efficient operation. The growing complexity of our economy induced the Congress to place regulation of businesses like communication in specialized agencies with broad powers. Courts are slow to interfere with their conclusions when reconcilable with statutory directions. We think the Multiple Ownership Rules, as adopted, are reconcilable with the Communications Act as a whole. An applicant files his application with knowledge of the Commission's attitude toward concentration of control. In National Broadcasting Co. v. United States,, similar rules prohibiting certain methods of chain broadcasting were upheld despite a claim that the Rules caused licenses to be denied without "examination of written applications presented . . . as required by §§ 308 and 309." Id. at. The National Broadcasting case validated numerous regulations couched in the prohibitory language of the present regulations. The one in the margin will serve as an example. In the National Broadcasting case, we called attention to the necessity for flexibility in the Rules there involved. The "Commission provided that 'networks will be given full opportunity, on proper application for new facilities or renewal of existing licenses, to call to our attention any reasons why the principle should be modified or held inapplicable.'" Id. at 319 U. S. We said: "The Commission therefore did not bind itself inflexibly to the licensing policies expressed in the Regulations. In each case that comes before it, the Commission must still exercise an ultimate judgment whether the grant of a license would serve the 'public interest, convenience, or necessity.' If time and changing circumstances reveal that the 'public interest' is not served by application of the Regulations, it must be assumed that the Commission will act in accordance with its statutory obligations." Id. at. That flexibility is here under the present § 309(a) and (b) and the FCC's regulations. See n 10, supra. We read the Act and Regulations as providing a "full hearing" for applicants who have reached the existing limit of stations, upon their presentation of applications conforming to Rules 1.361(c) and 1.702, that set out adequate reasons why the Rules should be waived or amended. The Act, considered as a whole, requires no more. We agree with the contention of the Commission that a full hearing, such as is required by § 309(b), note 5 supra, would not be necessary on all such applications. As the Commission has promulgated its Rules after extensive administrative hearings, it is necessary for the accompanying papers to set forth reasons, sufficient if true, to justify a change or waiver of the Rules. We do not think Congress intended the Commission to waste time on applications that do not state a valid basis for a hearing. If any applicant is aggrieved by a refusal, the way for review is open. We reverse the judgment of the Court of Appeals, and remand the case to that court so that it may consider respondent's other objections to the Multiple Ownership Rules. Reversed and remanded.

After rulemaking proceedings under the Communications Act of 1934, as amended, in which respondent appeared, filed written objections and argued orally, the Federal Communications Commission amended its rules so as to provide, in effect, that it would issue no license for an additional television broadcast station to any party already having five such stations. On the same day, applying this rule, the Commission dismissed, without hearing, respondent's application for a license for an additional television broadcast station, because respondent already had five such stations. Under the Communications Act, the Administrative Procedure Act and 5 U.S.C. § 1034, respondent applied to the Court of Appeals for review of the Commission's order amending its rule. Held: 1. Though the question of respondent's right to appeal was not raised by either party or by the Court of Appeals, it may be considered by this Court. P.. 2. Respondent had standing to bring this action. . (a) The process of rulemaking having been completed, the amended rules constituted final agency action within the meaning of the Administrative Procedure Act. . (b) The amended rules presently "aggrieve" respondent. . 3. Section 309(b) of the Communications Act, which requires a "full hearing" before denial of an application for a license, does not prevent the Commission from adopting the rules here involved limiting the number of broadcast stations that will be licensed to any one party. . (a) Section 309 (b) entitles each applicant for a license to a "full hearing," including the right to present his case or defense by oral or documentary evidence, to submit rebuttal evidence, and to conduct such cross-examination as may be required for a full and true disclosure of the facts. P.. (b) However, § 309(b) does not withdraw from the Commission the rulemaking authority necessary for the orderly conduct of its business. . (c) Nor does § 309(b) bar rules that declare a present intent to limit the number of stations consistent with a permissible "concentration of control." . (d) The Act and rules are to be read as providing a "full hearing" for applicants who have reached the existing limit of stations, upon presentation of proper applications that set out adequate reasons why the rules should be waived or amended. The Act, considered as a whole, requires no more. P.. 95 U.S.App.D.C. 97, 220 F.2d 204, reversed and remanded.

1955_21

https://www.oyez.org/cases/1955/21

Mr. Justice DOUGLAS delivered the opinion of the Court. This is a suit for condemnation of land instituted by the United States against respondent power company. A single question of valuation is presented. It is whether the just compensation which the United States must pay by force of the Fifth Amendment includes the value of the land as a site for hydroelectric power operations. The Fourth Circuit Court of Appeals held that it does. 215 F.2d 592. The Court of Appeals for the Fifth Circuit reached the same result in litigation involving other lands in the same hydroelectric project. United States v. Twin City Power Co., 221 F.2d 299. We granted the petition for certiorari in the former case because of the importance of the issue presented. 348 U.S. 910. The condemnation proceedings are part of the procedure for completion of the Clark Hill project on the Savannah River, a navigable stream in southeastern United States. The Clark Hill project is the first in a series of steps recommended by the Chief of Army Engineers for the improvement of the basin of that river. H.R.Doc. No. 657, 78th Cong., 2d Sess. That Report conceives of the Clark Hill project as serving multiple purposes -- hydroelectric, flood control, and navigation. It states that the Clark Hill project, "if suitably constructed and operated primarily for hydroelectric power development, would incidentally reduce downstream flood damages and improve low water flows for navigation." Id., p. 3. Congress approved this project as part of "the comprehensive development of the Savannah River Basin for flood control and other purposes." Section 10 of the Flood Control Act of 1944, 58 Stat. 887. And see United States ex rel. Chapman v. Federal Power Commission,,. The Court of Appeals concluded that the improvement of navigation was not the purpose of the taking, but that the Clark Hill project was designed to serve flood control and water power development. 215 F.2d at 597. It is not for courts, however, to substitute their judgments for congressional decisions on what is or is not necessary for the improvement or protection of navigation. See Arizona v. California,,. The role of the judiciary in reviewing the legislative judgment is a narrow one, in any case. See Berman v. Parker,,; United States ex rel. Tennessee Valley Authority v. Welch,,. The decision of Congress that this project will serve the interests of navigation involves engineering and policy considerations for Congress and Congress alone to evaluate. Courts should respect that decision until and unless it is shown "to involve an impossibility", as Mr. Justice Holmes expressed it in Old Dominion Land Co. v. United States,,. If the interests of navigation are served, it is constitutionally irrelevant that other purposes may also be advanced. United States v. Appalachian Electric Power Co.,,; Oklahoma ex rel. Phillips v. Atkinson Co.,,,. As we said in the Appalachian Power Co. case, "Flood protection, watershed development, recovery of the cost of improvements through utilization of power are likewise parts of commerce control." 311 U.S. at. The interest of the United States in the flow of a navigable stream originates in the Commerce Clause. That Clause speaks in terms of power, not of property. But the power is a dominant one which can be asserted to the exclusion of any competing or conflicting one. The power is a privilege which we have called "a dominant servitude," see United States v. Commodore Park, Inc.,,; Federal Power Commission v. Niagara Mohawk Power Corp.,,, or "a superior navigation easement." United States v. Gerlach Live Stock Co.,,. The legislative history and construction of particular enactments may lead to the conclusion that Congress exercised less than its constitutional power, fell short of appropriating the flow of the river to the public domain, and provided that private rights existing under state law should be compensable or otherwise recognized. Such were United States v. Gerlach Live Stock Co., supra, and Federal Power Commission v. Niagara Mohawk Power Corp., supra. We have a different situation here, one where the United States displaces all competing interests and appropriates the entire flow of the river for the declared public purpose. We can also put aside such cases as United States v. Kansas City Life Ins. Co.,, where assertion of the dominant servitude in the navigable river injured property beyond the bed of the stream. Here, we are dealing with the stream itself, for it is in the water power that respondents have been granted a compensable interest. It is argued, however, that the special water rights value should be awarded the owners of this land, since it lies not in the bed of the river nor below high water, but above and beyond the ordinary high water mark. An effort is made by this argument to establish that this private land is not burdened with the Government's servitude. The flaw in that reasoning is that the landowner here seeks a value in the flow of the stream, a value that inheres in the Government's servitude, and one that, under our decisions, the Government can grant or withhold as it chooses. It is no answer to say that payment is sought only for the location value of the fast lands. That special location value is due to the flow of the stream, and, if the United States were required to pay the judgments below, it would be compensating the landowner for the increment of value added to the fast lands if the flow of the stream were taken into account. That is illustrated by United States v. Chandler-Dunbar Co.,, the case that controls this one. In that case, a private company installed a power project in St. Mary's River under a permit from the Government, revocable at will. The permit was revoked, Congress appropriating the entire flow of the stream for navigation purposes. The Court unanimously held that the riparian owner had no compensable interest in the water power of which it had been deprived. Mr. Justice Lurton, speaking for the Court, said, "Ownership of a private stream wholly upon the lands of an individual is conceivable, but that the running water in a great navigable stream is capable of private ownership is inconceivable." Id. at. The Court accordingly reversed a judgment that awarded the riparian owner what respondents have obtained in this case, viz., "the present money value of the rapids and falls to the Chandler-Dunbar Company as riparian owners of the shore and appurtenant submerged land." Id. at. The Court said, "The government had dominion over the water power of the rapids and falls, and cannot be required to pay any hypothetical additional value to a riparian owner who had no right to appropriate the current to his own commercial use. *" Id. at. Some of the land owned by the private company was in the bed of the stream, some above ordinary high water. But the location of the land was not determinative. It was the dominion of the Government over the water power that controlled the decision. Both in Chandler-Dunbar and in this case, it is the water power that creates the special value, whether the lands are above or below ordinary high water. The holding in Chandler-Dunbar led us to say in United States v. Appalachian Power Co., supra, 311 U.S. at, that the "exclusion of riparian owners" from the benefits of the power in a navigable stream "without compensation is entirely within the Government's discretion." And again, "If the Government were now to build the dam, it would have to pay the fair value, judicially determined, for the fast land; nothing for the water power." Id. at. The power company in the present case is certainly in no stronger position than the owner of the hydroelectric site in the Chandler-Dunbar case. While the latter was deprived of a going private power project by the Government, the present private owners never had a power project on the Savannah, and, as a result of the Government's preemption, never can have one. It is no answer to say that these private owners had interests in the water that were recognized by state law. We deal here with the federal domain, an area which Congress can completely preempt, leaving no vested private claims that constitute "private property" within the meaning of the Fifth Amendment. Location of the lands might, under some circumstances, give them special value, as our cases have illustrated. But to attach a value of water power of the Savannah River due to location and to enforce that value against the United States would go contra to the teaching of Chandler-Dunbar -- "that the running water in a great navigable stream is capable of private ownership is inconceivable." 229 U.S. at. The holding of the Chandler-Dunbar case that water power in a navigable stream is not, by force of the Fifth Amendment, a compensable interest when the United States asserts its easement of navigation is in harmony with another rule of law expressed in United States v. Miller,,. "Since the owner is to receive no more than indemnity for his loss, his award cannot be enhanced by any gain to the taker. Thus, although the market value of the property is to be fixed with due consideration of all its available uses, its special value to the condemnor, as distinguished from others who may or may not possess the power to condemn, must be excluded as an element of market value." The Court in the Chandler-Dunbar case emphasized that it was only loss to the owner, not gain to the taker, that is compensable. 229 U.S. at. If the owner of the fast lands can demand water power value as part of his compensation, he gets the value of a right that the Government, in the exercise of its dominant servitude, can grant or withhold as it chooses. The right has value or is an empty one dependent solely on the Government. What the Government can grant or withhold and exploit for its own benefit has a value that is peculiar to it, and that no other user enjoys. Cf. United States ex rel. TVA v. Powelson,,. To require the United States to pay for this water power value would be to create private claims in the public domain. Reversed. Page

In a suit brought by the United States for the condemnation of private land adjoining a navigable river as part of a project for the improvement of the Savannah River basin, the just compensation which the Fifth Amendment requires to be paid does not include the value of the water power in the flow of the stream. . (a) A federal court may not substitute its judgment for a congressional determination that the taking is for the improvement or protection of navigation. P.. (b) If the interests of navigation are served, it is constitutionally irrelevant that other purposes also may be advanced. P.. (c) The interest of the United States in the flow of a navigable stream derives from the Commerce Clause, and can be asserted to the exclusion of any competing or conflicting interest. . (d) The fact that the land does not lie in the bed of the river nor below high water, but above and beyond the ordinary high water mark, does not entitle the owner to compensation based on a value in the flow of the stream. . (e) United States v. Gerlach Live Stock Co.,, Federal Power Commission v. Niagara Mohawk Power Corp.,, and United States v. Kansas City Life Ins. Co.,, distinguished. United States v. Chandler-Dunbar Co.,, followed. . ( f ) The fact that the private owners had interests in the water that were recognized by state law does not entitle them to compensation for such value. . (g) Under the Fifth Amendment, only loss to the owner, not gain to the taker, is compensable. P.. (h) To require the United States to pay for this water power value would be to create private claims in the public domain. P.. 215 F.2d 592 reversed.

1955_213

https://www.oyez.org/cases/1955/213

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court. This is a denaturalization proceeding under § 340(a) of the Immigration and Nationality Act of 1952.

1. Under § 340(a) of the Immigration and Nationality Act of 1952, the filing of an "affidavit showing good cause" is a prerequisite to the maintenance of a denaturalization proceeding. . (a) This conclusion is in accord with the language of the statute. . (b) It is also in accord with the legislative history of the statute, its contemporaneous administrative construction, and the usual administrative practice thereunder. . (c) The filing of such an affidavit is not rendered unnecessary merely because the complaint itself is verified. . 2. Section 340(a) is the only section under which a United States Attorney may institute denaturalization proceedings. Bindczyck v. Finucane,. ,. 221 F.2d 805 affirmed.

1955_63

https://www.oyez.org/cases/1955/63

PER CURIAM. The State of New Jersey imposes on each domestic corporation "an annual franchise tax . . . for the privilege of having or exercising its corporate franchise" in the State. This tax, as applied to appellant, is measured by the corporation's "net worth," which is defined as the sum of the corporation's issued and outstanding capital stock, paid-in or capital surplus, earned surplus, and undivided profits, other surplus accounts which will accrue to the shareholders (not including depreciation reserves), and debts owed to shareholders owning 10 percent or more of the corporation's stock. Appellant is a corporation organized under the laws of New Jersey, and is therefore subject to the tax. In assessing appellant's tax for 1952, the Tax Commissioner included in appellant's net worth the value of certain federal bonds held by appellant, thereby increasing the amount due by $320.07. Appellant protested, claiming that, under R.S. § 3701, 31 U.S.C. § 742, these bonds were immune from state taxation. The New Jersey courts upheld the Commissioner's assessment, and this appeal contests the validity of the state statute as so applied. Appellant contends that this tax is not in reality a franchise tax, but is rather in the nature of a direct property tax on the immune federal obligations. Corporate franchises granted by a State create a relationship which may legitimately be made the subject of taxation, Home Ins. Co. v. New York,,; Flint v. Stone Tracy Co.,,; Educational Films Corp. of America v. Ward,,; and the statute expressly declares this to be a franchise tax. Moreover, the Supreme Court of New Jersey has, on independent examination, found this to be "a bona fide franchise tax." While this is, of course, not conclusive here, Society for Savings v. Bowers,, we find no basis in this instance for not accepting the state court's conclusion that this tax is not imposed directly on the property held by the corporation. Cf. Pacific Co. v. Johnson,,. Appellant argues further that, even if this is a franchise tax, it must fall because its effect is the same as if it had been imposed directly on the tax exempt federal securities. Since the tax remains the same whatever the character of the corporate assets may be, no claim can be sustained that this taxing statute discriminates against the federal obligations. And since this is a tax on the corporate franchise, it is valid despite the inclusion of federal bonds in the determination of net worth. This Court has consistently upheld franchise taxes measured by a yardstick which includes tax exempt income or property, even though a part of the economic impact of the tax may be said to bear indirectly upon such income or property. See, e.g., 73 U. S. Coite, 6 Wall. 594; Provident Institution for Savings v. Massachusetts, 6 Wall. 611; Hamilton Co. v. Massachusetts, 6 Wall. 632; Home Ins. Co. of New York v. New York, supra; Educational Films Corp. of America v. Ward, supra; Pacific Co. v. Johnson, supra. We have only recently adhered to this principle in another aspect of this field of taxation. See Society for Savings v. Bowers, supra, at; New Jersey Realty Title Ins. Co. v. Division of Tax Appeals,, on which appellant relies, is distinguishable in that it did not involve a franchise tax, but rather a tax whose legal incidence this Court found to be upon the intangible assets of the corporation. Since, as applied here, this is a permissible tax on the corporate franchise, the decision below must be Affirmed.

As applied to this New Jersey corporation, the New Jersey corporation tax here involved, measured by the corporation's "net worth," is a tax on the corporate franchise, does not discriminate against federal obligations, and is valid despite the inclusion of federal bonds in the determination of net worth. . 17 N.J. 121,110 A.2d 89, affirmed.

1956_430

https://www.oyez.org/cases/1956/430

MR. JUSTICE FRANKFURTER delivered the opinion of the Court. Petitioner was charged in a three-count indictment under § 145(b) of the Internal Revenue Code of 1939, with the felony of willfully attempting to evade federal income taxes by filing a false return. Upon conviction, he was sentenced to concurrent two-year prison terms and was fined $2,000 on each count. The Court of Appeals for the Seventh Circuit reversed the conviction on count one, but affirmed the convictions on counts two and three. 234 F.2d 797. We granted certiorari limited to a question of general importance in the enforcement of the income tax, namely, whether petitioner could be prosecuted and sentenced under § 145(b) for an offense claimed by him to be punishable also under § 3616(a) of the Internal Revenue Code of 1939. 352 U.S. 1023. The threshold question is whether the conduct for which petitioner was convicted was an offense under § 3616(a). That section made it a misdemeanor for any person to deliver to the Collector "any false or fraudulent list, return, account, or statement, with intent to defeat or evade the valuation, enumeration, or assessment intended to be made . . . ," and provided maximum penalties of one year in prison and a $1,000 fine, together with the costs of prosecution. 53 Stat. 440. If the willful filing of a false income tax return was not embraced by § 3616(a), petitioner's case falls, and discussion of other issues becomes unnecessary. Unlike § 145(b), which appeared in the income tax chapter of the 1939 Code and was specifically and restrictively designed to punish evasion of that tax, § 3616(a) was placed among the Code's "General Administrative Provisions," and was general in scope. Failure explicitly to exclude evasion of the income tax from the scope of § 3616(a) is urged as ground for its inclusion, thereby making it a misdemeanor to file a false return with intent to evade the income tax, despite the specific felony provision of § 145(b). As long ago as 1926, it was the Government's position that the predecessor of § 145(b) effectively repealed § 3616(a)'s applicability to income tax evasion. See brief for the United States pp. 16-19, in United States v. Noveck,. To be sure, during the last five years, the Government prosecuted a small number of minor offenses, we are told less than seven per cent of the criminal income tax evasion cases involving the filing of false returns, as misdemeanors under § 3616(a). More recently, a series of cases brought the relation of § 145(b) to § 3616(a) into focus, and called for an interpretative analysis of the history of these sections in order to ascertain their respective functions. And so now, for the first time, has the Government made a detailed survey of the problem of alleged overlapping between § 3616(a) and § 145(b). Section 3616(a) goes back to the Act of 1798, 1 Stat. 580, 586, when excise taxes and customs duties were the main sources of federal revenue. Being general in scope, this section, as successively reenacted, was applicable to the first federal taxes on income from 1861 to 1871, and again in 1894; there were no separate provisions for punishing income tax evasions. See, e.g., the Act of 1861, 12 Stat. 292, 309; the Act of 1894, 28 Stat. 509, 553. A different story begins with the income tax legislation that followed the passage of the Sixteenth Amendment. Section II of the Revenue Act of 1913, 38 Stat. 114, 166, contained its own criminal sanctions. Section II(F) proscribed the making of a false return with intent to evade the income tax, an act that would otherwise have been punishable under what was then § 3179 of the Revised Statutes of 1874, the immediate predecessor of § 3616(a). The offense would have been a misdemeanor under either statute. But § II(F) provided a maximum fine of $2,000, while § 3179 only permitted a fine of up to $1,000. It seems clear that § II(F) displaced § 3179. Such implied repeal, pro tanto, is further demonstrated by the fact that §§ 3167, 3172, 3173 and 3176 of the Revised Statutes, related provisions in the enforcement of the revenue laws, were specifically incorporated, as modified, into § II, but § 3179 was not. Nor was it incorporated by reference; § II(L) made applicable only those administrative and general tax provisions "not inconsistent with the provisions of this section," and § 3179 was obviously inconsistent with § II(F). The Revenue Act of 1916, 39 Stat. 756, 775, and the Act of 1917, 40 Stat. 300, 325, offer further evidence that Congress withdrew the income tax from the reach of the general provisions of § 3179. Both of those Acts imposed income taxes, proscribed the making of false returns as a misdemeanor, and punished that offense more severely than did § 3179. In addition to its specific prohibition of false returns, the 1917 Act made it an offense to evade or attempt to evade taxes imposed by it, thereby using for the first time language similar to that subsequently found in § 145(b). In an effort to escape the effect of the scheme for punishing income tax evaders set forth in the 1913, 1916, and 1917 statutes, petitioner claims that the Revenue Act of 1918 made § 3179 again applicable to the income tax. Section 253 of Title II, the income tax title, provided in pertinent part: "Any individual . . . who willfully refuses to pay or collect such [required] tax, to make such return, or to supply such information at the time or times required under this title, or who willfully attempts in any manner to defeat or evade the tax imposed by this title, shall be guilty of a misdemeanor and shall be fined not more than $10,000 or imprisoned for not more than one year, or both. . . ." 40 Stat. 1057, 1085. Despite § 253's addition of the words "in any manner" to the "attempts" clause of the 1917 Act, petitioner contends that the failure of § 253 to single out the making of false returns with intent to evade must be attributed to a congressional determination that this particular mode of income tax evasion should be punished under § 3179. Plainly enough, such a reading of the Act is untenable. We cannot hold that the classic method of evading the income tax, the filing of a false return, did not constitute an attempt "in any manner to defeat or evade" that tax. This would empty those words of their most obvious content, and would produce glaring incongruities. It would mean that Congress, having manifested its desire in the previous revenue laws to punish this offense more harshly than did § 3179, inexplicably reversed itself in an Act that heavily increased the punishment for all other forms of obstruction to the income tax. And it would mean that Congress provided a lesser penalty for the making of false returns with intent to evade than for either willful refusal to file, which is usually considered to be a lesser offense, or refusal to file when combined with affirmative acts of evasion such as keeping a double set of books. An explanation of the omission more in harmony with the rational system of tax administration that was the congressional design is that Congress merely tried to speak economically in 1918 and, having prohibited "attempts in any manner" to evade the income tax, found it unnecessary also to proscribe the major kind of attempt. This interpretation gains further support from the Act of 1924, 43 Stat. 253, 343, which made the last significant alteration of the statutory scheme prior to the 1939 codification. Section 1017(a), subsequently § 145(a) of the Code, continued the willful failure to make returns, supply information, or pay taxes as a misdemeanor carrying a penalty of up to one year in prison and a $10,000 fine. Section 1017(b), the future § 145(b), made if a felony, with a maximum penalty of five years in prison and a $10,000 fine, to attempt "in any manner to evade or defeat any tax imposed by this Act." And § 1017(c), later § 3793(b) (1) of the Code, created a new offense which made it a felony, with a maximum penalty of five years in prison and $10,000 fine, for any person willfully to assist in the preparation of a false return. Thus, the 1924 Act, by increasing the punishment for affirmative acts of evasion, made even more pronounced one of the indicated anomalies that petitioner's view would impose. In addition, § 1017(c) requires petitioner to impute to Congress a desire to punish one who assisted in preparing a false return much more severely than one who actually made the return with intent to evade. Our duty is to give coherence to what Congress has done within the bounds imposed by a fair reading of legislation. In Spies v. United States,, the dominant consideration in the Court's unanimous decision relating § 145(b) to § 145(a) was the avoidance of incongruities analogous to those that would result from petitioner's reading of the sections before us. The evolution of those sections makes clear that, by the time the unconfined language of § 3179 became § 3616(a) of the 1939 Code, its scope had been shrunk by a series of specific enactments that had the potency of implied repeals. Due regard for appropriate statutory construction calls for such a conclusion in order to harmonize an earlier, generalized statute with later ad hoc enactments expressly directed to the collection of income taxes. In view of our conclusion that § 3616(a) did not apply to evasion of the income tax, it becomes unnecessary to consider other contentions advanced by petitioner. Affirmed.

Petitioner was indicted, convicted, and sentenced under § 145 (b) of the Internal Revenue Code of 1939 for the felony of willfully attempting to evade federal income taxes by filing false and fraudulent returns. Held: Section 3616(a) of the Internal Revenue Code of 1939, which makes it a misdemeanor for a person to deliver to the Collector "any false or fraudulent list, return, account, or statement, with intent to defeat or evade the valuation, enumeration, or assessment intended to be made . . . ," does not apply to this offense, and the felony conviction and sentence under § 145(b) are sustained. . 234 F.2d 797 affirmed.

1956_61

https://www.oyez.org/cases/1956/61

MR. JUSTICE BRENNAN delivered the opinion of the Court. The constitutionality of a criminal obscenity statute is the question in each of these cases. In Roth, the primary constitutional question is whether the federal obscenity statute violates the provision of the First Amendment that "Congress shall make no law . . . abridging the freedom of speech, or of the press. . . ." In Alberts, the primary constitutional question is whether the obscenity provisions of the California Penal Code invade the freedoms of speech and press as they may be incorporated in the liberty protected from state action by the Due Process Clause of the Fourteenth Amendment. Other constitutional questions are: whether these statutes violate due process, because too vague to support conviction for crime; whether power to punish speech and press offensive to decency and morality is in the States alone, so that the federal obscenity statute violates the Ninth and Tenth Amendments (raised in Roth), and whether Congress, by enacting the federal obscenity statute, under the power delegated by Art. I, § 8, cl. 7, to establish post offices and post roads, preempted the regulation of the subject matter (raised in Alberts). Roth conducted a business in New York in the publication and sale of books, photographs and magazines. He used circulars and advertising matter to solicit sales. He was convicted by a jury in the District Court for the Southern District of New York upon 4 counts of a 26-count indictment charging him with mailing obscene circulars and advertising, and an obscene book, in violation of the federal obscenity statute. His conviction was affirmed by the Court of Appeals for the Second Circuit. We granted certiorari. Alberts conducted a mail-order business from Los Angeles. He was convicted by the Judge of the Municipal Court of the Beverly Hills Judicial District (having waived a jury trial) under a misdemeanor complaint which charged him with lewdly keeping for sale obscene and indecent books, and with writing, composing and publishing an obscene advertisement of them, in violation of the California Penal Code. The conviction was affirmed by the Appellate Department of the Superior Court of the State of California in and for the County of Los Angeles. We noted probable jurisdiction. The dispositive question is whether obscenity is utterance within the area of protected speech and press. Although this is the first time the question has been squarely presented to this Court, either under the First Amendment or under the Fourteenth Amendment, expressions found in numerous opinions indicate that this Court has always assumed that obscenity is not protected by the freedoms of speech and press. Ex parte Jackson,,; United States v. Chase,,; Robertson v. Baldwin,,; Public Clearing House v. Coyne,,; Hoke v. United States,,; Near v. Minnesota,,; Chaplinsky v. New Hampshire,,; Hannegan v. Esquire, Inc.,,; Winters v. New York,,; Beauharnais v. Illinois,,. The guaranties of freedom of expression in effect in 10 of the 14 States which by 1792 had ratified the Constitution, gave no absolute protection for every utterance. Thirteen of the 14 States provided for the prosecution of libel, and all of those States made either blasphemy or profanity, or both, statutory crimes. As early as 1712, Massachusetts made it criminal to publish "any filthy, obscene, or profane song, pamphlet, libel or mock sermon" in imitation or mimicking of religious services. Acts and Laws of the Province of Mass. Bay, c. CV, § 8 (1712), Mass.Bay Colony Charters & Laws 399 (1814). Thus, profanity and obscenity were related offenses. In light of this history, it is apparent that the unconditional phrasing of the First Amendment was not intended to protect every utterance. This phrasing did not prevent this Court from concluding that libelous utterances are not within the area of constitutionally protected speech. Beauharnais v. Illinois,,. At the time of the adoption of the First Amendment, obscenity law was not as fully developed as libel law, but there is sufficiently contemporaneous evidence to show that obscenity, too, was outside the protection intended for speech and press. The protection given speech and press was fashioned to assure unfettered interchange of ideas for the bringing about of political and social changes desired by the people. This objective was made explicit as early as 1774 in a letter of the Continental Congress to the inhabitants of Quebec: "The last right we shall mention regards the freedom of the press. The importance of this consists, besides the advancement of truth, science, morality, and arts in general, in its diffusion of liberal sentiments on the administration of Government, its ready communication of thoughts between subjects, and its consequential promotion of union among them, whereby oppressive officers are shamed or intimidated into more honourable and just modes of conducting affairs." 1 Journals of the Continental Congress 108 (1774). All ideas having even the slightest redeeming social importance -- unorthodox ideas, controversial ideas, even ideas hateful to the prevailing climate of opinion -- have the full protection of the guaranties, unless excludable because they encroach upon the limited area of more important interests. But implicit in the history of the First Amendment is the rejection of obscenity as utterly without redeeming social importance. This rejection for that reason is mirrored in the universal judgment that obscenity should be restrained, reflected in the international agreement of over 50 nations, in the obscenity laws of all of the 48 States, and in the 20 obscenity laws enacted by the Congress from 1842 to 1956. This is the same judgment expressed by this Court in Chaplinsky v. New Hampshire,,: ". . . There are certain well defined and narrowly limited classes of speech, the prevention and punishment of which have never been thought to raise any Constitutional problem. These include the lewd and obscene. . . . It has been well observed that such utterances are no essential part of any exposition of ideas, and are of such slight social value as a step to truth that any benefit that may be derived from them is clearly outweighed by the social interest in order and morality. . . ." (Emphasis added.) We hold that obscenity is not within the area of constitutionally protected speech or press. It is strenuously urged that these obscenity statutes offend the constitutional guaranties because they punish incitation to impure sexual thoughts, not shown to be related to any overt antisocial conduct which is or may be incited in the persons stimulated to such thoughts. In Roth, the trial Judge instructed the jury: "The words 'obscene, lewd and lascivious' as used in the law, signify that form of immorality which has relation to sexual impurity and has a tendency to excite lustful thoughts." (Emphasis added.) In Alberts, the trial judge applied the test laid down in People v. Wepplo, 78 Cal. App. 2d Supp. 959, 178 P.2d 853, namely, whether the material has "a substantial tendency to deprave or corrupt its readers by inciting lascivious thoughts or arousing lustful desires." (Emphasis added.) It is insisted that the constitutional guaranties are violated because convictions may be had without proof either that obscene material will perceptibly create a clear and present danger of anti-social conduct, or will probably induce its recipients to such conduct. But, in light of our holding that obscenity is not protected speech, the complete answer to this argument is in the holding of this Court in Beauharnais v. Illinois, supra, at: "Libelous utterances not being within the area of constitutionally protected speech, it is unnecessary, either for us or for the State courts, to consider the issues behind the phrase 'clear and present danger.' Certainly no one would contend that obscene speech, for example, may be punished only upon a showing of such circumstances. Libel, as we have seen, is in the same class." However, sex and obscenity are not synonymous. Obscene material is material which deals with sex in a manner appealing to prurient interest. The portrayal of sex, e.g., in art, literature and scientific works, is not itself sufficient reason to deny material the constitutional protection of freedom of speech and press. Sex, a great and mysterious motive force in human life, has indisputably been a subject of absorbing interest to mankind through the ages; it is one of the vital problems of human interest and public concern. As to all such problems, this Court said in Thornhill v. Alabama,,: "The freedom of speech and of the press guaranteed by the Constitution embraces at the least the liberty to discuss publicly and truthfully all matters of public concern without previous restraint or fear of subsequent punishment. The exigencies of the colonial period and the efforts to secure freedom from oppressive administration developed a broadened conception of these liberties as adequate to supply the public need for information and education with respect to the significant issues of the times. . . . Freedom of discussion, if it would fulfill its historic function in this nation, must embrace all issues about which information is needed or appropriate to enable the members of society to cope with the exigencies of their period." (Emphasis added.) The fundamental freedoms of speech and press have contributed greatly to the development and wellbeing of our free society and are indispensable to its continued growth. Ceaseless vigilance is the watchword to prevent their erosion by Congress or by the States. The door barring federal and state intrusion into this area cannot be left ajar; it must be kept tightly closed, and opened only the slightest crack necessary to prevent encroachment upon more important interests. It is therefore vital that the standards for judging obscenity safeguard the protection of freedom of speech and press for material which does not treat sex in a manner appealing to prurient interest. The early leading standard of obscenity allowed material to be judged merely by the effect of an isolated excerpt upon particularly susceptible persons. Regina v. Hicklin, [1868] L.R. 3 Q.B. 360. Some American courts adopted this standard, but later decisions have rejected it and substituted this test: whether, to the average person, applying contemporary community standards, the dominant theme of the material, taken as a whole, appeals to prurient interest. The Hicklin test, judging obscenity by the effect of isolated passages upon the most susceptible persons, might well encompass material legitimately treating with sex, and so it must be rejected as unconstitutionally restrictive of the freedoms of speech and press. On the other hand, the substituted standard provides safeguards adequate to withstand the charge of constitutional infirmity. Both trial courts below sufficiently followed the proper standard. Both courts used the proper definition of obscenity. In addition, in the Alberts case, in ruling on a motion to dismiss, the trial judge indicated that, as the trier of facts, he was judging each item as a whole as it would affect the normal person, and, in Roth, the trial judge instructed the jury as follows: ". . . The test is not whether it would arouse sexual desires or sexual impure thoughts in those comprising a particular segment of the community, the young, the immature or the highly prudish or would leave another segment, the scientific or highly educated or the so-called worldly wise and sophisticated indifferent and unmoved. . . ." "* * * *" "The test in each case is the effect of the book, picture or publication considered as a whole not upon any particular class, but upon all those whom it is likely to reach. In other words, you determine its impact upon the average person in the community. The books, pictures and circulars must be judged as a whole, in their entire context, and you are not to consider detached or separate portions in reaching a conclusion. You judge the circulars, pictures and publications which have been put in evidence by present-day standards of the community. You may ask yourselves does it offend the common conscience of the community by present-day standards." "* * * *" "In this case, ladies and gentlemen of the jury, you and you alone are the exclusive judges of what the common conscience of the community is, and, in determining that conscience, you are to consider the community as a whole, young and old, educated and uneducated, the religious and the irreligious -- men, women and children. " It is argued that the statutes do not provide reasonably ascertainable standards of guilt, and therefore violates the constitutional requirements of due process. Winters v. New York,. The federal obscenity statute makes punishable the mailing of material that is "obscene, lewd, lascivious, or filthy . . . or other publication of an indecent character." The California statute makes punishable, inter alia, the keeping for sale or advertising material that is "obscene or indecent." The thrust of the argument is that these words are not sufficiently precise, because they do not mean the same thing to all people, all the time, everywhere. Many decisions have recognized that these terms of obscenity statutes are not precise. This Court, however, has consistently held that lack of precision is not itself offensive to the requirements of due process. ". . . [T]he Constitution does not require impossible standards"; all that is required is that the language "conveys sufficiently definite warning as to the proscribed conduct when measured by common understanding and practices. . . ." United States v. Petrillo,,. These words, applied according to the proper standard for judging obscenity, already discussed, give adequate warning of the conduct proscribed, and mark ". . . boundaries sufficiently distinct for judges and juries fairly to administer the law. . . . That there may be marginal cases in which it is difficult to determine the side of the line on which a particular fact situation falls is no sufficient reason to hold the language too ambiguous to define a criminal offense. . . ." Id. at. See also United States v. Harriss,,, n. 15; Boyce Motor Lines, Inc. v. United States,,; United States v. Ragen,,; United States v. Wurzbach,; Hygrade Provision Co. v. Sherman,; Fox v. Washington,; Nash v. United States,. In summary, then, we hold that these statutes, applied according to the proper standard for judging obscenity, do not offend constitutional safeguards against convictions based upon protected material, or fail to give men in acting adequate notice of what is prohibited. Roth's argument that the federal obscenity statute unconstitutionally encroaches upon the powers reserved by the Ninth and Tenth Amendments to the States and to the people to punish speech and press where offensive to decency and morality is hinged upon his contention that obscenity is expression not excepted from the sweep of the provision of the First Amendment that "Congress shall make no law . . . abridging the freedom of speech, or of the press. . . ." (Emphasis added.) That argument falls in light of our holding that obscenity is not expression protected by the First Amendment. We therefore hold that the federal obscenity statute punishing the use of the mails for obscene material is a proper exercise of the postal power delegated to Congress by Art. I, § 8, cl. 7. In United Public Workers v. Mitchell,,, this Court said: ". . . The powers granted by the Constitution to the Federal Government are subtracted from the totality of sovereignty originally in the states and the people. Therefore, when objection is made that the exercise of a federal power infringes upon rights reserved by the Ninth and Tenth Amendments, the inquiry must be directed toward the granted power under which the action of the Union was taken. If granted power is found, necessarily the objection of invasion of those rights, reserved by the Ninth and Tenth Amendments, must fail. . . ." Alberts argues that, because his was a mail-order business, the California statute is repugnant to Art. I, § 8, cl. 7, under which the Congress allegedly preempted the regulatory field by enacting the federal obscenity statute punishing the mailing or advertising by mail of obscene material. The federal statute deals only with actual mailing; it does not eliminate the power of the state to punish "keeping for sale" or "advertising" obscene material. The state statute in no way imposes a burden or interferes with the federal postal functions. ". . . The decided cases which indicate the limits of state regulatory power in relation to the federal mail service involve situations where state regulation involved a direct, physical interference with federal activities under the postal power or some direct, immediate burden on the performance of the postal functions. . . ." Railway Mail Assn. v. Corsi,,. The judgments are Affirmed. *

1. In the Roth case, the constitutionality of 18 U.S.C. § 1461, which makes punishable the mailing of material that is "obscene, lewd, lascivious, or filthy . . . or other publication of an indecent character," and Roth's conviction thereunder for mailing an obscene book and obscene circulars and advertising, are sustained. . 2. In the Albert case, the constitutionality of § 311 of West's California Penal Code Ann., 1955, which, inter alia, makes it a misdemeanor to keep for sale, or to advertise, material that is "obscene or indecent," and Alberts' conviction thereunder for lewdly keeping for sale obscene and indecent books and for writing, composing, and publishing an obscene advertisement of them, are sustained. . 3. Obscenity is not within the area of constitutionally protected freedom of speech or press either (1) under the First Amendment, as to the Federal Government, or (2) under the Due Process Clause of the Fourteenth Amendment, as to the States. . (a) In the light of history, it is apparent that the unconditional phrasing of the First Amendment was not intended to protect every utterance. . (b) The protection given speech and press was fashioned to assure unfettered interchange of ideas for the bringing about of political and social changes desired by the people. P.. (c) All ideas having even the slightest redeeming social importance -- unorthodox ideas, controversial ideas, even ideas hateful to the prevailing climate of opinion -- have the full protection of the guaranties, unless excludable because they encroach upon the limited area of more important interests; but implicit in the history of the First Amendment is the rejection of obscenity as utterly without redeeming social importance. . 4. Since obscenity is not protected, constitutional guaranties were not violated in these cases merely because, under the trial judges' instructions to the juries, convictions could be had without proof either that the obscene material would perceptibly create a clear and present danger of antisocial conduct, or probably would induce its recipients to such conduct. Beauharnais v. Illinois,. . (a) Sex and obscenity are not synonymous. Obscene material is material which deals with sex in a manner appealing to prurient interest -- i.e., material having a tendency to excite lustful thoughts. P.. (b) It is vital that the standards for judging obscenity safeguard the protection of freedom of speech and press for material which does not treat sex in a manner appealing to prurient interest. . (c) The standard for judging obscenity, adequate to withstand the charge of constitutional infirmity, is whether, to the average person, applying contemporary community standards, the dominant theme of the material, taken as a whole, appeals to prurient interest. . (d) In these cases, both trial courts sufficiently followed the proper standard and used the proper definition of obscenity. . 5. When applied according to the proper standard for judging obscenity, 18 U.S.C. § 1461, which makes punishable the mailing of material that is "obscene, lewd, lascivious, or filthy . . . or other publication of an indecent character," does not (1) violate the freedom of speech or press guaranteed by the First Amendment, or (2) violate the constitutional requirements of due process by failing to provide reasonably ascertainable standards of guilt. . 6. When applied according to the proper standard for judging obscenity, § 311 of West's California Penal Code Ann., 1955, which, inter alia, makes it a misdemeanor to keep for sale or to advertise material that is "obscene or indecent," does not (1) violate the freedom of speech or press guaranteed by the Fourteenth Amendment against encroachment by the States, or (2) violate the constitutional requirements of due process by failing to provide reasonably ascertainable standards of guilt. . 7. The federal obscenity statute, 18 U.S.C. § 1461, punishing the use of the mails for obscene material, is a proper exercise of the postal power delegated to Congress by Art. I, § 8, cl. 7, and it does not unconstitutionally encroach upon the powers reserved to the States by the Ninth and Tenth Amendments. . 8. The California obscenity statute here involved is not repugnant to Art. I, § 8, cl. 7, since it does not impose a burden upon, or interfere with, the federal postal functions -- even when applied to a mail-order business. . 237 F.2d 796, affirmed. 138 Cal. App. 2d Supp. 909, 292 P.2d 90, affirmed.

1956_36

https://www.oyez.org/cases/1956/36

MR. JUSTICE FRANKFURTER delivered the opinion of the Court. These are direct appeals under 28 U.S.C. § 1253, from a final judgment of a three-judge District Court for the Southern District of New York setting aside orders of the Interstate Commerce Commission and restraining appellant Alleghany Corporation from issuing a new class of preferred stock that had been approved by the Commission. The case raises numerous questions regarding the jurisdiction and powers of the Commission, especially under § 5 of the Interstate Commerce Act, for the understanding of which a rather detailed statement of the facts is necessary. Section 5(2)(a), in its pertinent portions, provides: "It shall be lawful with the approval and authorization of the Commission . . . (i) . . . for a person which is not a carrier to acquire control of two or more carriers through ownership of their stock or otherwise; or for a person which is not a carrier and which has control of one or more carriers to acquire control of another carrier through ownership of its stock or otherwise. . . ." 54 Stat. 899, 905. 49 U.S.C. § 5(2)(a). Appellant Alleghany Corporation is a Maryland corporation whose charter provides for extensive powers of investment under no express limitation. After the passage of the Investment Company Act of 1940, 54 Stat. 789, 15 U.S.C. § 80a-1 et seq., Alleghany registered as an investment company with the Securities and Exchange Commission. In 1944, in connection with an application by the Chesapeake & Ohio Railroad for approval by the Interstate Commerce Commission of acquisition of the property of the Norfolk Terminal & Transportation Company, Alleghany, alleging that it controlled the Chesapeake & Ohio, filed a supplementary application with the Commission joining the Chesapeake & Ohio's application and seeking approval of its own acquisition of control of the Terminal Company through the action of the Chesapeake & Ohio. In 1945, the Commission approved "acquisition of control" of the Terminal Company by the Chesapeake & Ohio and Alleghany as a transaction within § 5(2) and further found that Alleghany "shall be considered as a carrier subject to the [reporting and securities] provisions of section 20(1) to (10) and section 20a(2) to (11) of the act." 261 I.C.C. 239, 262. Shortly thereafter, under the provisions of § 3(c)(9) of the Investment Company Act, the Securities and Exchange Commission held that Alleghany was no longer an investment company within the meaning of the Investment Company Act. 20 S.E.C. 731. In March, April, and May, 1954, several petitions and complaints were filed with the Interstate Commerce Commission by the New York Central Railroad, a stockholder, a protective committee, and bondholder creditors of the Central, asserting violations of the law in Alleghany's purchases of New York Central stock. In view of statements by Alleghany and Chesapeake & Ohio officials that Alleghany had disposed of its holdings of Chesapeake stock, that Commission, in June, ordered Alleghany to show cause why the 1945 order providing that Alleghany should be "considered as a carrier" should not be set aside. Allegheny replied that it would accept an order terminating its control of the Chesapeake & Ohio, but requested delay until it could file a new application which, it alleged, would require the Commission's approval and continuance of its status as a noncarrier to be "considered as a carrier" under the Interstate Commerce Act. The present proceedings were commenced by the filing of such an application by Alleghany and Central -- after the ousting of the old Central management in May in a proxy fight. The contents of the application were described fully in the Report of Division 4 of the Commission: "The Cleveland, Cincinnati, Chicago and St. Louis Railway Company [the Big Four], the Louisville & Jeffersonville Bridge and Railroad Company [the Bridge Company or the Jeffersonville], The New York Central Railroad Company, and the Alleghany Corporation . . . on September 20, 1954, jointly applied under section 5(2) of the Interstate Commerce Act . . . for approval and authorization of (1)(a) merger of the properties and franchises of the Jeffersonville into the Big Four for ownership management, and operation; and (b) modification of the lease of January 2, 1930, under which Central, as lessee, operates the property of Big Four, lessor, to give effect to the acquisition of additional property pursuant to the proposed merger of Jeffersonville into Big Four; (2) acquisition by Central and Alleghany, by virtue of their control of Big Four, of control of the properties of Jeffersonville; and (3) continuation of Alleghany's status as a carrier subject to the provisions of section 20(1) to (10), inclusive, and 20a(2) to (11), inclusive, of the act, as provided by section 5(3) thereof." 290 I.C.C. 725-726. The Big Four already owned all the capital stock of the Jeffersonville. The Big Four itself had ceased to be an operating carrier in 1930; since then, the New York Central has operated it as lessee. In addition, the New York Central owns 98.98% of the common, and 86.45% of the preferred, stock of the Big Four. On March 2, 1955, Division 4 of the Commission approved and authorized the merger of the Jeffersonville into the Big Four; approved continued control of the properties and franchises of the Jeffersonville by the Central and Alleghany; modified the lease between the Big Four and the Central; continued Alleghany as a noncarrier to be "considered as a carrier" subject to the reporting and securities provisions of the Act; and terminated the effective portions of the 1945 order in the Chesapeake & Ohio proceeding. 290 I.C.C. 725. On reconsideration, the whole Commission on May 24, 1955, affirmed the conclusions of Division 4. It held that Alleghany had acquired control over Central; that at the time the present application was filed, Alleghany was in fact "a person not a carrier which controlled an established system"; that the acquisition of control over the Central was not within § 5(2)'s requirement of Commission approval; that the rearrangement by Central of its ownership or control of its subsidiaries was within § 5(2)'s requirement of approval by the Commission and that Alleghany as the controlling party was a necessary party; and that the terms and conditions of the transactions were fair and reasonable. Rejecting the suggestion of the Securities and Exchange Commission, which had intervened, the whole Commission also held that it had no discretion to yield jurisdiction over Alleghany to the former agency. 295 I.C.C. 11. Subsequent to their application with respect to the Jeffersonville, Alleghany, and Central, on December 17, 1954, filed an application under § 5(2) to "acquire control" of the Boston & Albany Railroad Company, the Pittsfield and North Adams Railroad Corporation, and the Ware River Railroad Company through purchase by Central of their capital stock. The Central owned a little more than 16% of the Pittsfield's capital stock, and none of the capital stock of the other two railroads. It operated the properties of the Boston & Albany, the Pittsfield, and the Ware River under leases due to expire in 1999, 1975, and 2873 respectively. On March 22, 1955, less than three weeks after it had approved the application in the Jeffersonville proceeding, Division 4 of the Commission approved the acquisition of such control by Alleghany and Central. (Opinion not reported.) A third application filed by Alleghany, on February 18, 1955, sought permission from the Commission to issue a new 6% convertible preferred stock pursuant to a charter amendment, approved by all classes of Alleghany's stockholders, that permitted consummation of Alleghany's proposed plan of allowing its outstanding cumulative 5 1/2% preferred stock to be exchanged for the new stock. On May 26, 1955, two days after the whole Commission affirmed Division 4's orders in the Jeffersonville proceeding, Division 4 approved the new stock issue (conditioning its approval on modification of one term), and, on June 22, the full Commission denied reconsideration. An action was then brought before a three-judge District Court by minority common stockholders of Alleghany to require the Commission to set aside its order granting Alleghany the status of a noncarrier to be "considered as a carrier" and its subsequent order approving the new class of preferred stock and to restrain Alleghany from issuing the new preferred stock. The three- judge District Court, convened under the Urgent Deficiencies Act, 28 U.S.C. §§ 1336, 1337, 2321-2325, granted first a preliminary injunction, Breswick & Co. v. United States, 134 F. Supp. 132 (Circuit Judge Hincks, dissenting), and then a permanent injunction setting aside the Commission's order designating Alleghany as a "carrier" and also its order approving Alleghany's new class of preferred stock, restraining its issue. 138 F. Supp. 123. Alleghany moved for a new trial based on the "acquisition of control" involved in the Boston & Albany proceeding. The District Court held that the Commission's order in that proceeding gave no validity of the orders in the Jeffersonville proceeding because of the Commission's failure to provide specifically in its Boston & Albany order that Alleghany should be "considered as a carrier." 138 F. Supp. 138. On appeal here from the final judgment below, we noted probable jurisdiction. 351 U.S. 903; I.C.C. v. Breswick & Co., 352 U.S. 816. Alleghany urges initially that the Commission's orders dealing with its status under the Interstate Commerce Act and dealing with its new preferred stock were not reviewable at the suit of appellees, that appellees had no standing. We find that appellees do have standing to challenge these orders . This is not a case where "the order under attack does not deal with the interests of investors," or where the "injury feared is the indirect harm which may result to every stockholder from harm to the corporation." Pittsburgh & W. Va. R. Co. v. United States,,. The appellees are common stockholders of Alleghany. The new preferred stock issue approved by the Commission is convertible, and, under relevant notions of standing, the threatened "dilution" of the equity of the common stockholders provided sufficient financial interest to give them standing. See American Power & Light Co. v. SEC,,. Having acquired standing to institute proceedings in the District Court by virtue of the threatened financial injury, appellees could also attack the order of the Commission conferring on Alleghany the status of a person not a carrier but to be "considered as a carrier." The status order was a source of the threatened financial injury. If the Commission acted out of bounds in decreeing its status order, it had no power to approve the new preferred stock issue, and the plaintiffs would be entitled to relief. This brings us to the substantive issues in the litigation. In the main, these involve the jurisdiction of the Commission under §§ 5(2) and 5(3) of the Act, defining its powers. The validity of the status order under § 5(3) turns on compliance with the statutory requirement of § 5(2) of the Commission approval "for a person which is not a carrier and which has control of one or more carriers to acquire control of another carrier through ownership of its stock or otherwise. . . ." Appellants Alleghany and the Commission contend that the Jeffersonville and the Boston & Albany transactions both support the Commission's assertion of jurisdiction. The District Court disagreed with respect to the former and, as we have seen, p., supra, found it unnecessary to pass on the latter. Whether the Jeffersonville transaction met the statutory requirement of § 5(2) raises three questions. (1) Was Commission approval of Alleghany's acquisition of control over Central required? (2) Did Alleghany in fact control Central? (3) Did the Jeffersonville transaction involved an acquisition of control by Alleghany over the properties of the Jeffersonville? The District Court held that whatever control Alleghany had over Central did not fit within the statutory requirement of "a person which is not a carrier and which has control of one or more carriers" because the Commission had not given the approval necessary for acquisition of control of Central and its subsidiaries, "two or more carriers." The Commission and Alleghany contend that Commission approval of the acquisition of a single, integrated system is not necessary. We need not decide this question, however, and intimate no opinion on it, for, even if such approval in necessary, the statutory requirement of "a person which is not a carrier and which has control of one or more carriers" refers to "control," and not to "approved control." There seems to be no reason to read in the word "approved." Such a holding would mean that the failure of a company engaging in a transaction requiring Commission approval to apply for that approval would deprive the Commission of jurisdiction. Remedies against a violator are provided by § 5(7), (8), and (9) of the Act. To punish a violator by depriving the Commission of jurisdiction over it would be indeed quixotic. As the Commission points out, the problem would appear clearer were Alleghany contesting, rather than acquiescing in, its jurisdiction. Control in fact, then, is sufficient to satisfy the requirement of § 5(2). Division 4 of the Commission reported the following: "The capital stock of Central is widely held by the public, but control of its functions reposes in Alleghany and its officers as a result of a proxy contest preceding a stockholders' meeting of May 26, 1954, at which the nominees chosen by Alleghany were elected as Central's board of directors. Alleghany has an undivided half interest in 600,000 shares of Central stock with voting rights to the 600,000 shares under joint venture agreements, and, in addition, owns 15,500 shares. The voting rights of Alleghany represent almost 10 percent of the total shares of Central stock outstanding. The chairman of the board of directors of Alleghany, who holds the same position with Central, beneficially owns 100,200 shares of the latter's stock. The president of Alleghany is a director of Central, and beneficially owns 300,100 shares of the latter's stock. A vice president of Alleghany holds a similar position with Central." 290 I.C.C. at 727. Division 4 recognized that "the present control of the Central system has passed to Alleghany by regular corporate procedures. . . ." Id. at 741. The full Commission reached this conclusion: "The contention that Alleghany does not control the individual directors on Central's board ignores the realities of the situation. Alleghany and its allied interests have succeeded in electing sufficient members of the board to permit them to organize and elect their own officers. Clearly, the tenure in office of such directors who permitted this action depends upon their conformance to the views of the stockholders who elected them. In our opinion, the power thus reposing in Alleghany constitutes control of Central." 295 I.C.C. 11, 16. The District Court, however, held that, "if the Commission's opinions contain a conclusion that Alleghany is in control of New York Central, those opinions lack sufficient findings to support that conclusion." 134 F.Supp at 147. It noted that the order of Division 4 "discloses the fact that Alleghany's beneficial holdings of the Central stock are less than the combined individual holdings of Kirby, Young, Richardson, and the Murchison group," and concluded that "the findings do no more than say that Alleghany, with someone else, controls New York Central. They do not even say whether the someone else, alone, has control." Ibid. We think that the District Court took too restricted a view of what constitutes "control." In 1939, in Rochester Telephone Corp. v. United States,,, arising under the Federal Communications Act, 48 Stat. 1064, 1065, 47 U.S.C. § 152(b), this Court rejected artificial tests for "control" and left its determination in a particular case as a practical concept to the agency charged with enforcement. This was the broad scope designed for "control" as employed by Congress in the Transportation Act of 1940, 54 Stat. 899-900, 49 U.S.C. §1(3)(b). See United States v. Marshall Transport Co.,,. That Act also added § 1(3)(b) to the Interstate Commerce Act, providing: "For the purposes of (section) 5 . . . of this Act, where reference is made to control (in referring to a relationship between any person or persons and another person or persons), such reference shall be construed to include actual as well as legal control, whether maintained or exercised through or by reason of the method of or circumstances surrounding organization or operation, through or by common directors, officers, or stockholders, a voting trust or trusts, a holding or investment company or companies, or through or by any other direct or indirect means, and to include the power to exercise control." 54 Stat. 899-900, 49 U.S.C. § 1(3)(b). Section 1(3)(a) provides: "The term 'person' as used in this part includes an individual, firm, copartnership, corporation, company, association, or joint-stock association; and includes a trustee, receiver, assignee, or personal representative thereof." 54 Stat. 899, 49 U.S.C. § 1(3)(a). The Commission's findings, setting forth the events surrounding the proxy fight for control of Central, the common directors in both, the stockholdings of Alleghany's officers and stockholders in Central, and the sworn statement of Central in the Central-Alleghany application that Central is controlled by Alleghany amply support its conclusion that "control" of Central was in Alleghany. See footnote 7 supra. The question remains whether the second portion of the statutory requirement of Commission approval "for a person which is not a carrier and which has control of one or more carriers to acquire control of another carrier through ownership of its stock or otherwise . . ." has been met. What constitutes an acquisition of control? The District Court gave this restricted interpretation: "A merger of carriers may involve an acquisition of control by a noncarrier where, through the merger, the noncarrier acquires control (direct or indirect) of a carrier or carrier property which the noncarrier had previously not controlled; United States v. Marshall Transport Co.,. . . . But where, as in the instant case, the noncarrier (Alleghany) is (according to our assumption, arguendo) already in indirect control of a carrier (Bridge Company), and the merger still leaves the noncarrier in indirect control of such property, no acquisition by the noncarrier results from the merger. . . ." 138 F. Supp. at 127-128. We think that this is too narrow a reading of the statute. Not labels, but the nature of the changed relation, is crucial in determining whether a rearrangement within a railroad system constitutes an "acquisition of control" under § 5(2). The Court has already considered twice what constitutes an "acquisition of control" under the Interstate Commerce Act. In New York Central Securities Corp. v. United States,, the Court interpreted § 5(2) as it read in the Transportation Act of 1920: "Whenever the commission is of opinion . . . that the acquisition, to the extent indicated by the commission, by one of such carriers of the control of any other such carrier or carriers either under a lease or by the purchase of stock or in any other manner not involving the consolidation of such carriers into a single system for ownership and operation, will be in the public interest, the commission shall have authority by order to approve and authorize such acquisition, under such rules and regulations and for such consideration and on such terms and conditions as shall be found by the commission to be just and reasonable in the premises." In that case, the order of the Commission permitting the New York Central Railroad to acquire control, by lease, of the railroad systems of the Big Four and the Michigan Central Railroad Companies, was under review. Minority stockholders contended, inter alia, that the Commission could not authorize "acquisition of control" by lease, since the Central had already acquired control of both railroads by stock ownership. The Court held that the "disjunctive phrasing of the statute 'either under a lease or by the purchase of stock' must be read in the light of its obvious purpose, and cannot be taken to mean that one method must be exclusive of the other." 287 U.S. at. Nowhere did it intimate that the lease was not an "acquisition of control," even though the Central already had stock ownership control of both railroads. In fact, the refusal to set aside the Commission's order necessarily involved approval of the Commission's finding of an "acquisition of control," and the Court further stated: "The public interest is served by economy and efficiency in operation. If the expected advantages are inadequately secured by stock ownership, and would be better secured by lease, the statute affords no basis of the contention that the latter may not be authorized, although the former exists. The fact that one precedes the other cannot be regarded as determinative if the desired coordination is not otherwise obtainable." Ibid. The Transportation Acts of 1933, 48 Stat. 211, and 1940, 54 Stat. 898, rewrote § 5 but retained the "acquisition of control" language, except that the phrase relating to method of acquisition -- "under a lease or by the purpose of stock or in any other manner not involving the consolidation of such carriers into a single system" -- became, for acquisitions by both carriers and noncarriers, an all-inclusive phrase in the 1940 Act -- "through ownership of their stock of otherwise." These changes do not lessen the authority of the New York Central Securities case in the scope to be given to an "acquisition of control." In United States v. Marshall Transport Co.,, the Court interpreted § 5, as amended by the 1940 Act, 54 Stat. 899, 905, 49 U.S.C. § 5. The Court held that the noncarrier parent (Union) of a carrier (Refiners) that proposed to purchase the property and franchises of another carrier (Marshall) "acquired control" of the property and franchises of the vendor, and was therefore subject to the Commission's jurisdiction. The substantive issues in that case were, of course, different from those of the present case, since there had been no prior relation between the noncarrier parent and the vendor carrier. In reaching its decision, however, the Court was explicit regarding the purpose of § 5: "It is not doubted that, if Union, having control of Refiners, sought to acquire stock control of Marshall, Union would be required by § 5(2)(b) to apply for the Commission's authority to do so. But it is said that, having control of Refiners, Union may, by procuring Refiners' compliance with the purchase provisions of the statute alone, extend its control indefinitely to other carriers merely by directing the purchase of their property and business by Refiners, without subjecting itself to the jurisdiction of the Commission as provided in § 5(3), so long as Union does not act directly as the purchaser of the property or of a controlling stock interest in such other carriers." "We think that neither the language nor the legislative history of the statute admits of so narrow a construction. Section 5(4) makes it unlawful, without the approval of the Commission as provided by § 5(2)(a), for a person which is not a carrier and which has control of one or more carriers to acquire control of another carrier through ownership of its stock or otherwise. Not only is this language broad enough in terms to embrace the acquisition of control by a noncarrier through the purchase, by a controlled carrier, of the property and business of another carrier, but the legislative history indicates that such was its purpose." Id. at. See also id. at. In other words, a noncarrier may not gain "control" over carriers free of Commission regulation merely by operating through subsidiaries. The crux of each inquiry to determine whether there has been an "acquisition of control" is the nature of the change in relations between the companies whose proposed transaction is before the Commission for approval. Does the transaction accomplish a significant increase in the power of one over the other, for example, an increased voice in management or operation, or the ability to accomplish financial transactions or operational changes with greater legal ease? This is the issue, and not the immediacy or remoteness of the parent from the proposed transaction, for, as we said in the Marshall Transport case, the parent can always, by operating through subsidiaries, make itself more remote. In deciding this type of issue, of course, the finding of the Commission that a given transaction does or does not constitute a significant increase in the power of one company over another is not to be overruled so long as "there is warrant in the record for the judgment of the expert body. . . ." Rochester Telephone Corp. v. United States,,. The principal issue, therefore, in the Jeffersonville proceeding is not Alleghany's remoteness from, or closeness to, the proposed transaction, but rather the nature of the proposed transaction itself. The Big Four, whose stock was largely owned by Central, owned all the stock of the Jeffersonville. (By agreement between the Big Four and the Central, this stock was held by the Central.) The proposal was to merge the Jeffersonville into the Big Four. While the immediate practical effects of the merger on the operation of the Jeffersonville might be small, even minimal, a merger is the ultimate in one company's obtaining control over another. So long as the Jeffersonville existed as a separate company, there was always the possibility that the Big Four, through the Central, might sell, or be forced to divest itself of, the Jeffersonville stock, and that the control of the Jeffersonville might thus pass to another railroad. In considering this possibility, it is important to note that the Jeffersonville does not connect physically with the Big Four, but connects with it only by virtue of the Big Four's trackage rights over the Baltimore & Ohio, and that the Jeffersonville, with its few miles of track, also connects with the Pennsylvania, Baltimore & Ohio, Louisville & Nashville, Illinois Central, and Chesapeake & Ohio Railroads. The merger of the Jeffersonville into the Big Four virtually precludes any change in the relation of the Jeffersonville lines to the Central system. The Jeffersonville will be no more. In view of this, it cannot reasonably be said that there has been no increase in the power of the Big Four, the Central, and, through its relation with them, Alleghany over the Jeffersonville. While it is not always profitable to analogize "fact" to "fiction," La Fontaine's fable of the crow, the cheese, and the fox demonstrates that there is a substantial difference between holding a piece of cheese in the beak and putting it in the stomach. Denial of power to the Commission to regulate the elimination of the Jeffersonville from the national transportation scene would be a disregard of the responsibility placed on it by Congress to oversee combinations and consolidations of carriers and "to promote safe, adequate, economical, and efficient service and foster sound economic conditions in transportation and among the several carriers . . . ," and the further requirement that "All of the provisions of this Act shall be administered and enforced with a view to carrying out the above declaration of policy." National Transportation Policy, 54 Stat. 899, 49 U.S.C. preceding § 1. We hold that the Commission was justified in finding that the merger of the Jeffersonville into the Big Four involved an "acquisition of control" of the Jeffersonville by Central and Alleghany within the meaning of § 5(2) of the Act. Since the status order of the Commission is supportable by virtue of the Jeffersonville proceeding, we need not consider the District Court's denial of Alleghany's motion, based on the Boston & Albany proceeding, for a new trial. Several other matters urged by appellees remain to be considered. Appellees contend that Alleghany did not acquire control of any carrier in the Jeffersonville proceeding, since the application was made by the Big Four as lessor and the Central as lessee, and that therefore the Big Four was a statutory lessor, and not a carrier, within § 5. We need not discuss the distinction that appellees seek to assert between lessors and carriers, for the Jeffersonville, the railroad whose control we have held was acquired by Alleghany, was an operating carrier. Appellees also urge that the Marshall Transport case,, requires dismissal of Alleghany's application because two stockholders, alleged to dominate Alleghany, did not join in the application, and therefore, in the absence of those two indispensable parties, the Commission had no jurisdiction to proceed. But, in the Marshall Transport case, the Commission was refusing to approve a subsidiary's application to acquire control of the property and operating rights of another carrier unless the noncarrier parent submitted itself to the Commission's jurisdiction, and the Court upheld the Commission's power to refuse to approve the application. Although the Court in that case used language of "jurisdiction," the problem is not strictly jurisdictional in the sense that, if the Commission wrongly decides that corporation or person A does not "control" noncarrier B (which is "considered as a carrier"), and therefore that A need not join B's application to acquire control of C, the Commission loses jurisdiction over B, the power to regulate B. The Commission's jurisdiction over a noncarrier depends on whether the activities of the noncarrier fall within § 5(2) and (3), and does not depend on the action of the parent. For example, if Alleghany were contending that it could reshuffle the whole Central system without Commission approval, alleging that the Commission had no jurisdiction over it through failure to join two stockholders controlling it in the original status order proceedings, this whole problem would appear in a clearer context. The basis of the Commission's jurisdiction in the present case is Alleghany's status as "a person which is not a carrier and which has control of one or more carriers," seeking permission "to acquire control of another carrier through ownership of its stock or otherwise. . . ." The failure to join two stockholders alleged to control Alleghany does not oust the Commission of jurisdiction. Since that is so, the status order submitting Alleghany to the Commission's jurisdiction cannot be attacked on that basis. Appellees further argue, and the District Court held, 134 F. Supp. at 147-149 and 138 F. Supp. at 136-137, that, under §§ 5(2)(b) and 17(3), appellees were entitled to an evidentiary hearing of some sort in the merger status order proceeding (as distinguished from the subsequent preferred stock proceeding) even though the Commission had discretion to dispense with a "public hearing." Section 5(2)(b), in its relevant portion, provides: "Whenever a transaction is proposed under subparagraph (a) . . . , the Commission shall notify the Governor of each State in which any part of the properties of the carriers involved in the proposed transaction is situated, and also such carriers and the applicant or applicants . . . and shall afford reasonable opportunity for interested parties to be heard. . . . [A] public hearing shall be held in all cases where carriers by railroad are involved unless the Commission determines that a public hearing is not necessary in the public interest. . . ." 54 Stat. 906, as amended, 63 Stat. 485-486, 49 U.S.C. §5(2)(b). Section 17(3) provides, in part, that "All hearings before the Commission, a division, individual Commissioner, or board shall be public upon the request of any party interested." 54 Stat. 914, 49 U.S.C. § 17(3). We need not determine the bounds of the Commission's power to dispense with, or limit, hearings under § 5(2)(b), for appellees' claim of a right to a hearing in the merger status order proceeding must fail for another reason -- lack of the requisite interest of "interested parties." The reference in § 5 to "interested parties," like the reference in § 1(20) to "party in interest," must be interpreted in accordance with the rules relevant to standing to become parties in proceedings under the Interstate Commerce Act. A hearing under that Act is not like a legislative hearing, and "interest" is not equivalent to "concern." It may not always be easy to apply in particular cases the usual formulation of the general principle governing such standing -- e.g., "the complaint must show that plaintiff has, or represents others having, a legal right or interest that will be injuriously affected by the order." Moffat Tunnel League v. United States,,. In each case, the sufficiency of the "interest" in these situations must be determined with reference to the particular context in which the party seeks to assert its position. Appellees assert three grounds of interest in the merger status order proceeding: that they were common stockholders of Alleghany, that the assertion of jurisdiction by the Interstate Commerce Commission would deprive them of the benefits of the Investment Company Act, 54 Stat. 789, 15 U.S.C. § 80a-1 et seq., and that the proposed preferred stock issue was unfair. The fact that appellees were common stockholders of Alleghany is insufficient "interest." The proceeding before the Commission was to determine whether the Jeffersonville-Big Four merger was a transaction requiring Commission approval as an acquisition of control by "a person which is not a carrier and which has control of one or more carriers" of "another carrier through ownership of its stock or otherwise. . . ." 54 Stat. 905, 49 U.S.C. § 5(2)(a)(i). Unlike the subsequent preferred stock order whose threatened financial injury to appellees was sufficient to confer standing to bring the present proceedings, the merger agreement had no special effect on appellees or on common stockholders of Alleghany. See New York Central Securities Corp. v. United States,,. Nor did the proposed status order that Alleghany should be "considered as a carrier," and therefore regulated by the Interstate Commerce Commission, by itself, pose any individualized threat to the welfare of the appellees. Reliance on the alleged benefits of protection under the Investment Company Act subtly begs the question. Alleghany would be subject to regulation under the Investment Company Act only if the Interstate Commerce Commission lacked jurisdiction to regulate it under § 5 of the Interstate Commerce Act. The fact that there may be another Act that gives appellees greater protection as investors is immaterial to the appellees' right to a hearing in the merger status order proceeding. The question here is whether the proposed transaction falls within the Interstate Commerce Commission's jurisdiction, not what the consequences will be if it does not. No special threat to appellees arises from the mere assertion of Commission jurisdiction to regulate Alleghany. When subsequent Commission action in approving the Alleghany's new preferred stock issue did present a special threat to appellees, that provided the "interest" sufficient to attack the Commission's jurisdiction in the present proceeding. But this threat could not retroactively confer upon them the right to a hearing in the merger status order proceeding, in which they had no "interest." Appellees' claim that they were entitled to a hearing in the preferred stock proceeding is governed by § 20a(6) of the Act, which provides that "The Commission may hold hearings, if it sees fit, to enable it to determine its decision upon the application for authority." 41 Stat. 495, 49 U.S.C. § 20a(6). For all these reasons, the judgment of the District Court must be reversed, and the case remanded for consideration by the District Court of appellees' claim, not previously discussed, that the preferred stock issue as approved by the Commission was in violation of the Interstate Commerce Act. This disposition renders it needless to pass on appellees' motion to dismiss in No. 82. Reversed and remanded.

In a suit by appellees, who are minority common stockholders of Alleghany Corporation (an investment company), a three-judge District Court set aside orders of the Interstate Commerce Commission granting Alleghany the status of a noncarrier to be "considered as a carrier" under §§ 5 (2) and 5 (3) of the Interstate Commerce Act and approving Alleghany's issuance of new preferred stock convertible into common stock. It also enjoined Alleghany from issuing the new preferred stock. The Commission's orders were based on its holding that Alleghany, being in control of the New York Central Railroad, needed Commission approval under § 5(2) to merge one subsidiary of the New York Central into another. Held: 1. As common stockholders whose equity might be "diluted" by the issuance of the new preferred stock, appellees had sufficient financial interest to give them standing to sue to set aside the Commission's orders. . 2. Since the Commission's order conferring on Alleghany the status of a noncarrier to be "considered as a carrier" gave the Commission jurisdiction to approve the preferred stock issue, appellees could attack that order. P.. 3. The Commission had jurisdiction over Alleghany under §§ 5 (2) and 5(3). . (a) It is unnecessary to decide whether Commission approval of acquisition of control of a single integrated railroad system is required; if Alleghany in fact controlled Central, that was sufficient to meet the statutory requirement of "a person which is not a carrier and which has control of one or more carriers." . (b) The Commission's findings amply support its conclusion that "control" of Central was in Alleghany. . (c) The Commission was justified in finding that the merger of one of Central's subsidiaries into another involved an "acquisition of control" of a "carrier" by Central and Alleghany within the meaning of § 5(2). . (d) The failure to join two stockholders alleged to control Alleghany did not oust the Commission of jurisdiction. . 4. Appellees were not entitled to a hearing in the proceedings in which the Commission approved the merger of two of Central's subsidiaries and granted Alleghany he status of a noncarrier to be "considered as a carrier" under § 5(2), since they were not "interested parties" within the meaning of § 5(2)(b). . (a) The fact that appellees were common stockholders of Alleghany is insufficient "interest," since that proceeding had no special effect on appellees, and did not pose any individualized threat to their welfare. P.. (b) That assertion of jurisdiction by the Commission would deprive appellees of the benefits of the Investment Company Act of 1940 did not give them sufficient "interest" in that proceeding. . 5. Appellees' claim that they were entitled to a hearing in the preferred stock proceeding is governed by § 20a(6), which provides that "The Commission may hold hearings, if it sees fit, to enable it to determine its decision on application for authority." P.. 6. The judgment of the District Court is reversed, and the case is remanded for consideration by the District Court of appellees' claim that the preferred stock issue, as approved by the Commission, was in violation of the Interstate Commerce Act. P.. 138 F. Supp. 123 reversed and remanded.

1956_40

https://www.oyez.org/cases/1956/40

MR. JUSTICE DOUGLAS delivered the opinion of the Court. This is a companion case to Leedom v. International Union, ante, p.. International Fur and Leather Workers Union filed a charge with the National Labor Relations Board alleging that respondent Lannom Mfg. Co. had interfered with the rights of its employees guaranteed by the Act. This charge was filed in April, 1951. A complaint was issued based on the charges in February 1952. At the hearing, Lannom sought to prove that certain § 9(h) affidavits filed by officers of the union were false. The trial examiner ruled, in accordance with the Board's practice, that that issue could not be litigated in the proceeding. The trial examiner recommended that an appropriate remedial order issue to correct the unfair labor practice which he found to exist. The Board in general sustained the trial examiner, and issued a remedial order against Lannom, 103 N.L.R.B. 847. Prior to this order, the Board had been enjoined from taking administrative action requiring the union's officers to reaffirm their § 9(h) affidavits. Farmer v. United Electrical Workers, 93 U.S.App.D.C. 178, 211 F.2d 36. Accordingly the Board ruled, "We are administratively satisfied that the Union was in compliance with section 9(h) at all times relevant hereto." 103 N.L.R.B. at 847, n. 2. In August, 1953, an indictment was returned against Ben Gold, an officer of the union, charging that the § 9(h) affidavit which he filed with the Board on August 30, 1950, was false. In 1954, Gold was convicted for that offense. Thereafter, the Board ordered the union to show cause why its compliance status under the Act should not be altered unless Gold were removed from office. The union reelected Gold as its president. Shortly thereafter, the Board declared the union out of compliance with § 9(h). 108 N.L.R.B. 1190, 1191. The union then obtained from the District Court for the District of Columbia a preliminary injunction enjoining the Board from altering or restricting the union's compliance status by reason of Gold's conviction. The Court of Appeals affirmed. Farmer v. International Fur & Leather Workers Union, 95 U.S.App.D.C. 308, 221 F.2d 862. The Board sought a stay of the preliminary injunction pending decision by the Court of Appeals in the Farmer case. When the stay was denied, the Board petitioned the court below, pursuant to § 10(e) of the Act, for enforcement of the unfair labor practice order. Respondent Lannom Mfg. Co. moved for dismissal of the enforcement petition on the grounds of Gold's conviction for false filing under § 9(h). The union intervened and opposed the motion to dismiss. The court below granted the motion to dismiss, holding that, since the falsity of the affidavit had been proved, the requirements of § 9(h) had not been met and no benefits should be accorded the union. We granted certiorari. 351 U.S. 905. As noted, the complaint in the unfair labor practice proceeding was issued in February, 1952, more than twelve months after the affidavit of August 30, 1950. Section 9(h) provides that no investigation shall be made or complaint issued on behalf of a union unless there is on file with the Board a non-Communist affidavit of each officer "executed contemporaneously or within the preceding twelve-month period." There was no charge against Gold for filing a false affidavit in 1951. The Court of Appeals met that difficulty by presuming that a person who was a Communist in 1950 continued as such through 1951 and through the critical date of February, 1952, in absence of evidence showing a change in the factual situation. 226 F.2d 194, 198-199. The petitioner has also urged that Gold's conviction for filing a false affidavit could form no basis for holding the union in decompliance prior to the affirmance of Gold's conviction on appeal. At the time of the decision below, Gold's appeal was pending in the Court of Appeals for the District of Columbia. As noted, we have granted certiorari to review the affirmance of his conviction. For the reasons stated in Leedom v. International Union, ante, p., we conclude that the sole sanction for the filing of a false affidavit under § 9(h) is the criminal penalty imposed on the officer who files a false affidavit, not decompliance of the union nor the withholding of the benefits of the Act that are granted once the specified officers file their § 9(h) affidavits. Having so concluded, we find it unnecessary to reach the collateral phases of this controversy. Reversed.

The criminal penalty imposed by § 35A of the Criminal Code, 18 U.S.C. § 1001, is the exclusive remedy for the filing of a false non-Communist affidavit under § 9(h) of the National Labor Relations Act. Leedom v. International Union, ante, p.. . 226 F.2d 194 reversed.

1956_41

https://www.oyez.org/cases/1956/41

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court. Respondent operates three meat markets in the vicinity of Akron, Ohio. All of its sales are intrastate, but, of its purchases in one year totaling not quite $900,000, slightly more than $100,000 worth came from outside Ohio directly, and as much or more indirectly. Petitioner union, after an unsuccessful attempt to organize respondent's employees, asked respondent for recognition as their bargaining agent and for a union shop contract. When respondent refused to enter into such a contract, the union picketed respondent's stores and put some secondary pressure on its suppliers. Upon respondent's complaint, the Court of Common Pleas enjoined the union from picketing respondent, from trespassing upon respondent's premises, and from exerting secondary pressure on the suppliers. Petitioners objected throughout that the jurisdiction of the National Labor Relations Board was exclusive. On appeal, the Ohio Court of Appeals found that respondent's business was "purely of a local character," and interstate commerce, therefore, was not burdened or obstructed. The Court of Appeals held that the union's picketing was unlawful according to Ohio policy, and it continued in effect the injunction granted by the Court of Common Pleas.

Fairlawn operates three meat markets in the vicinity of Akron, Ohio. All of its sales are intrastate. Of its purchases, amounting to about $900,000 in one year, about $100,000 come from out of the State directly, and as much or more indirectly. After a labor union had attempted unsuccessfully to organize Fairlawn's employees and Fairlawn had refused to recognize the union as the bargaining agent for its employees, the union picketed Fairlawn's stores and put some secondary pressure on its suppliers. Upon Fairlawn's complaint, an Ohio state court enjoined the union from picketing Fairlawn, from trespassing on its premises, and from exerting secondary pressure on its suppliers. No effort was made to invoke the jurisdiction of the National Labor Relations Board, but it is assumed that the Board would have declined jurisdiction, and that it had not ceded jurisdiction under § 10(a) of the National Labor Relations Act. Held: the labor dispute was within the jurisdiction of the National Labor Relations Board, the state court was without jurisdiction over the labor dispute, and the judgment is vacated. . (a) Fairlawn's interstate purchases were not so negligible that its business cannot be said to affect interstate commerce within the meaning of § 2(7) of the National Labor Relations Act. P.. (b) Since the proviso to § 10 (a) of the National Labor Relations Act operates to exclude state labor boards from disputes within the jurisdiction of the National Labor Relations Board in the absence of a cession agreement, Guss v. Utah Labor Relations Board, ante, p., it must also exclude state courts. P. 353 U.S. 23. (c) Congress did not leave it to state labor agencies, to state courts, or to this Court to decide how consistent with federal policy state law must be. The power to make that decision in the first instance was given to the National Labor Relations Board, guided by the language of the proviso to § 10(a). Pp. 353 U.S. 23-24. (d) Since the unitary judgment of the Ohio court as based on the erroneous premise that it had power to reach the union's conduct in its entirety, it is impossible to know whether its conclusion on the mere act of trespass would have been the same outside of the context of the union's other conduct. . 164 Ohio St. 285, 130 N.E.2d 237, judgment vacated and cause remanded.

1956_240

https://www.oyez.org/cases/1956/240

PER CURIAM. We hold that the proofs justified with reason the jury's conclusion that employer negligence played a part in producing the petitioner's injury. Rogers v. Missouri Pacific R. Co.,; Webb v. Illinois Central R. Co.,; Ferguson v. Moore-McCormack Lines,; Shaw v. Atlantic Coast Line R. Co., 353 U.S. 920; Futrelle v. Atlantic Coast Line R. Co., 353 U.S. 920; Deen v. Gulf, Colorado & Santa Fe R. Co., 353 U.S. 925; Thomson v. Texas & Pacific R. Co., 353 U.S. 926. The jury's general verdict, that the respondent negligently contributed to the petitioner's injury, has support in the testimony of witnesses justifying the inference that the passageway, as used, was not a safe place for the petitioner to work while performing his assigned duties. The special issues claimed to be in conflict with this finding concerned alleged negligence only in the operation and presence of the truck on this passageway. But even if the rule announced by the Court of Civil Appeals controlled, as we see, it these answers present no square conflict. The findings on these special issues do not exhaust all of the possible grounds on which the prior "unsafe place to work" finding of the jury may have been based. Hence. all of the findings in the case might well be true insofar as the record indicates. The petitioner having asserted federal rights governed by federal law, it is our duty under the Act to make certain that they are fully protected, as the Congress intended them to be. We therefore cannot accept interpretations that nullify their effectiveness, for " . . . the assertion of Federal rights, when plainly and reasonably made, is not to be defeated under the name of local practice." Davis v. Wechsler,,. See Dice v. Akron, Canton & Y. R. Co.,; Brown v. Western R. Co.,. The judgment of the Court of Civil Appeals is reversed, and the case is remanded. Reversed and remanded.

In this action, brought in a Texas state court under the Federal Employers' Liability Act, the proofs justified with reason the jury's conclusion that employer negligence played a part in producing the petitioner's injury, and the judgment of the Texas Court of Civil Appeals reversing the trial court judgment for petitioner is reversed, and the case is remanded. . 283 S.W.2d 303, reversed and remanded.

1956_89

https://www.oyez.org/cases/1956/89

MR. JUSTICE BRENNAN delivered the opinion of the Court. In 1945, the Commissioner of Internal Revenue revoked his 1934 and 1938 rulings exempting the petitioner from federal income taxes, and retroactively applied the revocation to 1943 and 1944. The Commissioner also determined that prepaid membership dues received by the petitioner should be taken into income in the year received, rejecting the petitioner's method of reporting as income only that part of the dues as was recorded on petitioner's books as earned in the tax year. The Tax Court sustained the Commissioner's determinations, and the Court of Appeals for the Sixth Circuit affirmed. This Court granted certiorari. The Commissioner had determined in 1934 that the petitioner was a "club" entitled to exemption under provisions of the internal revenue laws corresponding to § 101(9) of the Internal Revenue Code of 1939, notifying the petitioner that ". . . future returns, under the provisions of section 101(9) . . . will not be required so long as there is no change in your organization, your purposes, or methods of doing business." In 1938, the Commissioner confirmed this ruling in a letter stating: ". . . as it appears that there has been no change in your form of organization or activities which would affect your status the previous ruling of the Bureau holding you to be exempt from filing returns of income is affirmed. . . ." Accordingly the petitioner did not pay federal taxes from 1933 to 1945. The Commissioner revoked these rulings in 1945, however, and directed the petitioner to file returns for 1943 and subsequent years. Pursuant to this direction, the petitioner filed, under protest, corporate income and excess profits tax returns for 1943, 1944, and 1945. The Commissioner's earlier rulings were grounded upon an erroneous interpretation of the term "club" in § 101(9), and thus were based upon a mistake of law. It is conceded that, in 1943 and 1944, petitioner was not, in fact or in law, a "club" entitled to exemption within the meaning of § 101(9), and also that petitioner is subject to taxation for 1945 and subsequent years. It is nevertheless contended that the Commissioner had no power to apply the revocation retroactively to 1943 and 1944, and that, in any event, the assessment of taxes against petitioner for 1943 and 1944 was barred by the statute of limitations. The petitioner argues that, in light of the 1934 and 1938 rulings, the Commissioner was equitably estopped from applying the revocation retroactively. This argument is without merit. The doctrine of equitable estoppel is not a bar to the correction by the Commissioner of a mistake of law. The decision in Stockstrom v. Commissioner, 88 U.S.App.D.C. 286, 190 F.2d 283, to the extent that it holds to the contrary, is disapproved. Petitioner's reliance on H.S.D. Co. v. Kavanagh, 191 F.2d 831, and Woodworth v. Kales, 26 F.2d 178, is misplaced, because those cases did not involve correction of an erroneous ruling of law. Reliance of Lesavoy Foundation v. Commissioner, 238 F.2d 589, is also misplaced, because there, the court recognized the power in the Commissioner to correct a mistake of law, but held that, in the circumstances of the case, the Commissioner had exceeded the bounds of the discretion vested in him under § 3791(b) of the 1939 Code. The Commissioner's action may not be disturbed unless, in the circumstances of this case, the Commissioner abused the discretion vested in him by § 3791(b) of the 1939 Code. That section provides: "RETROACTIVITY OF REGULATIONS OR RULINGS. -- The Secretary, or the Commissioner with the approval of the Secretary, may prescribe the extent, if any, to which any ruling, regulation, or Treasury Decision, relating to the internal revenue laws, shall be applied without retroactive effect." The petitioner contends that this section forbids the Commissioner's taking retroactive action. On the contrary, it is clear from the language of the section and its legislative history that Congress thereby confirmed the authority of the Commissioner to correct any ruling, regulation, or Treasury decision retroactively, but empowered him, in his discretion, to limit retroactive application to the extent necessary to avoid inequitable results. The petitioner, citing Helvering v. R. J. Reynolds Tobacco Co.,, argues that resort by the Commissioner to § 3791(b) was precluded in this case because the repeated reenactments of § 101(9) gave the force of law to the provision of the Treasury regulations relating to that section. These regulations provided that, when an organization had established its right to exemption, it need not thereafter make a return of income or any further showing with respect to its status unless it changed the character of its operations or the purpose for which it was originally created. Helvering v. R. J. Reynolds Tobacco Co. is inapplicable to this case. As stated by the Tax Court: "The regulations involved there [Helvering v. R. J. Reynolds Tobacco Co.] . . . purported to determine what did or did not constitute gain or loss. The regulations here . . . in nowise purported to determine whether any organization was or was not exempt. " These regulations did not provide the exemption or interpret § 101(9), but merely specified the necessary information required to be filed in order that the Commissioner might rule whether or not the taxpayer was entitled to exemption. This is thus not a case of " . . . administrative construction embodied in the regulation[s] . . . " which, by repeated reenactment of § 101(9), " . . . Congress must be taken to have approved . . . , and thereby to have given . . . the force of law." Helvering v. R. J. Reynolds Tobacco Co., 306 U.S. at. We must, then, determine whether the retroactive action of the Commissioner was an abuse of discretion in the circumstances of this case. The action was the consequence of the reconsideration by the Commissioner, in 1943, of the correctness of the prior rulings exempting automobile clubs, initiated by a General Counsel Memorandum interpreting § 101(9) to be inapplicable to such organizations. The Commissioner adopted the General Counsel's interpretation and proceeded to apply it, effective from 1943, indiscriminately to automobile clubs. We thus find no basis for disagreeing with the conclusion, reached by both the Tax Court and the Court of Appeals, that the Commissioner, having dealt with petitioner upon the same basis as other automobile clubs, did not abuse his discretion. Nor did the two-year delay in proceeding with the petitioner's case, in these circumstances, vitiate the Commissioner's action. The petitioner's contention that the statute of limitations barred the assessment of deficiencies for 1943 and 1944 is also without merit. Its returns for those years were not filed until October 22, 1945. Within three years, on August 25, 1948, the petitioner and the Commissioner signed consents extending the period to June 30, 1949. The period was later extended to June 20, 1950. Notice of deficiencies was mailed to petitioner on February 20, 1950. The assessments were therefore within time under §§ 275(a) and 276(b) unless, as the petitioner asserts, the statute of limitations began to run from the dates when, if there was a duty to file, the statute required filing. The petitioner argues that, because its omission to file on March 15, 1914, and March 15, 1945, was induced by the Commissioner's 1934 and 1938 rulings, it is only equitable to interpret the statute of limitations as running from those dates in the circumstances of this case. But the express condition prescribed by the Congress was that the statute was to run against the United States from the date of the actual filing of the return, and no action of the Commissioner can change or modify the conditions under which the United States consents to the running of the statute of limitations against it. In Lucas v. Pilliod Lumber Co.,,, this Court held: "Under the established general rule, a statute of limitation runs against the United States only when they assent and upon the conditions prescribed. Here, assent that the statute might begin to run was conditioned upon the presentation of a return duly sworn to. No officer had power to substitute something else for the thing specified. . . . " It is also argued that the Form 990 returns filed by the petitioner in compliance with § 54(f) of the 1939 Code, as amended, constituted the filing of returns for the purposes of § 275(a). But the Form 990 returns are merely information returns in furtherance of a congressional program to secure information useful in a determination whether legislation should be enacted to subject to taxation certain tax exempt corporations competing with taxable corporations. Those returns lack the data necessary for the computation and assessment of deficiencies, and are not, therefore, tax returns within the contemplation of § 275(a). Cf. Commissioner v. Lane-Wells Co.,. The final issue argued concerns the treatment of membership dues, and arises because such dues are paid in advance for one year. The dues, upon collection, are deposited in a general bank account, and are not segregated from general funds, but are available and are used for general corporate purposes. For bookkeeping purposes, however, the dues, upon receipt, are credited to an account carried as a liability account and designated "Unearned Membership Dues." During the first month of membership and each of the following eleven months, one-twelfth of the amount paid is credited to an account designated "Membership Income." This method of accounting was followed by petitioner from 1934. The income from such dues reported by petitioner in each of its tax returns for 1943 through 1947 was the amount credited in the year to the "Membership Income" account. The Commissioner determined that the petitioner received the prepaid dues under a claim of right, without restriction as to their disposition, and therefore the entire amount received in each year should be reported as income. The Commissioner relies upon North American Oil Consolidated v. Burnet,,, where this Court said: "If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, . . . [it] has received income which [it] is required to return. . . ." The petitioner does not deny that it has the unrestricted use of the dues income in the year of receipt, but contends that its accrual method of accounting clearly reflects its income, and that the Commissioner is therefore bound to accept its method of reporting membership dues. We do not agree. Section 41 of the Internal Revenue Code of 1939 required that "[t]he net income shall be computed . . . in accordance with such method of accounting regularly employed in keeping the books . . . , but . . . , if the method employed does not clearly reflect the income, the computation shall be made in accordance with such method as, in the opinion of the Commissioner, does clearly reflect the income. . . . " The pro rata allocation of the membership dues in monthly amounts is purely artificial, and bears no relation to the services which petitioner may in fact be called upon to render for the member. Section 41 vests the Commissioner with discretion to determine whether the petitioner's method of accounting clearly reflects income. We cannot say, in the circumstances here, that the discretionary action of the Commissioner, sustained by both the Tax Court and the Court of Appeals, exceeded permissible limits. See Brown v. Helvering,,. Affirmed.

The Commissioner of Internal Revenue, by rulings in 1934 and 1938, exempted petitioner automobile club from income taxes as a "club" within the meaning of provisions corresponding to § 101(9) of the Internal Revenue Code of 1939. In 1945, the Commissioner revoked his 1934 and 1938 rulings, which were based upon a mistake of law, and directed petitioner to file returns for 1943 and subsequent years. The Commissioner also determined that prepaid membership dues received by petitioner should be treated as income in the year received. The Tax Court sustained the Commissioner's determinations, and the Court of Appeals affirmed. Held: the judgment is affirmed. . 1. The Commissioner had power to apply the revocation retroactively to 1943 and 1944. . (a) The doctrine of equitable estoppel does not bar correction by the Commissioner of a mistake of law. P.. 2. In the circumstances of this case, the Commissioner did not abuse the discretion vested in him by § 3791(b) of the 1939 Code. . (a) It is clear from the language and legislative history of § 3791(b) that it confirmed the authority of the Commissioner to correct any ruling, regulation or Treasury decision retroactively, and empowered him, in his discretion, to limit retroactive application to the extent necessary to avoid inequitable results. P.. (b) Helvering v. Reynolds Co.,, distinguished. Pp. 184-185. (c) Having dealt with petitioner upon the same basis as other automobile clubs, the Commissioner did not abuse his discretion. . (d) The 2-year delay in proceeding with petitioner's case did not, in the circumstances, vitiate the Commissioner's action. P.. 3. In the circumstances of this case, assessment of tax deficiencies against petitioner for 1943 and 1944 was not barred by limitations under §§ 275(a) and 276(b) of the 1939 Code. . (a) The express condition prescribed by Congress was that the statute was to run against the United States from the date of the actual filing of the return, and no action of the Commissioner can change or modify the conditions under which the United States consents to the running of the statute of limitations against it. P.. (b) Form 990 returns are not tax returns within the contemplation of § 275(a) of the 1939 Code. . 4. The Commissioner's determination that the entire amount of prepaid dues received in each year by petitioner should be reported as income for that year (instead of being allocated over the following 12 months) did not exceed the permissible limits of the Commissioner's discretion under § 41 of the 1939 Code. . 230 F.2d 585, affirmed.

1956_370

https://www.oyez.org/cases/1956/370

MR. JUSTICE CLARK delivered the opinion of the Court. This is a suit for damages arising from an injury suffered by a section foreman of the petitioner while operating a motor track car that was towing a push truck on petitioner's tracks. It was brought under the Federal Employers' Liability Act. The sole question is whether such vehicles, when used in the manner here, are within the coverage of the Safety Appliance Acts. The petitioner contends that neither vehicle comes within the general coverage of the Acts, and, in the alternative, if the vehicles are included, that they are exempted as "four-wheel cars" under § 6 of the Acts. Both the trial court and the Court of Appeals have decided that the vehicles involved here are included within the coverage of the Safety Appliance Acts, and that neither falls within any exemption contained therein. The case reaches us on certiorari, 352 U.S. 889. We agree with the two-court interpretation of the Acts as applied to the facts here involved. The respondent was injured over five years ago. For 39 years, he had been a section foreman of track maintenance for petitioner. He and the crew over which he had supervision were responsible for the maintenance and repair of a section of track between Waring and Durwood, Maryland. They used in their work a gasoline motor-powered track car equipped with belt drive and a hand brake. The car could carry as many as 12 men and their tools. At various times, a push truck or hand car was coupled by a pin to the motor track car, and was towed by it to the scene of the work. The hand car weighed about 800 pounds unloaded, had a 5-ton carrying capacity, and had no brakes. Sometimes it carried a load of material, and other times only equipment and tools. Each of these cars was equipped with four wheels, and was capable of being removed from the rails by a crew of men. On the occasion in question, respondent and a crew of two men, pursuant to orders, had hauled about a ton of coal via the motor track car and hand car from Gaithersburg to the stationmaster at Washington Grove, a station near the scene of their roadbed work on that day. The coal was placed on the hand car, which was pulled along the tracks by the motor car. The two vehicles also carried tools, a wheelbarrow, and other equipment, as well as the respondent and his crew. After unloading the coal, they proceeded a short distance beyond the Washington Grove station to work on a section of the westbound track. There, they removed the vehicles from the track and worked that section of the rails until about 4 p.m. They then replaced the vehicles on the tracks, fastened them together, and began the return trip to the yards at Gaithersburg. On approaching the Washington Grove station at a speed of from 5 to 10 miles per hour, the vehicles struck a large dog and derailed, throwing the respondent into a ditch and causing his injuries. The uncontradicted evidence was that respondent applied the hand brake on the motor track car immediately upon seeing the dog, and the cars skidded on wet tracks about 39 feet before the impact. Respondent further testified that the motor track car alone, without the hand car attached, could have been stopped under the same conditions within six to eight feet. Respondent brought his action against the railroad claiming that (1) the petitioner was negligent in directing him to operate a motor track car and push truck without sufficient braking power, and in requiring him to pull the push truck over wet, slippery rails when the truck was not equipped with brakes, and (2) the injury was proximately caused by petitioner's noncompliance with the requirements of the Safety Appliance and Boiler Inspection Acts. The District Court ruled and instructed the jury that the provisions of the Safety Appliance Acts included within their coverage the vehicles in question. The issues in both causes of action were submitted to the jury, which returned with a verdict for respondent on "the issues aforesaid." The appeal in the Court of Appeals was directed only to the second cause of action concerning the applicability of the Safety Appliance Acts. That court affirmed, 98 U.S.App.D.C. 169, 233 F.2d 660, and, as has already been indicated, we are faced here only with the problem of the coverage of the Safety Appliance Acts. The power or train brake provisions of the Safety Appliance Acts apply to the motor track car and the coupling and brake requirements to the hand car when they are employed in the manner here involved. If used separately, though we do not pass on the question, it may well be that entirely different sections of the Acts might apply to each of the vehicles. But here, the hand car was not operated by hand, as was originally intended. On the contrary, it was fastened by a pin -- not a coupler -- to a motor track car, a self-propelled piece of equipment, and was hauled with its cargo to its destination on the tracks of petitioner. The hand car had no brakes, although the Acts specifically require "any car" to be equipped with a hand brake. It was being used for hauling purposes. Furthermore, the motor track car, instead of being used solely to carry men and tools to their place of work, was used to pull or tow another car -- albeit a hand car. It had no power or train brakes, but was equipped with a simple hand brake designed for its individual operation. The brake was wholly insufficient for the use to which the railroad put the vehicles. We believe that the controlling factor is the nature of the employment of the vehicles in the railroad's service, that is, the type of operation for which they are being used. Here, at the time of the injury, it is admitted that petitioner was putting the motor track car to locomotive uses in pulling a hand car used to haul material, tools, and equipment. In the light of the prime purpose of the Safety Appliance Acts, i.e., "the protection of employees and others by requiring the use of safe equipment," Lilly v. Grand Trunk Western R. Co.,, (1943), when the railroad uses this type of equipment in this manner -- regardless of the label it places on the vehicles -- the commands of the Acts must be obeyed. The operation as conducted, when the respondent was injured, with a motor track car equipped with neither power nor train brakes pulling an attached hand car with neither an automatic coupler nor hand brake, was in defiance of the requirements of the Acts. See 45 U.S.C. §§ 1-8. This is not to say that these vehicles, even when used as herein described, must be equipped with devices not adaptable to their safe operation. As was said in Southern R. Co. v. Crockett, (1914): "We deem the true intent and meaning to be that the provisions and requirements respecting train brakes, automatic couplers, grab irons, and the height of draw-bars shall be extended to all railroad vehicles . . . so far as the respective safety devices and standards are capable of being installed upon the respective vehicles." Id. at. It is said that there is no place on the vehicles in question here for a grab iron or a handhold, and that power brakes might well increase the hazards of their operation. This may be true, but, if these vehicles are to be used in a manner such as here, the Commission, through the promulgation of standards or regulations covering such equipment, should adapt the safety requirements of the Acts to the safe use of such vehicles, and thus protect employees and the public from the hazards of their operation. It is contended that, since the Commission has for over 60 years considered maintenance of way vehicles not subject to the Acts, this consistent administrative interpretation is persuasive evidence that the Congress never intended to include them within its coverage. It is true that long administrative practice is entitled to weight, Davis v. Manry,, (1925), but here, there has been no expressed administrative determination of the problem. We believe petitioner overspeaks in elevating negative action to positive administrative decision. In our view, the failure of the Commission to act is not a binding administrative interpretation that Congress did not intend these cars to come within the purview of the Acts. See Shields v. Atlantic Coast Line R. Co.,, (1956). The fact that the Commission has not sponsored legislation rather indicates that it thought the problem too insignificant for consideration. We think the Commission expresses this view in its amicus curiae brief when it says "the needs are for strict enforcement of sound operating rules and regulations, rather than for air brakes, automatic couplers, and the other devices specified in the Safety Appliance Acts." But this is a matter of policy for the Congress to decide, and it wrote into the Safety Appliance Acts that their coverage embraced "all trains, locomotives, tenders, cars, and similar vehicles." This plain language could not have been more all-inclusive. This Court has construed the language of the Act in its generic sense. In Johnson v. Southern Pacific Co., (1904), with reference to the meaning of the word "car," the Court said: "There is nothing to indicate that any particular kind of car was meant. Tested by context, subject matter, and object, 'any car' meant all kinds of cars running on the rails, including locomotives." Id. at. See also Spokane & Inland E. R. Co. v. Campbell, (1916). While there is a paucity of cases on the point, with none to the contrary of our holding here, as early as 1934, in Hoffman v. New York, N.H. & H. R. Co., 74 F.2d 227, the Court of Appeals for the Second Circuit held a hand car or push truck, identical with the one here involved, and a small gasoline tractor subject to the Acts. The hand car was attached to the gasoline tractor by means of a hook (though the engine had an automatic coupler on one end), and the petitioner was injured when the hook dislodged and he was pinned between the car and the locomotive. The court unanimously held that, if a hand car "is to be operated by a locomotive [which it held the gasoline tractor to be], rather than by hand, we are not inclined to depart from the literal terms of the statute and dispense with the requirement of an automatic coupler." Id., 74 F.2d at 232. Three years later, the requirement of the Acts as to power or train brakes was held applicable to other than standard equipment in United States v. Ft. Worth & D.C. R. Co., 21 F. Supp. 916. There, a trial court in the Northern District of Texas held that, where a locomotive crane was "used to haul cars . . . , it is being used for the purposes for which a locomotive is used and is a locomotive . . . , regardless of whatever else it might also be." Id. at 918. In 1955, the Supreme Court of Florida unanimously, held in Martin v. Johnston, 79 So. 2d 419, that the same type motor track car as is involved here came within the terms of the Acts. There, the motor track car was being used entirely separately and independently from any other vehicle. The Safety Acts require all cars to be equipped with "efficient hand brakes." The failure of the brakes was the cause of the injury. The court commented: "There being as much reason for requiring the motor car in question to be equipped with efficient handbrakes, to insure its safe operation when propelled under its own power, as there is for the requirement that such a car be equipped with automatic couplers, where it is to be used in connection with a train movement, we have the view that the Safety Appliance Acts are applicable and that we are not authorized to depart from the literal terms of the statute." Id., 79 So. 2d at 420. Nor do we find that § 6 of the Acts exempts these vehicles from the provisions of the Acts. Though it is true that the cars are of the four-wheel variety, they are used neither in coal trains nor as logging cars. As the Commission points out in its amicus curiae brief, the proviso of § 6 originally exempted "trains composed of four-wheel cars or . . . locomotives used in hauling such trains," and the legislative history shows that this provision was enacted specifically to exempt coal cars. 24 Cong.Rec. 1477. This language was incorporated in the phraseology of the present section, which admittedly, through error, was thought to apply to the exemption of trains composed of logging cars. See H.R. Rep. No. 727, 54th Cong., 1st Sess. The legislative history of the section reveals beyond doubt that it has no application here. In view of the history and purposes of the Safety Appliance Acts, and the literal language used by the Congress that they embraced "any car" and "any locomotive engine . . . hauling . . . any car," together with the practical necessity of affording safety appliances to thousands of railroad maintenance employees, as well as the public, we conclude that the motor track car and hand car, when used by the petitioner in the manner employed here, must be equipped in accordance with the requirements of the Safety Appliance Acts. Affirmed.

In this suit under the Federal Employers' Liability Act, a section foreman of a railroad was awarded damages for injuries sustained while operating a gasoline-powered motor track car pulling a hand car hauling material, tools, and equipment. Each car had only four wheels. The cars were fastened together by a pin, not a coupler. The motor track car had only hand brakes, and the hand car had no brakes. There was evidence that the accident resulted from want of adequate brakes for the use to which the cars were being put. The sole issue before this Court was whether such vehicles, when used in the manner here involved, are within the coverage of the Safety Appliance Acts. Held: 1. The motor track car and hand car, when used in the manner employed here, must be equipped in accordance with the requirements of the Safety Appliance Acts. . (a) When a railroad puts a motor track car to locomotive use in pulling a hand car used to haul material, tools and equipment, the commands of the Acts must be obeyed. . (b) That, for 60 years, the Interstate Commerce Commission had not required such cars to be equipped in accordance with the Acts is not a binding administrative interpretation that Congress did not intend these cars to come within the purview of the Acts when used in the manner here involved. . (c) Whether the Safety Appliance Acts should apply to such cars is a matter of policy for Congress to decide, and it made the Acts applicable all-inclusively to "all trains, locomotives, tenders, cars, and similar vehicles." . 2. Though they had only four wheels each, these cars were not exempted from the Acts by § 6, which exempts certain "trains composed of four-wheel cars." P.. 98 U.S.App.D.C. 169, 233 F.2d 660, affirmed.

1956_204

https://www.oyez.org/cases/1956/204

MR. JUSTICE CLARK delivered the opinion of the Court. While the petitioners in this diversity case present several questions, the sole one decided is whether the Labor Management Relations Act of 1947 applies to a controversy involving damages resulting from the picketing of a foreign ship operated entirely by foreign seamen under foreign articles while the vessel is temporarily in an American port. We decide that it does not, and therefore do not reach other questions raised by the parties. The S.S. Riviera, on September 3, 1952, sailed into harbor at Portland, Oregon, for repairs, to load a cargo of wheat, and to complete an insurance survey. It was owned by respondent, a Panamanian corporation, and sailed under a Liberian flag. The crew was made up entirely of nationals of countries other than the United States, principally German and British. They had agreed to serve on a voyage originating at Bremen, Germany, for a period of two years, or until the vessel returned to a European port. A British form of articles of agreement was opened at Bremen. The conditions prescribed by the British Maritime Board were incorporated into the agreement, including wages and hours of employment, all of which were specifically set out. The crew further agreed to obey all lawful commands of the Master of the Riviera in regard to the ship, the stores, and the cargo, whether on board, in boats, or on shore. On or about September 9, 1952, the members of the crew went on strike on board the vessel and refused to obey the orders of the Master. They demanded that their term of service be reduced, their wages be increased, and more favorable conditions of employment be granted. They refused to work, demanding their back pay and transportation or its cost to their ports of engagement. The Master told the crew to continue their work or they would be discharged. When they declined to work, he discharged them and ordered them to leave the ship, which they refused to do. This situation continued until September 26, 1952, when the striking crewmen left the vessel pursuant to an order of the United States District Court entered in a possessory libel filed by the respondent. The crew had picketed the vessel from September 9, 1952, when the strike began, until September 26, when they left the ship. On September 15, 1952, they had designated the Sailors' Union of the Pacific as their collective bargaining representative. The striking crew or others acting for them continued the picketing from September 26, 1952, until they withdrew the picket line on October 13, 1952. The Sailors' Union of the Pacific began picketing the Riviera on October 14 and continued to do so until restrained by an injunction issued in an action for injunctive relief and damages filed against it and its principal representatives by the respondent. Two days later, Local 90 of the National Organization of Masters, Mates, and Pilots of America set up a picket line at the Riviera which was maintained until December 8, 1952. This picketing was stopped by a writ issued against that union and its representatives in the second action for injunction and damages filed by respondent and consolidated here. On December 10, 1952, another picket line was established at the vessel. It was maintained this time by the Atlantic and Gulf Coast District, S.I.U., until it too was enjoined on December 12 in a third action filed by the respondent in which the prayer likewise was for an injunction and damages. These three cases have been consolidated for consideration here. All of the picketing was peaceful. The ship sailed in December, 1952. In June, 1953, the injunction orders were vacated on appeal to the Court of Appeals and were ordered dismissed as moot. The cases were returned to the District Court for trial on the damage claims. 205 F.2d 944. The ship had not returned to an American port at the time of trial in 1954. At the trial, the court found that the purpose of the picketing "was to compel the [respondent] to reemploy" the striking members of the crew for a shorter term and at more favorable wage rates and conditions than those agreed upon in the articles. The court further found that as a result of the picketing the employees of the firms repairing and loading the vessel refused to cross the picket line and the ship was forced to stand idly by without repairs or cargo, all to the damage of respondent. The unions and their representatives contended that the trial court was without jurisdiction because the Labor Management Relations Act had preempted the field. However, the trial court entered judgment for damages against the three unions as well as their principal representatives. The judgments were based on a common law theory that the picketing was for an unlawful purpose under Oregon law. The court found that respondent had no remedy under the Labor Management Relations Act because that Act "is concerned solely with the labor relations of American workers between American concerns and their employees in the United States, and it is not intended to, nor does it cover a dispute between a foreign ship and its foreign crew." The Court of Appeals thought that United Construction Workers v. Laburnum Construction Corp., (1954), governed, but that Oregon law did not permit recovery against the unions, since they were unincorporated associations. 233 F.2d 62. This, in effect, left the judgments standing against the individual representatives of the unions, the petitioners here. We granted certiorari in order to settle the important question of jurisdiction 352 U.S. 889. It should be noted at the outset that the dispute from which these actions sprang arose on a foreign vessel. It was between a foreign employer and a foreign crew operating under an agreement made abroad under the laws of another nation. The only American connection was that the controversy erupted while the ship was transiently in a United States port and American labor unions participated in its picketing. It is beyond question that a ship voluntarily entering the territorial limits of another country subjects itself to the laws and jurisdiction of that country. Wildenhus' Case, (1887). The exercise of that jurisdiction is not mandatory, but discretionary. Often, because of public policy or for other reasons, the local sovereign may exert only limited jurisdiction and sometimes none at all. Cunard S.S. Co. v. Mellon, (1923). It follows that if Congress had so chosen, it could have made the Act applicable to wage disputes arising on foreign vessels between nationals of other countries when the vessel comes within our territorial waters. The question here therefore narrows to one of intent of the Congress as to the coverage of the Act. The parties point to nothing in the Act itself or its legislative history that indicates in any way that the Congress intended to bring such disputes within the coverage of the Act. Indeed the District Court found to the contrary, specifically stating that the Act does not "cover a dispute between a foreign ship and its foreign crew." The Court of Appeals, though not passing on the question, noted that "[i]t may well be that American laws should not be construed to apply, without some more explicit Congressional indication than we are able to find in the National Labor Relations Act, as amended, to situations with as many points of foreign contact as the situation at bar." 233 F.2d at 65. Our study of the Act leaves us convinced that Congress did not fashion it to resolve labor disputes between nationals of other countries operating ships under foreign laws. The whole background ground of the Act is concerned with industrial strife between American employers and employees. In fact, no discussion in either House of Congress has been called to our attention from the thousands of pages of legislative history that indicates in the least that Congress intended the coverage of the Act to extend to circumstances such as those posed here. It appears not to have even occurred to those sponsoring the bill. The Report made to the House by its Committee on Education and Labor and presented by the coauthor of the bill, Chairman Hartley, stated that "the bill herewith reported has been formulated as a bill of rights both for American workingmen and for their employers." The report declares further that, because of the inadequacies of legislation, "the American workingman has been deprived of his dignity as an individual," and that it is the purpose of the bill to correct these inadequacies. (Emphasis added.) H.R.Rep. No. 245, 80th Cong., 1st Sess. 4. What was said inescapably describes the boundaries of the Act as including only the workingmen of our own country and its possessions. The problem presented is not a new one to the Congress. In the Seamen's Act of March 4, 1915, 38 Stat. 1164, the Congress declared it unlawful to pay a seaman wages in advance, and specifically declared the prohibition applicable to foreign vessels "while in waters of the United States." Id. at 1169, as amended, 46 U.S.C. § 599(e). In Sandberg v. McDonald, (1918), this Court construed the Act as not covering advancements "when the contract and payment were made in a foreign country where the law sanctioned such contract and payment. . . . Had Congress intended to make void such contracts and payments, a few words would have stated that intention, not leaving such an important regulation to be gathered from implication." Id. at. The Court added that "such sweeping and important requirement is not found specifically made in the statute." Ibid. See also Neilson v. Rhine Shipping Co., (1918). In 1920, Congress amended § 4 of the Seamen's Act of 1915, and granted to every seaman on a vessel of the United States the right to demand one-half of his then earned wages at every port the vessel entered during a voyage. 41 Stat. 1006, 46 U.S.C. § 597. The section was made applicable to "seamen on foreign vessels while in harbors of the United States, and the courts of the United States shall be open to such seamen for its enforcement." This Court, in Strathearn Steamship Co. v. Dillon, (1920), upheld the applicability of the section to a British seaman on a British vessel under British articles. The Court pointed out: "taking the provisions of the act as the same are written, we think it plain that it manifests the purpose of Congress to place American and foreign seamen on an equality of right in so far as the privileges of this section are concerned, with equal opportunity to resort to the courts of the United States for the enforcement of the act. Before the amendment . . . , the right to recover one-half the wages could not be enforced in face of a contractual obligation to the contrary. Congress, for reasons which it deemed sufficient, amended the act so as to permit the recovery upon the conditions named in the statute." Id. at. In 1928, Jackson v. S.S. Archimedes,, was decided by this Court. It involved advance payments made by a British vessel to foreign seamen before leaving Manchester on her voyage to New York and return. It was contended that the advances made in Manchester were illegal and void. That there was "no intention to extend the provisions of the statute," the Court said, "to advance payments made by foreign vessels while in foreign ports is plain. This Court had pointed out in the Sandberg case, supra, that such a sweeping provision was not specifically made in the statute. . . ." Id. at. Soon thereafter, several proposals were made in Congress designed to extend the coverage of the Seamen's Act so as to prohibit advancements made by foreign vessels in foreign ports. A storm of diplomatic protest resulted. Great Britain, Italy, Sweden, Norway, Denmark, the Netherlands, Germany, and Canada all joined in vigorously denouncing the proposals. In each instance, the bills died in Congress. And so, here, such a "sweeping provision" as to foreign applicability was not specified in the Act. The seamen agreed in Germany to work on the foreign ship under British articles. We cannot read into the Labor Management Relations Act an intent to change the contractual provisions made by these parties. For us to run interference in such a delicate field of international relations, there must be present the affirmative intention of the Congress clearly expressed. It alone has the facilities necessary to make fairly such an important policy decision where the possibilities of international discord are so evident and retaliative action so certain. We, therefore, conclude that any such appeal should be directed to the Congress, rather than the courts. Affirmed.

The Labor Management Relations Act of 1947 does not apply to a controversy involving damages resulting from the picketing of a foreign ship operated entirely by foreign seamen under foreign articles while the vessel is temporarily in an American port, though American unions to which the foreign seamen did not belong participated in the picketing, and the Act therefore does not preclude a remedy under state law for such damages. . (a) Congress could have made the Labor Management Relations Act applicable to wage disputes arising on foreign vessels between nationals of other countries when the vessel comes within territorial waters of the United States, but Congress did not do so. . (b) The cases of Sailors' Union of the Pacific, 92 N.L.R.B. 547, and Norris Grain Co. v. Seafarers' International Union, 232 Minn. 91, 46 N.W.2d 94, are inapposite to the question for decision here. P., n. 5. (c) An intent on the part of Congress to change the contractual agreement made by the foreign shipowner and the foreign seamen in this case cannot be read into the Labor Management Relations Act. . 233 F.2d 62 affirmed.

1956_69

https://www.oyez.org/cases/1956/69

MR. JUSTICE CLARK delivered the opinion of the Court. Petitioner, while driving a pickup truck on the highways of New Mexico, was involved in a collision with a passenger car. Three occupants of the car were killed, and petitioner was seriously injured. A pint whiskey bottle, almost empty, was found in the glove compartment of the pickup truck. Petitioner was taken to a hospital, and, while he was lying unconscious in the emergency room, the smell of liquor was detected on his breath. A state patrolman requested that a sample of petitioner's blood be taken. An attending physician, while petitioner was unconscious, withdrew a sample of about 20 cubic centimeters of blood by use of a hypodermic needle. This sample was delivered to the patrolman and subsequent laboratory analysis showed this blood to contain about .17% alcohol. Petitioner was thereafter charged with involuntary manslaughter. Testimony regarding the blood test and its result was admitted into evidence at trial over petitioner's objection. This included testimony of an expert that a person with .17% alcohol in his blood was under the influence of intoxicating liquor. Petitioner was convicted and sentenced for involuntary manslaughter. He did not appeal the conviction. Subsequently, however, he sought release from his imprisonment by a petition for a writ of habeas corpus to the Supreme Court of New Mexico. That court, after argument, denied the writ. 58 N.M. 385, 271 P.2d 827. Petitioner contends that his conviction, based on the result of the involuntary blood test, deprived him of his liberty without that due process of law guaranteed him by the Fourteenth Amendment to the Constitution. We granted certiorari, 351 U.S. 906, to determine whether the requirements of the Due Process Clause, as it concerns state criminal proceedings, necessitate the invalidation of the conviction. It has been clear since Weeks v. United States, (1914), that evidence obtained in violation of rights protected by the Fourth Amendment to the Federal Constitution must be excluded in federal criminal prosecutions. There is argument on behalf of petitioner that the evidence used here, the result of the blood test, was obtained in violation of the Due Process Clause of the Fourteenth Amendment in that the taking was the result of an unreasonable search and seizure violative of the Fourth Amendment. Likewise, he argues that, by way of the Fourteenth Amendment, there has been a violation of the Fifth Amendment in that introduction of the test result compelled him to be a witness against himself. Petitioner relies on the proposition that "the generative principles" of the Bill of Rights should extend the protections of the Fourth and Fifth Amendments to his case through the Due Process Clause of the Fourteenth Amendment. But Wolf v. Colorado, (1949), answers this contention in the negative. See also Twining v. New Jersey, (1908); Palko v. Connecticut, (1937); Irvine v. California, (1954). New Mexico has rejected, as it may, the exclusionary rule set forth in Weeks, supra. State v. Dillon, 34 N.M. 366, 281 P. 474 (1929). Therefore, the rights petitioner claims afford no aid to him here for the fruits of the violations, if any, are admissible in the State's prosecution. Petitioner's remaining and primary assault on his conviction is not so easily unhorsed. He urges that the conduct of the state officers here offends that "sense of justice" of which we spoke in Rochin v. California, (1952). In that case, state officers broke into the home of the accused and observed him place something in his mouth. The officers forced open his mouth after considerable struggle in an unsuccessful attempt to retrieve whatever was put there. A stomach pump was later forcibly used, and among the matter extracted from his stomach were found narcotic pills. As we said there, "this course of proceeding by agents of government to obtain evidence is bound to offend even hardened sensibilities." Id. at. We set aside the conviction because such conduct "shocked the conscience," and was so "brutal" and "offensive" that it did not comport with traditional ideas of fair play and decency. We therefore found that the conduct was offensive to due process. But we see nothing comparable here to the facts in Rochin. Basically the distinction rests on the fact that there is nothing "brutal" or "offensive" in the taking of a sample of blood when done, an in this case, under the protective eye of a physician. To be sure, the driver here was unconscious when the blood was taken, but the absence of conscious consent, without more, does not necessarily render the taking a violation of a constitutional right; and certainly the test as administered here would not be considered offensive by even the most delicate. Furthermore, due process is not measured by the yardstick of personal reaction or the sphygmogram of the most sensitive person, but by that whole community sense of "decency and fairness" that has been woven by common experience into the fabric of acceptable conduct. It is on this bedrock that this Court has established the concept of due process. The blood test procedure has become routine in our everyday life. It is a ritual for those going into the military service, as well as those applying for marriage licenses. Many colleges require such tests before permitting entrance and literally millions of us have voluntarily gone through the same, though a longer, routine in becoming blood donors. Likewise, we note that a majority of our States have either enacted statutes in some form authorizing tests of this nature or permit findings so obtained to be admitted in evidence. We therefore conclude that a blood test taken by a skilled technician is not such "conduct that shocks the conscience," Rochin, supra, at, nor such a method of obtaining evidence that it offends a "sense of justice," Brown v. Mississippi,, (1936). This is not to say that the indiscriminate taking of blood under different conditions or by those not competent to do so may not amount to such "brutality" as would come under the Rochin rule. The chief law enforcement officer of New Mexico, while at the Bar of this Court, assured us that every proper medical precaution is afforded an accused from whom blood is taken. The test upheld here is not attacked on the ground of any basis deficiency or of injudicious application, but admittedly is a scientifically accurate method of detecting alcoholic content in the blood, thus furnishing an exact measure upon which to base a decision as to intoxication. Modern community living requires modern scientific methods of crime detection lest the public go unprotected. The increasing slaughter on our highways, most of which should be avoidable, now reaches the astounding figures only heard of on the battlefield. The States, through safety measures, modern scientific methods, and strict enforcement of traffic laws are using all reasonable means to make automobile driving less dangerous. As against the right of an individual that his person be held inviolable, even against so slight an intrusion as is involved in applying a blood test of the kind to which millions of Americans submit as a matter of course nearly every day, must be set the interests of society in the scientific determination of intoxication, one of the great causes of the mortal hazards of the road. And the more so since the test likewise may establish innocence, thus affording protection against the treachery of judgment based on one or more of the senses. Furthermore, since our criminal law is to no small extent justified by the assumption of deterrence, the individual's right to immunity from such invasion of the body as is involved in a properly safeguarded blood test is far outweighed by the value of its deterrent effect due to public realization that the issue of driving while under the influence of alcohol can often by this method be taken out of the confusion of conflicting contentions. For these reasons, the judgment is Affirmed. Petitioner sought and was denied a writ of habeas corpus from the District Court for Santa Fe County, New Mexico, on March 7, 1952. It might be a fair assumption that a driver on the highways in obedience to a policy of the State, would consent to have a blood test made as a part of a sensible and civilized system protecting himself as well as other citizens not only from the hazards of the road due to drunken driving, but also from some use of dubious lay testimony. In fact, the State of Kansas has, by statute, declared that any person who operates a motor vehicle on the public highways of that State shall be deemed to have given his consent to submit to a chemical test of his breath, blood, urine, or saliva for the purpose of determining the alcoholic content of his blood. If, after arrest for operation of a motor vehicle while under the influence of intoxicating liquor, the arresting officer has reasonable grounds for the arrest, and the driver refuses to submit to the test, the arresting officer must report this fact to the proper official, who shall suspend the operator's permit. Kan.Gen.Stat.1949, Supp.1955, § 8-1001 through § 8-1007. Forty-seven States use chemical tests, including blood tests, to aid in the determination of intoxication in cases involving charges of driving while under the influence of alcohol. Twenty-three of these States sanction the use of the tests by statute. These, for the most part, are patterned after § 11-902 of the Uniform Vehicle Code prepared by the National Committee on Uniform Traffic Laws and Ordinances. This section makes it unlawful to operate a motor vehicle while under the influence of intoxicating liquor. The finding of the presence of a certain percentage of alcohol, by weight, in the blood of a person gives rise to a presumption that he was under the influence of intoxicating liquor. The twenty-three state statutory provisions include: Ariz.Rev.Stat.Ann. § 28-692; Del.Code Ann., Tit. 11, § 3507; Ga.Code Ann.1937 (Cum.Supp.1955), § 68-1625; Idaho Code, 1948 (Cum.Supp.1955), § 49-520.2; Burns' Ind.Stat.Ann., 1952 (Cum.Supp.1955), § 47-2003; Kan.Gen.Stat.1949 (Supp.1955), § 8-1001 through § 8-1007; Ky.Rev.Stat.Ann.1955, § 189.520; Me.Rev.Stat.1954, c. 22, § 150; Minn.Stat.Ann. § 169.12; Neb.Rev.Stat.1943, Reissue of 1952, § 39-727.01; N.H.Rev.Stat.Ann.1955, § 262:20; N.J.Stat.Ann. § 39:4-50.1; McKinney's N.Y.Laws, Veh. and Traffic Law, § 70(5); N.D.Laws 1953, c. 247; Or.Rev.Stat.1955, § 483.630; S.C.Code, 1952, § 46-344; S.D.Code, 1939, Supp.1952, § 44.0302-1; Tenn.Code Ann.1955, § 59-1032 to § 59-1033; Utah Code Ann.1953, § 41-6-44; Va.Code, 1950, Supp.1956, § 18-75.1 to § 18-75.3; Wash.Rev.Code, 1951, § 46.56.010; Wis.Laws 1955, c. 510; Wyo.Comp.Stat.1945, Cum.Supp.1955, § 60-414. Other States have accepted the use of chemical tests for intoxication without statutory authority, but with court approval. See, e.g., People v. Haeussler, 41 Cal. 2d 252, 260 P.2d 8 (1953) (blood); Block v. People, 125 Colo. 36, 240 P.2d 512 (1951) (blood); Touchton v. State, 154 Fla. 547, 18 So. 2d 752 (1944) (blood); People v. Bobczyk, 343 Ill.App. 504, 99 N.E.2d 567 (1951) (breath); State v. Haner, 231 Iowa 348, 1 N.W.2d 91 (1941) (blood); Breithaupt v. Abram, 58 N.M. 385, 271 P.2d 827 (1954) (blood); Bowden v. State, 95 Okl.Cr. 382, 246 P.2d 427 (1952) (blood and urine); McKay v. State, 155 Tex.Cr.R. 416, 235 S.W.2d 173 (1950) (breath). Still other States accept the practice of the use of chemical tests for intoxication, though there does not appear to have been litigation on the problem. See the summary in a report of the Committee on Tests for Intoxication of the National Safety Council, 1955 Uses of Chemical Tests for Intoxication. The fact that so many States make use of the tests negatives the suggestion that there is anything offensive about them. For additional discussion of the use of these blood tests, see Inbau, Self-Incrimination (1950) 72-86. Several States have considered the very problem here presented, but none has found that the conduct of the state authorities was so offensive as to necessitate reversal of convictions based in part on blood tests. People v. Duroncelay, 146 Cal. App. 2d 96, 303 P.2d 617 (1956); Block v. People, 125 Colo. 36, 240 P.2d 512 (1951); State v. Ayres, 70 Idaho 18, 211 P.2d 142 (1949) (test results were favorable to accused); State v. Cram, 176 Or. 577, 160 P.2d 283 (1945). See also State v. Sturtevant, 96 N.H. 99, 70 A.2d 909 (1950); cf. United States v. Williamson, 4 U.S.C.M.A. 320, 15 C.M.R. 320 (1954). But see State v. Weltha, 228 Iowa 519, 292 N.W. 148 (1940); State v. Kroening, 274 Wis. 266, 79 N.W.2d 810 (1956). But cf. United States v. Jordan, 7 U.S.C.M.A. 452, 22 C.M.R. 242 (1957). The withdrawal of blood for use in blood grouping tests in state criminal prosecutions is widespread. See, e.g., Davis v. State, 189 Md. 640, 57 A.2d 289 (1948); State v. Alexander, 7 N.J. 585, 83 A.2d 441 (1951); Commonwealth v. Statti, 166 Pa.Super. 577, 73 A.2d 688 (1950). Many States authorize blood tests in civil actions such as paternity proceedings. See, e.g., the discussion in Cortese v. Cortese, 10 N.J.Super. 152, 76 A.2d 717 (1950). Other States authorize such tests in bastardy proceedings. See, e.g., Jordan v. Davis, 143 Me. 185, 57 A.2d 209 (1948); State ex rel. Van Camp v. Welling, 6 Ohio Op. 371, 3 Ohio Supp. 333 (1936). For a general discussion of blood tests in paternity proceedings, see Schatkin, Disputed Paternity Proceedings (3d ed.1953) 193-282. In explanation, he advised that, by regulation, the state police are permitted to obtain blood for analysis only when the blood is withdrawn by a physician. He further advised that it is the customary administrative practice among municipalities to allow blood to be taken only by a doctor. In all cases, a competent technician is required to make the laboratory analysis incident to the test. We were assured that in no instance had a municipality or the state police permitted the test to be made without these precautions. National Safety Council, Accident Facts 1956, 43-71. Governors' Conference Committee, Report on Highway Safety (Nov. 1956); National Committee on Uniform Traffic Laws and Ordinances, Uniform Vehicle Code (Rev. 1956); White House Conference on Highway Safety, Organize Your Community for Traffic Safety (1954). MR. CHIEF JUSTICE WARREN, with whom MR. JUSTICE BLACK and MR. JUSTICE DOUGLAS join, dissenting. The judgment in this case should be reversed if Rochin v. California,, is to retain its vitality and stand as more than an instance of personal revulsion against particular police methods. I cannot agree with the Court when it says, "we see nothing comparable here to the facts in Rochin." It seems to me the essential elements of the cases are the same, and the same result should follow. There is much in the Court's opinion concerning the hazards on our nation's highways, the efforts of the States to enforce the traffic laws, and the necessity for the use of modern scientific methods in the detection of crime. Everybody can agree with these sentiments, and yet they do not help us particularly in determining whether this case can be distinguished from Rochin. That case grew out of police efforts to curb the narcotics traffic, in which there is surely a state interest of at least as great magnitude as the interest in highway law enforcement. Nor does the fact that many States sanction the use of blood test evidence differentiate the cases. At the time Rochin was decided, illegally obtained evidence was admissible in the vast majority of States. In both Rochin and this case, the officers had probable cause to suspect the defendant of the offense of which they sought evidence. In Rochin, the defendant was known as a narcotics law violator, was arrested under suspicious circumstances, and was seen by the officers to swallow narcotics. In neither case, of course, are we concerned with the defendant's guilt or innocence. The sole problem is whether the proceeding was tainted by a violation of the defendant's constitutional rights. In reaching its conclusion that, in this case, unlike Rochin, there is nothing "brutal" or "offensive," the Court has not kept separate the component parts of the problem. Essentially, there are two: the character of the invasion of the body and the expression of the victim's will; the latter may be manifested by physical resistance. Of course, one may consent to having his blood extracted or his stomach pumped, and thereby waive any due process objection. In that limited sense, the expression of the will is significant. But, where there is no affirmative consent, I cannot see that it should make any difference whether one states unequivocally that he objects or resorts to physical violence in protest or is in such condition that he is unable to protest. The Court, however, states that "the absence of conscious consent, without more, does not necessarily render the taking a violation of a constitutional right." This implies that a different result might follow if petitioner had been conscious and had voiced his objection. I reject the distinction. Since there clearly was no consent to the blood test, it is the nature of the invasion of the body that should be determinative of the due process question here presented. The Court's opinion suggests that an invasion is "brutal" or "offensive" only if the police use force to overcome a suspect's resistance. By its recital of the facts in Rochin -- the references to a "considerable struggle" and the fact that the stomach pump was "forcibly used" * -- the Court finds Rochin distinguishable from this case. I cannot accept an analysis that would make physical resistance by a prisoner a prerequisite to the existence of his constitutional rights. Apart from the irrelevant factor of physical resistance, the techniques used in this case and in Rochin are comparable. In each, the operation was performed by a doctor in a hospital. In each, there was an extraction of body fluids. Neither operation normally causes any lasting ill effects. The Court denominates a blood test as a scientific method for detecting crime, and cites the frequency of such tests in our everyday life. The stomach pump too is a common and accepted way of making tests and relieving distress. But it does not follow from the fact that a technique is a product of science or is in common, consensual use for other purposes that it can be used to extract evidence from a criminal defendant without his consent. Would the taking of spinal fluid from an unconscious person be condoned because such tests are commonly made and might be used as a scientific aid to law enforcement? Only personal reaction to the stomach pump and the blood test can distinguish them. To base the restriction which the Due Process Clause imposes on state criminal procedures upon such reactions is to build on shifting sands. We should, in my opinion, hold that due process means at least that law enforcement officers, in their efforts to obtain evidence from persons suspected of crime, must stop short of bruising the body, breaking skin, puncturing tissue, or extracting body fluids, whether they contemplate doing it by force or by stealth. Viewed according to this standard, the judgment should be reversed. *

Petitioner, while driving a pickup truck on a state highway, was involved in a collision which resulted in the deaths of three persons and his serious injury. While he was lying unconscious in the emergency room of a hospital, the smell of liquor was detected on his breath, and a state patrolman requested that a sample of his blood be taken. An attending physician, using a hypodermic needle, drew a blood sample which, on laboratory analysis, contained about .17% alcohol. Thereafter, petitioner was convicted in a state court voluntary manslaughter. At his trial, the evidence of the blood test, together with expert testimony that a person with .17% alcohol in his blood was under the influence of intoxicating liquor, was admitted over petitioner's objection. Held: petitioner was not deprived of due process of law in violation of the Fourteenth Amendment. . (a) In a prosecution in a state court for a state crime, the Fourteenth Amendment does not forbid the use of evidence obtained by an unreasonable search and seizure violative of the Fourth Amendment, nor of compelled testimony violative of the Fifth Amendment, even if the evidence in this case were so obtained. P.. (b) The taking of a blood test by a skilled technician is not "conduct that shocks the conscience," nor such a method of obtaining evidence as offends a "sense of justice." Rochin v. California,, and Brown v. Mississippi,, distinguished. . (c) The right of the individual to immunity from such invasion of the body as is involved in a properly safeguarded blood test is far outweighed by the value of its deterrent effect due to public realization that the issue of driving while under the influence of alcohol can often by this method be taken out of the confusion of conflicting contentions. . 58 N.M. 385, 271 P.2d 827, affirmed.

1956_247

https://www.oyez.org/cases/1956/247

MR. JUSTICE CLARK delivered the opinion of the Court. The British Transport Commission, owner of the overnight ferry Duke of York, questions the power of a District Court sitting in an admiralty limitation proceeding to permit the parties to cross-claim against each other for damages arising out of the same maritime collision. The United States, as owner of the U.S.N.S. Haiti Victory, had filed the original proceeding in which the Commission, along with others, filed claims. While the proceeding was pending, some of the claimants against the Haiti filed cross-claims against the Duke, and, in addition, the United States asserted a "set-off" and "cross-claim" against the Duke in answer to the latter's claim. The District Court dismissed all of the cross-claims on the ground that "a limitation proceeding does not provide a forum for the adjudication of liability of co-claimants to each other." The Court of Appeals reversed holding that, "[a]s a practical matter as well as an equitable one, the claimants herein should be allowed to implead the Commission." 230 F.2d 139, 144. Because the question is an important one of admiralty jurisdiction, we granted certiorari, limited to the limitation proceeding question. 352 U.S. 821. We agree with the Court of Appeals. On May 6, 1953, in the North Sea, the Naval Transport Haiti Victory, owned by the United States, rammed the overnight channel ferry, Duke of York, owned by petitioner. The bow of the Duke broke away from the vessel and sank as a result of a deep cut on her port side just forward of the bridge inflicted by the Haiti. While the Haiti suffered only minor damage, the Duke's loss was claimed to be $1,500,000. In addition, several of the 437 persons aboard the Duke were killed, many were injured, and many of them lost their baggage. The Haiti returned to the United States and, thereafter, this proceeding was filed under §§ 183-186 of the Limited Liability Act, R.S. §§4281-4289, as amended, 46 U.S.C. §§ 181-196, for exoneration from, or limitation of, liability for loss or damage resulting from the collision. The United States, as petitioner, further alleged that the collision was "caused by the fault and neglect of the S.S. Duke of York and the persons in charge of her . . . , and occurred without fault on the part of the petitioner. . . ." The Duke filed a claim in the proceeding for $1,500,000, and, in addition, an answer in which it claimed, inter alia, that the damages resulting from the collision were "not caused or contributed to by any fault or negligence on the part of this claimant . . . , but were done, occasioned or incurred with the privity or knowledge of and were caused by the Petitioner and its managing officers and supervising agents and the master of the Haiti Victory . . . which will be shown on the trial." The United States answered that the collision "was occasioned by either the sole fault of the Duke of York or the joint fault of both the Duke of York and the Haiti Victory"; it alleged damage to the Haiti in the sum of $65,000, and that, in addition, it "has also been subjected to claims by passengers and members of the crews of both vessels filed herein, which presently approximate $809,714 for personal injury and death, and $45,975 for property damage other than that claimed by the Duke of York, all of which damage it prays to set off and recoup against the claimant, British Transport Commission, as owner of the Duke of York. . . ." Various of the claimants against the Haiti, in the meanwhile, filed impleading petitions against the Duke alleging the collision was "caused or contributed to by the fault and negligence of the S.S. "Duke of York" . . . " setting out, as did the United States, the particular acts upon which the claim of negligence was based. The District Court dismissed all of these cross-claims, holding that the Act offers "a forum for the complete adjudication and recovery of all claims . . . against the petitioner only. . . . To permit one claimant to prosecute another claimant in the limitation litigation would be unfair. The latter has intervened under compulsion, the court enjoining his resort to any other tribunal. Therefore, his responsibility should not be enlarged beyond that incident to his claim. Obedience to the injunction should not expose him to an attack to which, in regular course, he would be subject only in the jurisdiction of his residence or other place of voluntary entrance." On a hearing "restricted to the issues of the asserted liabilities of the two vessels, Duke of York and Haiti Victory, for the collision," the court exonerated the Haiti from all liability, holding the Duke solely to blame for the collision. 131 F. Supp. 712. This finding was subsequently affirmed by the Court of Appeals, and is not before us. In reversing the dismissal of the cross-claims, the Court of Appeals reasoned that "Modern codes of procedure have reflected two facets: (1) all rights, if this can fairly be done, should be decided in a single legal proceeding; (2) parties who submit themselves to the jurisdiction of a court in a legal proceeding should be bound by that court's decision on all questions, appropriate to and seasonably raised in, that proceeding. Those ideas, we think, can reasonably be deduced from the spirit, if not the letter, of the 56th Admiralty Rule." 230 F.2d at 145. The excellent coverage this Court's cases have given the historical incidents forming the background that went into the adoption of the Limited Liability Act relieves us of any minute recitation of that history. See Norwich & N.Y. Transp. Co. v. Wright, 13 Wall. 104 (1872); Providence & N.Y. S.S. Co. v. Hill Mfg. Co., (1883); The Main v. Williams, (1894); Just v. Chambers, (1941). The history shows that, although the Act was patterned on earlier English statutes, its foundations sprang from the roots of the general maritime law of medieval Europe. "The real object of the act . . . was to limit the liability of vessel owners to their interest in the adventure," The Main v. Williams, supra, at, and thus "to encourage shipbuilding and to induce capitalists to invest money in this branch of industry," Norwich & N.Y. Transp. Co. v. Wright, supra, 13 Wall. at. The Congress, by the provisions of the Act, left the form and modes of procedure to the judiciary. Twenty years after passage of the Act, this Court adopted some general rules with respect to admiralty practice. See 13 Wall. xii and xiii. Rule 56 first came into the General Admiralty Rules as Rule 59. As will be noted, it was originally fashioned to accommodate cross-libels in marine collision cases, but acting upon the same inherent power to bring into the proceeding other parties whose presence would enable the court to do substantial justice in regard to the entire matter, the courts soon began to extend the practice by analogy to cases other than collision. See, e.g., The Alert, 40 F. 836 (1889); 3 Moore, Federal Practice (2d ed. 1948) 450-456. As it is expressed in 2 Benedict, Admiralty (6th ed. 1940) § 349 at 534, "the 'equity of the rule' was given wide extension, and the principle . . . was applied by analogy to require the appearance of any additional respondent who might be responsible for the claim or a part thereof." In the 1920 revision, the 59th Rule became the 56th General Admiralty Rule and, as amended by this Court, authorized either a claimant or respondent to bring in any other vessel or person "partly or wholly liable . . . by way of remedy over, contribution or otherwise, growing out of the same matter." 254 U.S. 707. The present-day limitation proceeding, therefore, springs from the 1851 Act and this Court's rules. Neither source indicates that admiralty limitation precluded other ordinary admiralty procedures. In fact, as Mr. Justice Bradley put it in The Scotland,, (1881), "we may say, once for all, that [the rules] were not intended to restrict parties claiming the benefit of the law, but to aid them. . . . The rules referred to were adopted for the purpose of formulating a proceeding that would give full protection to the ship owners in such a case. They were not intended to prevent them from availing themselves of any other remedy or process which the law itself might entitle them to adopt." Accord, Ex parte Slayton, (1882). It is the Commission's contention that Rule 56 is wholly inapplicable to the adjudication of a claim of one co-claimant against another in a limitation proceeding. The rule, it says, refers to libels and the use of the word "claimant" includes only the claimant of the vessel involved, and not to those making claims against the vessel. But we have seen that Rule 56 has long been held to encompass cross-claims between parties in libel actions. This Court has held that limitation of liability petitions may also be determined by appropriate pleading in libel actions. See The North Star, (1882), and the discussion infra. It may therefore be said that a limitation proceeding not only provides concourse, but serves the function of a cross-libel to determine the rights between petitioner and claimants as well, and equitable rights between the limitation petitioner and a claimant have long been recognized as encompassed in Rule 50. Moore-McCormack Lines, Inc. v. McMahon, 235 F.2d 142 (1956). It appears, then, that, had this proceeding started out as a libel, the Commission admittedly would have no complaint. And, as we have pointed out, the Rules were not promulgated as technicalities restricting the parties as well as the admiralty court in the adjudication of relevant issues before it. There should therefore be no requirement that the facts of a case be tailored to fit the exact language of a rule. The initial petition filed in the limitation proceeding alleged that the Duke was wholly or partly at fault, and asked for a "set-off" or "cross-claim" against it; the Commission entered the case not only to prove its claim, but to contest this allegation of negligence against the Duke. The claimants are all present in the litigation. The United States has now filed a cross-claim or cross-libel against the Commission, it already being a party to the suit and before the court. The question is not what "tag" we put on the proceeding, or whether it is a "suit" under Rule 56 or a libel in personam, or whether the pleading is of an offensive or defensive nature, but rather whether the Court has jurisdiction of the subject matter and of the parties. It is sufficient to say, as did Chief Justice Taft for a unanimous Court in Hartford Accident & Indemnity Co. of Hartford v. Southern Pacific Co., (1927), "that all the ease with which rights can be adjusted in equity is intended to be given to the [limitation] proceeding. It is the administration of equity in an admiralty court. . . . It looks to a complete and just disposition of a many-cornered controversy. . . ." Id. at. See also the opinion of Chief Justice Hughes for a unanimous Court in Just v. Chambers,, (1941). We do not believe that the analogy to equity is shadowy. The claimants in this proceeding have just claims arising out of the collision of the Haiti and the Duke. They have as much interest in the potential liability resulting from that marine disaster as has the equity receiver in perfecting the res of the estate. The scope of the proceeding is not limited to a determination of the petitioner's fault, nor to its interest in the Haiti. In fact, here, the fault of the disaster, a matter of legitimate interest to the claimants, has been adjudicated against the Commission, and it admits this judgment is res judicata in all courts. Why does it not follow that the claimants, scattered as they are in eight countries of the world but all present in this proceeding, should recover judgment for their damages? Why should each be required to file a secondary action in the courts of another country merely to prove the amount of his due when the same evidence is already before the admiralty court here? Logic and efficient judicial administration require that recovery against all parties at fault is as necessary to the claimants as is the fund which limited the liability of the initial petitioner. Otherwise, this proceeding is but a "water haul" for the claimants, a result completely out of character in admiralty practice. Furthermore, the Commission entered this proceeding voluntarily, without compulsion. It filed an answer asking that justice be done regarding the subject matter, the collision; it denied all fault on its part, and affirmatively sought to place all blame on the Haiti; it claimed damage in the sum of $1,500,000; and it contested the Haiti's claim of limitation or exoneration. In all of these respects, judgment went against the Commission -- it lost. Now having lost, it claims that the court has wholly lost jurisdiction, while, had it won, jurisdiction to enter judgment on all claims would have continued. It asserts that neither the Haiti, which was damaged to the extent of some $65,000, nor any of the other 115 claimants may prove their losses against it. But reason compels the conclusion that, if the court had power to administer justice in the event the Commission had won, it should have like power when it lost. Whether it is by analogy to Rule 56 or by virtue of Rule 44, or by admiralty's general rules heretofore promulgated by this Court, we hold it a necessary concomitant of jurisdiction in a factual situation such as this one that the Court have power to adjudicate all of the demands made and arising out of the same disaster. This too reflects the basic policy of the Federal Rules of Civil Procedure. Admiralty practice, which has served as the origin of much of our modern federal procedure, should not be tied to the mast of legal technicalities it has been the forerunner in eliminating from other federal practices. It is true that no case of this Court has passed on the question directly. However, examination of the practice of American admiralty courts indicates that cross-libel procedures have been resorted to between co-parties in a limitation concursus at least since The North Star, (1882). While initially that case was not a limitation proceeding, this Court held that both parties could have obtained a limitation of liability if entitled to it without the necessity of separate suits. In The Manitoba, (1887), both the libelant and the cross-libelant sought and received the benefit of liability limitation. Thereafter, in The City of Boston, 182 F. 171, 173 (1909), a District Court allowed the filing of cross-claims in the limitation proceeding there begun. It is of interest to note that, while there was no express rule at the time permitting such procedure, it was granted "following the analogy of admiralty rule 59 (now Rule 56)." It was thought that "the same claim for contribution which . . . might [be recovered] in an independent suit" could properly be adjudicated by a cross-claim although there was no "reported precedent for the allowance of such a claim in limited liability proceedings." In re Eastern Dredging Co., 182 F. 179, 183 (1909). In 1919, the Second Circuit decided The Adah, 258 F. 377, 381, in which Judge Hough declared that "Whether it was necessary, in absolving the Adah, to fix blame on some one else, is a question we need not decide." But where the parties enter the limitation proceeding, the court held, "It is enough that they did come in, and made parties of themselves. . . . Having become parties, they are bound by the decree entered in the suit wherein they are parties." Id., 258 F. at 381. And this was but the echo of Mr.Justice Bradley in The Scotland, supra, where he said, "when parties choose to resort to [a nation's] forum for redress," they cannot "complain of the determination of their rights by that law. . . ." 105 U.S. at. Later, in In re United States Steel Products Co., 24 F.2d 657, the Second Circuit squarely decided that cross-claims were properly considered in limitation proceedings. The United States' claim in limitation was "a right of suit in admiralty against the Steel Inventor," id., 24 F.2d at 659, the court said, which subjected it to cross-suit, citing United States v. The Thekla, (1924). See also The Steel Inventor, 43 F.2d 958 (1930). And as recently as Moore-McCormack Lines, Inc. v. McMahon, 235 F.2d 142, 143 (1956), the Second Circuit unanimously reaffirmed the principles of these cases. It reasoned that, since all of the claims arose out of the same incident, they should be determined in a single cause, thus effectuating an "economy of trial litigation" so much desired in judicial administration. Petitioner points to cases from the Second Circuit in which cross-claims were not permitted. But we find none apposite to this case, other than perhaps New Jersey Barging Corp. v. T. A. D. Jones & Co., 135 F. Supp. 97 (1955). That case held that the impleading of the claimant would convert a proceeding to limit the petitioners' liability to a proceeding by other claimants against the impleaded claimant. While it is sufficient to say that New Jersey Barging Corp. has subsequently, in effect, been overruled by the Second Circuit in Moore-McCormack Lines, Inc. v. McMahon, supra, we might add that it is easily distinguishable from the situation here. No answer was filed, and no effort was made toward an affirmative defense, the claimant only having forwarded his statement of asserted damage by mail. Nor do we think Algoma C. & H.B. R. Co. v. Great Lakes Transit Corp., 86 F.2d 708 (1936), affords petitioner comfort. There, Judge Learned Hand held that the railroad, in filing a limitation proceeding, had improperly laid venue. While there is some dicta in the opinion indicating that the petitioner in a limitation proceeding could recover nothing affirmatively, we agree with Judge Knox's interpretation of that case in his opinion in The Clio -- The Springhill, 1948 A.M.C. 75, 77. In Algoma, the original limitation petitioner had filed no counterclaim in its proceeding. Therefore, nothing could be recovered affirmatively. The case therefore does not stand for the proposition that it would not be permissible for a counterclaim to be filed. The view that the counterclaim would be permissible is supported by The Steel Inventor, supra, and In re United States Steel Products Co., supra, in both of which Judge Hand participated. Petitioner also depends heavily on Department of Highways of State of Louisiana v. Jahncke Service, Inc., 174 F.2d 894 (1949), an opinion of the Fifth Circuit. We believe it inapposite also. There, Jahncke's barges tore loose in a windstorm and damaged the Department of Highways' bridge. Jahncke petitioned for limitation and the Department, after filing its claim and answer, then attempted to implead the Town of Madisonville, the owner of some other barges which also had struck the bridge. Obviously there was no connection, other than the same wind and water, between Madisonville's barges which were independently moored and Jahncke's. Madisonville had filed no claim in Jahncke's limitation proceeding, the damages arising from a distinctly separate incident. Petitioner points to the many dire consequences that may flow from exposing claimants to cross-claims. While these predictions are entirely speculative, and not before us, we comment on those which petitioner believes to be the more serious. First, it says foreign claimants will be frightened away, and will not file claims in American limitation proceedings. This result is more, says petitioner, "than just robbing Peter to pay Paul." But, if petitioner prevailed, both Peter and Paul would be robbed. While it is true that no compulsion could be exerted on foreign claimants to file claims, and some would not do so, thus preventing the determination of fault from being res judicata as to them; and while an injunction against suits being filed in foreign jurisdictions would be ineffective unless comity required its recognition; and assuming all this would encourage the filing of foreign suits and the levying of attachments on any offending American vessel while in a foreign port, or, for that matter, against any vessel of the same American owner; still this would have little practical effect on the operation of our limitation law. Most foreign claimants are foreign shipowners whose vessels visit American ports and are subject to like action by claimants living here. Self-protection would balance things out. But even if it did not, of what good is a judgment as to fault, even if res judicata, if a claimant recovers nothing? The proceeding here would become entirely abortive. Petitioner's theory makes the claimants no more than pawns in a game between the offending shipowners in which all that the claimants win after the successful battle is the right to fight another day for their due and in another court. It appears to us, therefore, that fairness in litigation requires that those who seek affirmative recovery in a court should be subject therein to like exposure for the damage resulting from their acts connected with the identical incident. The claimants here ask no more. That no foreign country permits such impleading should not force litigants in United States courts to forego such procedures. Foreign limitation of liability procedures are, for the most part, different from ours, where not only fault, but claims, are determined as part and parcel of the limitation action itself. We conclude that, in the final analysis, the manifest advantages of this cross-claim procedure serve the best interests of all of the parties before a court of the United States who find themselves the unfortunate victims of maritime disaster. Other questions of procedural detail raised by the petitioner we leave to the trial courts. This has been the policy of this Court in the past in admiralty practice. Affirmed.

Under the Limited Liability Act, 46 U.S.C. §§ 181-196, the United States filed a proceeding in a Federal District Court for exoneration from, or limitation of liability for, loss or damage resulting from a collision in the North Sea between one of its ships and a ship owned by the British Transport Commission. The Commission and others filed claims in the proceeding. While the proceeding was pending, some of the claimants against the American ship filed cross-claims against the British ship, and the United States asserted a "set-off" and a "cross-claim" against the British ship in answer to the latter's claim. Held: the claimants against the British ship may implead the Commission to respond to any damages for losses suffered by them in the collision, and the court having jurisdiction of the limitation proceeding may proceed to settle all questions appropriate to, and seasonably raised in, that proceeding by parties thereto. . (a) Whether it be by analogy to Admiralty Rule 56, or by virtue of Admiralty Rule 44, or by admiralty's general rules heretofore promulgated by this Court, it is a necessary concomitant of jurisdiction in a factual situation such as this that the court have power to adjudicate all of the demands made and arising out of the same disaster. . (b) Fairness in litigation requires that those who seek affirmative recovery in a court should be subject therein to like exposure for the damage resulting from their acts connected with the identical incident. . (c) In the final analysis, the manifest advantages of this cross-claim procedure serve the best interests of all the parties before a court of the United States who find themselves the unfortunate victims of maritime disaster. P.. 230 F.2d 139, affirmed.

1956_313

https://www.oyez.org/cases/1956/313

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court. We are asked to interpret that provision of the Railway Labor Act which created the National Railroad Adjustment Board for the resolution of minor grievances in the event that the parties were unable to settle them by negotiation. The ultimate question is whether a railway labor organization can resort to a strike over matters pending before the Adjustment Board. The Chicago River and Indiana Railroad Company operates the switching and yard facilities at the Chicago stockyards. A segment of the employees of the River Road were represented by the Brotherhood of Railroad Trainmen. A collective bargaining agreement between the Brotherhood and the River Road was in existence throughout the period covered by this case. The present disagreement arises from an accumulation of twenty-one grievances of members of the Brotherhood against the carrier. Nineteen of these were claims for additional compensation, one was a claim for reinstatement to a higher position, and one was for reinstatement in the employ of the carrier. When negotiations failed, the Brotherhood called a strike. Because of the serious nature of the impending work stoppage, the National Mediation Board proffered its services. The mediator was unsuccessful, and upon his withdrawal, the River Road submitted the controversy to the Adjustment Board. The Brotherhood promptly issued a strike call for four days later. The River Road then sought relief from a District Court. Because of the threatened irreparable injury to the carrier, its employees and the 600 industries and 27 railroads served by it, the complaint prayed for a preliminary injunction, and ultimately a permanent injunction, against a strike by the Brotherhood over the grievances pending before the Adjustment Board. A temporary restraining order was issued, but that order was vacated and the complaint dismissed upon the finding by the district judge that the Norris-LaGuardia Act was applicable and that the court lacked jurisdiction to grant the relief requested. The Court of Appeals for the Seventh Circuit reversed. 229 F.2d 926. A permanent injunction was accordingly entered by the District Court and affirmed by the Seventh Circuit. We granted certiorari in order to resolve an important question concerning interpretation and application of the Railway Labor Act. 352 U.S. 865. The grievances for which redress is sought by the Brotherhood are admittedly "minor disputes" as that phrase is known in the parlance of the Railway Labor Act. These are controversies over the meaning of an existing collective bargaining agreement in a particular fact situation, generally involving only one employee. § 2, Sixth. They may be contrasted with "major disputes" which result when there is disagreement in the bargaining process for a new contract. § 2, Seventh. See Elgin, J. & E. R. Co. v. Burley,,. The first step toward settlement of either kind of dispute is negotiation and conference between the parties. Section 3, First (i), provides that -- "The disputes between an employee or group of employees and a carrier or carriers growing out of grievances or out of the interpretation or application of agreements concerning rates of pay, rules, or working conditions . . . shall be handled in the usual manner up to and including the chief operating officer of the carrier designated to handle such disputes. . . . " If the parties are unable to reach an agreement, the section continues -- ". . . but, failing to reach an adjustment in this manner, the disputes may be referred by petition of the parties or by either party to the appropriate division of the [National Railroad] Adjustment Board with a full statement of the facts and all supporting data bearing upon the disputes." Section 3, First(m) declares that -- "The awards of the several divisions of the Adjustment Board . . . shall be final and binding upon both parties to the dispute. . . ." This language is unequivocal. Congress has set up a tribunal to handle minor disputes which have not been resolved by the parties themselves. Awards of this Board are "final and binding upon both parties." And either side may submit the dispute to the Board. The Brotherhood suggests that we read the act to mean only that an Adjustment Board has been organized and that the parties are free to make use of its procedures of they wish to, but that there is no compulsion on either side to allow the Board to settle a dispute if an alternative remedy, such as resort to economic duress, seems more desirable. Such an interpretation would render meaningless those provisions in the Act which allow one side to submit a dispute to the Board, whose decision shall be find and binding on both sides. If the Brotherhood is correct, the Adjustment Board could act only if the union and the carrier were amenable to its doing so. The language of § 3, First, reads otherwise and should be literally applied in the absence of a clear showing of a contrary or qualified intention of Congress. Legislative history of the provisions creating the National Railroad Adjustment Board reinforces the literal interpretation of the Act. The present law is a composite of two major pieces of legislation. Most of the basic framework was adopted in 1926. In 1934, after eight years of experience, the statute was amended, and, in that amendment, the Adjustment Board was born. The distinction between "major disputes" and "minor disputes" was found in the 1926 statute. Above the level of negotiation and conference, each was to follow a separate procedure. Section 3, First, of that Act called upon carriers or groups of carriers and their employees to agree to the formation of boards of adjustment, composed equally of representatives of labor and management, to resolve the "minor disputes." If this step were unsuccessful, these disputes along with the "major disputes" became a function of the Board of Mediation, predecessor of the National Mediation Board. The obvious lack of any compulsion toward a settlement of disputes was a basic characteristic of the Act, and proved to be a major weakness in the procedures for handling "minor disputes." As stated in the Report of the House of Representatives Committee on Interstate and Foreign Commerce, after hearings on the 1934 amendment: "In many instances . . . , the carriers and the employees have been unable to reach agreements to establish such boards [of adjustment]." H.R.Rep. No. 1944, 73d Cong., 2d Sess. 3. This was not the only weakness, however. "Many thousands of these [minor] disputes have been considered by boards established under the Railway Labor Act, but the boards have been unable to reach a majority decision, and so the proceedings have been deadlocked." Ibid. This condition was in market contrast to the declared purpose of the 1926 Act ". . . to settle all disputes, whether arising out of the application of . . . agreements or otherwise, in order to avoid any interruption to commerce or to the operation of any carrier growing out of any dispute between the carrier and the employee thereof." § 2, First. The Report continued: "These unadjusted disputes have become so numerous that, on several occasions, the employees have resorted to the issuance of strike ballots and threatened to interrupt interstate commerce in order to secure an adjustment. This has made it necessary for the President of the United States to intervene and establish an emergency board to investigate the controversies. This condition should be corrected in the interest of industrial peace, and of uninterrupted transportation service." Ibid. The means chosen to correct this situation are the present provisions of § 3, First, concerning the National Railroad Adjustment Board. The Board was set up by Congress, making it unnecessary for the parties to agree to establish their own boards. In case of a deadlock on the Adjustment Board, which continued the policy of equal representation of labor and management, the appropriate division is allowed to select a neutral referee to sit with them and break the tie. If the division cannot agree even on a referee, the Act provides that one shall be appointed by the National Mediation Board. Thus was the machinery built for the disposition of minor grievances. The change was made with the full concurrence of the national railway labor organizations. Commissioner Joseph B. Eastman, Federal Coordinator of Transportation and principal draftsman of the 1934 bill, complimented the unions on conceding the right to strike over "minor disputes" in favor of the procedures of the Adjustment Board: "The willingness of the employees to agree to such a provision is, in my judgment, a very important concession, and one of which full advantage should be taken in the public interest. I regard it as perhaps the most important part of the bill. " Asked if the Act made it a matter of discretion whether disputes would be submitted to the Adjustment Board, he replied in the negative. It was, he said, a matter of duty -- ". . . and it is my understanding that the employees, in the case of these minor grievances -- and that is all that can be dealt with by the adjustment board -- are entirely agreeable to those provisions of the law." "I think that is a very important concession on their part. . . . [T]his law is in effect an agreement on the part of the parties to arbitrate all of these minor disputes. " The chief spokesman for the railway labor organizations was George M. Harrison. He appeared as chairman of the legislative committee of the Railway Labor Executives' Association before both the House of Representatives and the Senate Committee. This Association comprised the twenty-one standard railway labor groups, including the Brotherhood of Railroad Trainmen. He testified before the House Committee: "So, out of all that experience and recognizing the character of the services given to the people of this country by our industry and how essential it is to the welfare of the country, these organizations have come to the conclusion that in respect to these minor grievance cases that grow out of the interpretation and/or application of the contracts already made that they can very well permit those disputes to be decided . . . by an adjustment board. " Later, before the Senate Committee, he declared: "Grievances are instituted against railroad officers' actions, and we are willing to take our chances with this national board, because we believe, out of our experience, that the national board is the best and most efficient method of getting a determination of these many controversies that arise on these railroads between the officers and the employees." "* * * * " "These railway labor organizations have always opposed compulsory determination of their controversies. . . . [W]e are now ready to concede that we can risk having our grievances go to a board had get them determined, and that is a contribution that these organizations are willing to make. " The voice of labor was not unanimous in this concession. The representative of the International Brotherhood of Teamsters vehemently objected to the adoption of § 3, First. "We are unalterably opposed to paragraph M, . . . [which] brings about compulsory arbitration and prevents the use of the only weapon in the hands of organized labor. We believe that a very dangerous precedent would be established with the passage of this paragraph, and, to the best of our knowledge, it is the first time that any such measure has been enacted by the Congress of the United States. " This record is convincing that there was general understanding between both the supporters and the opponents of the 1934 amendment that the provisions dealing with the Adjustment Board were to be considered as compulsory arbitration in this limited field. Our reading of the Act is therefore confirmed, not rebutted, by the legislative history. The only question which remains is whether the federal courts can compel compliance with the provisions of the Act to the extent of enjoining a union from striking to defeat the jurisdiction of the Adjustment Board. The Brotherhood contends that the Norris-LaGuardia Act has withdrawn the power of federal courts to issue injunctions in labor disputes. That limitation, it is urged, applies with full force to all railway labor disputes, as well as labor controversies in other industries. We hold that the Norris-LaGuardia Act cannot be read alone in matters dealing with railway labor disputes. There must be an accommodation of that statute and the Railway Labor Act, so that the obvious purpose in the enactment of each is preserved. We think that the purposes of these Acts are reconcilable. In adopting the Railway Labor Act, Congress endeavored to bring about stable relationships between labor and management in this most important national industry. It found from the experience between 1926 and 1934 that the failure of voluntary machinery to resolve a large number of minor disputes called for a strengthening of the Act to provide an effective agency, in which both sides participated, for the final adjustment of such controversies. Accumulation of these disputes had resulted in the aggregate's being serious enough to threaten disruption of transportation. Hence, with the full consent of the brotherhoods, the 1934 amendment became law. The Norris-LaGuardia Act, on the other hand, was designed primarily to protect working men in the exercise of organized economic power, which is vital to collective bargaining. The Act aimed to correct existing abuses of the injunctive remedy in labor disputes. Federal courts had been drawn into the field under the guise either of enforcing federal statutes, principally the Sherman Act, or through diversity of citizenship jurisdiction. In the latter cases, the courts employed principles of federal law frequently at variance with the concepts of labor law in the States where they sat. Congress acted to prevent the injunctions of the federal courts from upsetting the natural interplay of the competing economic forces of labor and capital. Rep. LaGuardia, during the floor debates on the 1932 Act, recognized that the machinery of the Railway Labor Act channeled these economic forces, in matters dealing with railway labor, into special processes intended to compromise them. Such controversies, therefore, are not the same as those in which the injunction strips labor of its primary weapon without substituting any reasonable alternative. In prior cases involving railway labor disputes, this Court has authorized the use of injunctive relief to vindicate the processes of the Railway Labor Act. Virginia R. Co. v. System Federation No. 40,, was an action by the union to enjoin compliance with the Act's provisions for certification of a bargaining representative. The question raised was whether a federal court could issue an injunction in a labor dispute. The Court held: "It suffices to say that the Norris-LaGuardia Act can affect the present decree only so far as its provisions are found not to conflict with those of § 2, Ninth, of the Railway Labor Act, authorizing the relief which has been granted. Such provisions cannot be rendered nugatory by the earlier and more general provisions of the Norris-LaGuardia Act." Id. at. In Brotherhood of Railroad Trainmen v. Howard,, and other similar cases, the Court held that the specific provisions of the Railway Labor Act take precedence over the more general provisions of the Norris-LaGuardia Act. "Our conclusion is that the District Court has jurisdiction and power to issue necessary injunctive orders [to enforce compliance with the requirements of the Railway Labor Act] notwithstanding the provisions of the Norris-LaGuardia Act." Id. at 343 U.S. 774. This is a clear situation for the application of that principle. The Brotherhood has cited several cases in which it has been held that the Norris-LaGuardia Act's ban on federal injunctions is not lifted because the conduct of the union in unlawful under some other statute. We believe that these are inapposite to this case. None involved the need to accommodate two statutes, when both were adopted as a part of a pattern of labor legislation. The judgment of the Court of Appeals must be affirmed. It is so ordered.

After negotiations had failed, a railroad which had a collective bargaining agreement with a labor union of its employees submitted several "minor disputes" arising under the agreement to the National Railroad Adjustment Board created by the Railway Labor Act. The union promptly issued a strike call. The railroad sought relief from the Federal District Court, which entered a permanent injunction against the strike. Held: a railway labor union cannot lawfully resort to a strike over such "minor disputes" pending before the National Railroad Adjustment Board; the District Court had jurisdiction to enjoin such a strike; and its judgment is sustained. . (a) Section 3, First, of the Railway Labor Act authorizes either side to submit a "minor dispute" to the National Railroad Adjustment Board, whose decision shall be final and binding on both sides, and the Section should be literally applied in the absence of a clear showing of a contrary or qualified intention of Congress. . (b) The legislative history of the provisions of the Railway Labor Act creating the National Railroad Adjustment Board shows that they were intended to provide for compulsory arbitration of such "minor disputes." . (c) The federal courts can compel compliance with the provisions of the Act to the extent of enjoining a union from striking to defeat the jurisdiction of the National Railroad Adjustment Board, and such injunctions are not barred by the Norris-LaGuardia Act. . (d) The Norris-LaGuardia Act and the Railway Labor Act must be read together so that the obvious purpose in the enactment of each is preserved. . (e) Cases in which it has been held that the Norris-LaGuardia Act's ban on federal injunctions is not lifted because the conduct of the union is unlawful under some other statute are inapposite to this case. P.. Affirmed.

1956_24

https://www.oyez.org/cases/1956/24

MR. JUSTICE DOUGLAS delivered the opinion of the Court. The question in the case is whether petitioner, by virtue of a vesting order issued under § 5 of the Trading with the Enemy Act, as amended, 40 Stat. 411, 50 U.S.C.App. § 5, is entitled to the res of a trust established in 1928 by one Cobb and administered by respondent under an indenture. The trust was created for the benefit of the descendants of Bruno Reinicke who, by reason of his powers over the trust and his ownership of the right of reversion, was the real settlor. In 1945, when this Nation was at war with Germany, the Alien Property Custodian issued an order vesting "all right, title, interest and claim of any kind or character whatsoever" of the beneficiaries of the trust, declaring that they were nationals of Germany. Subsequently the Custodian (for whom the Attorney General was later substituted) intervened in an action brought by the trustee in the New York courts for a construction of the indenture and for an accounting. Relief sought by that intervention was that the income of the trust be paid to the Attorney General, and that the powers reserved to the settlor be held to have passed by virtue of the vesting order to the Attorney General. We are also advised by the report of the case in the Court of Appeals that the Attorney General also claimed that, if the vesting order had not transferred the settlor's powers to the Attorney General, "then the trust had failed, and all of the trust property should pass to the Attorney General under the vesting order as being property of alien enemies." Chase National Bank v. McGrath, 301 N.Y. 602, 603-604, 93 N.E.2d 495. The New York Supreme Court denied the relief asked by the Attorney General, holding he was not entitled to the income of the trust, that he had not succeeded to the powers of the settlor, and that those powers were vested in the trustee as long as the settlor was barred from asserting them. On appeal, the Appellate Division affirmed. Chase National Bank v. McGrath, 276 App.Div. 831, 93 N.Y.S.2d 724. The Court of Appeals, in turn, affirmed. Chase National Bank v. McGrath, 301 N.Y. 602, 93 N.E.2d 495. No review of that order was sought here. Some years passed, when, in 1953, the Attorney General amended the vesting order by undertaking to appropriate "all property in the possession, custody or control" of the trustee. * In a suit in the New York courts, he asked, among other things, that the principal of the trust be transferred to him. The Supreme Court of New York denied the relief. The Appellate Division affirmed without opinion. Chase National Bank v. Reinicke, 286 App.Div. 808, 143 N.Y.S.2d 623. The Court of Appeals denied leave to appeal. Chase National Bank v. Reinicke, 309 N.Y. 1030, 129 N.E.2d 790. The case is here on certiorari, 350 U.S. 964. We do not reach the several questions presented under the Trading with the Enemy Act, for we are of the view that the principles of res judicata require an affirmance. In the first litigation, the Attorney General sought to reach the equitable interests in the trust and the powers of the settlor. When the Attorney General now seeks the entire bundle of rights, he is claiming, for the most part, what was denied him in the first suit. That is not all. In the first suit, he claimed that, if he were denied the powers which the settlor had over the trust, the trust must fail, and all the trust property must be transferred to him. In other words, the Attorney General tendered in the first suit his claim to the entire property. Cf. Young v. Higbee Co.,,. Under familiar principles of res judicata, the claim so tendered may not be relitigated. Cromwell v. County of Sac,,. Tait v. Western Maryland R. Co.,,. If he was not content with the first ruling, his remedy was by certiorari to this Court. Angel v. Bullington,,. Having failed to seek and obtain that review, he is barred from relitigating the issues tendered in the first suit. Affirmed.

In an action brought by a trustee in New York state courts for a construction of the indenture and for an accounting, the Alien Property Custodian, later succeeded by the Attorney General of the United States, intervened and, in effect, tendered his claim to the entire property, by virtue of a vesting order issued under § 5 of the Trading with the Enemy Act, as amended. The state courts denied such relief, and no review was sought here. The Attorney General subsequently amended the vesting order and brought suit in the New York state courts, praying that the principal of the trust be transferred to him. The state courts denied the relief. Held: principles of res judicata bar the present suit. . 286 App.Div. 808, 143 N.Y.S.2d 623, affirmed.

1956_43

https://www.oyez.org/cases/1956/43

MR. JUSTICE CLARK delivered the opinion of the Court. In Shaughnessy v. Pedreiro,, we held that an alien, ordered deported by the Attorney General under the provisions of the Immigration and Nationality Act of 1952, might test the legality of such order in a declaratory judgment action brought under § 10 of the Administrative Procedure Act, 60 Stat. 243, 5 U.S.C. § 1009. The sole question to be determined here is whether the legality of an exclusion order entered under the relevant provisions of the same 1952 Act must be challenged by habeas corpus, or whether it may also be reviewed by an action for declaratory judgment under § 10 of the Administrative Procedure Act. The Court of Appeals held the latter to be an appropriate remedy. 97 U.S.App.D.C. 25, 227 F.2d 40. We granted certiorari, 351 U.S. 905, because of the importance of the question in the administration of the immigration law. We conclude that either remedy is available in seeking review of such orders. This makes it unnecessary for us to pass upon other questions raised by the parties. Shung, a Chinese alien, presented himself at San Francisco on November 28, 1947, claiming admission to the United States under the provisions of the War Brides Act of December 28, 1945, 59 Stat. 659, 8 U.S.C. (1946 ed.) § 232. He testified under oath that he was the blood son of an American citizen who served in the United States armed forces during World War II. In January, 1948, and again in February, 1949, Boards of Special Inquiry held Shung inadmissible on the ground that he had not established the alleged relationship. The Board of Immigration Appeals Affirmed. Shung first sought judicial review of this order by a declaratory judgment action instituted before the effective date of the Immigration and Nationality Act of 1952. His complaint was dismissed on the ground that the order was valid. Tom We Shung v. McGrath, 103 F. Supp. 507, aff'd sub nom. Tom We Shung v. Brownell, 93 U.S.App.D.C. 32, 207 F.2d 132. We vacated the judgment and remanded the cause to the District Court with directions to dismiss it for lack of jurisdiction, 346 U.S. 906, on the authority of Heikkila v. Barber, (1953), which held that habeas corpus was the only available remedy for testing deportation orders under the Immigration Act of 1917. After the passage of the 1952 Act, Shung filed this suit seeking review of his exclusion by a declaratory judgment action. He asserts that our ruling in Pedreiro permitting deportation orders under the 1952 Act to be challenged by declaratory action requires a similar result as to exclusion orders. However, the Government contends that the Pedreiro rule does not apply in exclusion cases, because of the basic differences between those actions and deportation cases. The Government also urges that the language, statutory structure, and legislative history of the 1952 Act support its contention. I At the outset, the Government contends that, constitutionally, an alien seeking initial admission into the United States is in a different position from that of a resident alien against whom deportation proceedings are instituted. This, it contends, precludes general judicial review. Shung admits these substantive differences, but counters that such a distinction should be without significance when all that is involved is the form of judicial action available, not the scope of review. We do not believe that the constitutional status of the parties requires that the form of judicial action be strait-jacketed. Nor should the fact that, in one action, the burden is on the alien, while, in the other, it must be met by the Government afford basis for discrimination. Admittedly, excluded aliens may test the order of their exclusion by habeas corpus. Citizenship claimants who hold "certificates of identity" are required by § 360(c) of the 1952 Act to test the validity of their exclusion by habeas corpus only. Respondent here neither claims citizenship nor did he hold a certificate of identity, and § 360(c) has no bearing on this case. For a habeas corpus proceeding, the alien must be detained, or at the least be in technical custody, as the Government puts it. On the other hand, a declaratory judgment action requires no such basis, and the odium of arrest and detention is not present. It does not follow that the absence of this condition would enlarge the permissible scope of review traditionally permitted in exclusion cases. The substantive law governing such actions would remain the rule of decision on the merits, but the form of action would be by declaratory judgment, rather than habeas corpus. We conclude that, unless the 1952 Act is to the contrary, exclusion orders may be challenged either by habeas corpus or by declaratory judgment action. II The Government insists that Congress has limited such challenges to habeas corpus actions by certain language in the 1952 Act. It argues that the finality clause of the Act with respect to exclusion limits judicial review to habeas corpus only. The gist of that clause as to deportation cases is that "the decision of the Attorney General shall be final," while, in exclusion proceedings, "the decision of a special inquiry officer [is] final unless reversed on appeal to the Attorney General." The Government reasons that the latter clause limits review to administrative appeal to the Attorney General, and that no other form of review was intended, aside from habeas corpus, to test the alien's exclusion. It points to exceptions that even withhold administrative review in certain classes of cases as bolstering its position. It is true that subsections (b) and (d) of § 236 of the 1952 Act deny any administrative appeal on temporary exclusion in security cases as well as in those where the alien suffers a medical affliction of certain types. But to darken the meaning of the word "final" as used by Congress by giving it chameleonic characteristics is to indulge in choplogic. In fact, the regulations of the Attorney General seem to give "final" the same connotation with respect to deportation as does the Act with respect to exclusion. See 8 CFR, Rev. 1952, § 242.61(e). Furthermore, more, as we pointed out in Pedreiro, such a "cutting off" of judicial review "would run counter to § 10 and § 12 of the Administrative Procedure Act." 349 U.S. at. "Exemptions from the . . . Administrative Procedure Act are not lightly to be presumed," Marcello v. Bonds,, (1955), and, unless made by clear language or supersedure, the expanded mode of review granted by that Act cannot be modified. We therefore conclude that the finality provision of the 1952 Act in regard to exclusion refers only to administrative finality. III The Government also points to certain testimony at hearings on the bill, as well as statements made on the floor in debate at the time of passage of the 1952 Act, as supported its position. We believe, however, that Senate Report No. 1137, 82d Cong., 2d Sess., and the statement of the managers on the part of the House which accompanied the Conference Report, reflect the intention of the Congress in this regard. The Senate Report, after reciting that a provision limiting "judicial review only through the writ of habeas corpus" had been stricken from the bill, stated that such action was not intended to "expand [the scope of] judicial review in immigration cases beyond that under existing law." (Emphasis supplied.) The House managers reported that, after careful consideration of "the problem of judicial review," they were satisfied that the "procedures provided in the bill . . . remain within the framework and the pattern of the Administrative Procedure Act. The safeguard of judicial procedure is afforded the alien in both exclusion and deportation proceedings." We believe that our interpretation of the Act is in full accord with these significant reports made by those sponsoring and managing the legislation on the floor of each house of the Congress. It may be that habeas corpus is a far more expeditious remedy than that of declaratory judgment, as the experience of Shung may indicate. But that fact may be weighed by the alien against the necessity of arrest and detention, after which he may make his choice of the form of action he wishes to use in challenging his exclusion. In either case, the scope of the review is that of existing law. Affirmed.

Under § 10 of the Administrative Procedure Act, an alien whose exclusion has been ordered administratively under the Immigration and Nationality Act of 1952, and who neither claims citizenship nor holds a certificate of identity issued under § 360(b) of that Act, may obtain judicial review of such order by an action in a federal district court for a declaratory judgment. . 1. Unless the Immigration and Nationality Act of 1952 is to the contrary, exclusion orders may be challenged -- either by habeas corpus proceedings or by declaratory judgment actions under the Administrative Procedure Act. . 2. The provision of § 236(c) of the Immigration and Nationality Act of 1952 that the decision of a special inquiry officer excluding an alien from admission into the United States "shall be final unless reversed on appeal to the Attorney General" refers only to administrative finality, and it does not limit challenges of such decisions to habeas corpus proceedings. . 3. The conclusion here reached is in full accord with reports made to Congress by those sponsoring and managing the Immigration and Nationality Act of 1952 on the floor of each house of Congress. . 4. Whether an alien seeks judicial review of an exclusion order by a habeas corpus proceeding or by an action for a declaratory judgment, the scope of the review is that of existing law. P.. 97 U.S.App.D.C. 25, 227 F.2d 40, affirmed.

1956_16

https://www.oyez.org/cases/1956/16

MR. JUSTICE FRANKFURTER delivered the opinion of the Court. This appeal from a judgment of conviction entered by the Recorder's Court of the City of Detroit, Michigan, challenges the constitutionality of the following provision, § 343, of the Michigan Penal Code: "Any person who shall import, print, publish, sell, possess with the intent to sell, design, prepare, loan, give away, distribute or offer for sale, any book, magazine, newspaper, writing, pamphlet, ballad, printed paper, print, picture, drawing, photograph, publication or other thing, including any recordings, containing obscene, immoral, lewd or lascivious language, or obscene, immoral, lewd or lascivious prints, pictures, figures or descriptions, tending to incite minors to violent or depraved or immoral acts, manifestly tending to the corruption of the morals of youth, or shall introduce into any family, school or place of education or shall buy, procure, receive or have in his possession, any such book, pamphlet, magazine, newspaper, writing, ballad, printed paper, print, picture, drawing, photograph, publication or other thing, either for the purpose of sale, exhibition, loan or circulation, or with intent to introduce the same into any family, school or place of education, shall be guilty of a misdemeanor." Appellant was charged with its violation for selling to a police officer what the trial judge characterized as "a book containing obscene, immoral, lewd, lascivious language, or descriptions, tending to incite minors to violent or depraved or immoral acts, manifestly tending to the corruption of the morals of youth." Appellant moved to dismiss the proceeding on the claim that application of § 343 unduly restricted freedom of speech as protected by the Due Process Clause of the Fourteenth Amendment in that the statute (1) prohibited distribution of a book to the general public on the basis of the undesirable influence it may have upon youth; (2) damned a book and proscribed its sale merely because of some isolated passages that appeared objectionable when divorced from the book as a whole; and (3) failed to provide a sufficiently definite standard of guilt. After hearing the evidence, the trial judge denied the motion, and, in an oral opinion, held that ". . . the defendant is guilty because he sold a book in the City of Detroit containing this language [the passages deemed offensive], and also because the Court feels that, even viewing the book as a whole, it [the objectionable language] was not necessary to the proper development of the theme of the book, nor of the conflict expressed therein." Appellant was fined $100. Pressing his federal claims, appellant applied for leave to appeal to the Supreme Court of Michigan. Although the State consented to the granting of the application "because the issues involved in this case are of great public interest, and because it appears that further clarification of the language of . . . [the statute] is necessary," leave to appeal was denied. In view of this denial, the appeal is here from the Recorder's Court of Detroit. We noted probable jurisdiction. 350 U.S. 963. Appellant's argument here took a wide sweep. We need not follow him. Thus, it is unnecessary to dissect the remarks of the trial judge in order to determine whether he construed § 343 to ban the distribution of books merely because certain of their passages, when viewed in isolation, were deemed objectionable. Likewise, we are free to put aside the claim that the Michigan law falls within the doctrine whereby a New York obscenity statute was found invalid in Winters v. New York,. It is clear on the record that appellant was convicted because Michigan, by § 343, made it an offense for him to make available for the general reading public (and he in fact sold to a police officer) a book that the trial judge found to have a potentially deleterious influence upon youth. The State insists that, by thus quarantining the general reading public against books not too rugged for grown men and women in order to shield juvenile innocence, it is exercising its power to promote the general welfare. Surely, this is to burn the house to roast the pig. Indeed, the Solicitor General of Michigan has, with characteristic candor, advised the Court that Michigan has a statute specifically designed to protect its children against obscene matter "tending to the corruption of the morals of youth." * But the appellant was not convicted for violating this statute. We have before us legislation not reasonably restricted to the evil with which it is said to deal. The incidence of this enactment is to reduce the adult population of Michigan to reading only what is fit for children. It thereby arbitrarily curtails one of those liberties of the individual, now enshrined in the Due Process Clause of the Fourteenth Amendment, that history has attested as the indispensable conditions for the maintenance and progress of a free society. We are constrained to reverse this conviction. Reversed.

Section 343 of the Michigan Penal Code, in effect, makes it a misdemeanor to sell or make available to the general reading public any book containing obscene language "tending to the corruption of the moral of youth." For selling to an adult police officer a book which the trial judge found to have such a potential effect on youth, appellant was convicted of a violation of this section. Held: the statute violates the Due Process Clause of the Fourteenth Amendment, and the conviction is reversed. . Reversed.

1956_385

https://www.oyez.org/cases/1956/385

MR. JUSTICE BURTON delivered the opinion of the Court. The question presented here is whether the Railway Labor Act of May 20, 1926, 44 Stat. 577, as amended, 45 U.S.C. § 151 et seq., applies to the State Belt Railroad, a common carrier owned and operated by the California and engaged in interstate commerce. For the reasons hereafter stated, we hold that it does. The operations of the State Belt Railroad have been described by this Court in Sherman v. United States,; United States v. California,; and California v. Latimer,. It parallels the San Francisco waterfront, serves wharves and industrial plants, and connects with car ferries, steamship docks, and three interstate railroads. It is a common carrier engaged in interstate commerce, and files tariffs with the Interstate Commerce Commission. For over 65 years, the Belt Railroad has been owned by the California. It is operated by the Board of State Harbor Commissioners for San Francisco Harbor, composed of three Commissioners appointed by the Governor. Its employees number from 125 to 255, and are appointed in accordance with the civil service laws of the State. These laws prescribe procedures for hirings, promotions, layoffs, and dismissals, and authorize the State Personnel Board to fix rates of pay and overtime. On September 1, 1942, the Board of State Harbor Commissioners entered into a collective bargaining agreement with the Brotherhood of Locomotive Firemen and Enginemen and the Brotherhood of Railroad Trainmen as the representatives of the Belt Railroad's operating employees. This agreement established procedures for promotions, layoffs and dismissals. It also fixed rates of pay and overtime. Those procedures and rates differed from their counterparts under the state civil service laws. The collective bargaining agreement conformed to the Railway Labor Act, and was observed by the parties at least until January, 1948. At that time, a successor Harbor Board instituted litigation in the state courts of California in which it contended that the Railway Labor Act had no application to the Belt Railroad, and that the wages and working conditions of the Railroad's employees were governed by the State's civil service laws, rather than by the agreement. This contention was rejected by a local trial court and by the California District Court of Appeal. California v. Brotherhood of Railroad Trainmen, 222 P.2d 27. It was, however, accepted by the Supreme Court of California, with one justice dissenting, 37 Cal. 2d 412, 422, 232 P.2d 857, 864, certiorari denied, 342 U.S. 876. Shortly thereafter, five employees of the Belt Railroad instituted the present action in the United States District Court for the Northern District of Illinois against the ten members of the National Railroad Adjustment Board, First Division, and its executive secretary. The employees alleged that they had filed with the First Division, pursuant to § 3, First (i), of the Railway Labor Act, claims relating to their classifications, extra pay and seniority rights under the agreement. They charged that the five carrier members of the Division had refused to consider these claims on the ground that the Board was without jurisdiction, because, under the above decision of the Supreme Court of California, the Belt Railroad was not subject to the Railway Labor Act. The employees alleged that this refusal created an impasse in the ten-member Division, and they sought a court order requiring action on their claims. The United States, answering on behalf of the First Division and its executive secretary, supported the complaint and prayer for relief. The carrier members, answering through their own attorneys, opposed the complaint, as did the present petitioner, the State of California, which intervened as a party defendant. The District Court granted California's motion for summary judgment, and dismissed the complaint. 132 F. Supp. 356. The Court of Appeals reversed. 233 F.2d 251. It held that the Railway Labor Act applied to the Belt Railroad, and remanded the cause to the District Court with directions to enter a decree granting the relief sought. We granted certiorari to resolve the conflict between the United States Court of Appeals and the California Supreme Court as to the applicability of the Railway Labor Act to a railroad owned and operated by a State. 352 U.S. 940. We invited the Solicitor General to file a brief as amicus curiae and, in doing so, he urged that the Railway Labor Act was applicable to the State Belt Railroad. The Railway Labor Act of 1926, 44 Stat. 577, evolved from legislative experimentation beginning in 1888. The evolution of this railroad labor code was marked by a continuing attempt to bring about self-adjustment of disputes between rail carriers and their employees. To this end, specialized machinery of mediation and arbitration was established. The 1926 Act -- unique in that it had been agreed upon by the majority of the railroads and their employees -- incorporated practically every device previously used in settling disputes between carriers and their employees. These included (1) conferences between the parties; (2) appeal to a Board of Adjustment; (3) recourse to the permanent Board of Mediation; (4) submission of the controversy to a temporary Board of Arbitration; and (5) the establishment of an Emergency Board of Investigation appointed by the President. Dissatisfaction with the operation of this legislation led to its 1934 amendments. 48 Stat. 1185. One of the most significant changes was the creation of the National Railroad Adjustment Board, composed of equal numbers of carrier representatives and representatives of unions national in scope. The Board was divided into four divisions, each with jurisdiction over particular crafts or classes and their disputes. § 3. This arrangement made available a National Board to settle disputes in case the carrier and its employees could not agree upon a system, group, or regional board. The National Board was given jurisdiction over "minor disputes," meaning those involving the interpretation of a collective bargaining agreements in a particular set of facts. Either party to such a dispute could bring the other before the Board in what was, in fact, compulsory arbitration. Brotherhood of Railroad Trainmen v. Chicago River & I. R. Co.,. Provisions were made for the enforcement of a Board order against a carrier in a United States District Court. § 3, First (p). Section 2, Fourth, of the 1934 amendments insured to railroad employees the right to organize their own unions and the right of a majority of any craft or class of employees to select the representative of that craft or class. Section 2, Ninth, authorized the newly created National Mediation Board to hold representation elections and to certify the representative with which the carrier must deal. Section 2, Fourth, provided that the employees shall have the right to bargain collectively through representatives of their own choosing. On numerous occasions, this Court has recognized that the Railway Labor Act protects and promotes collective bargaining. Virginian R. Co. v. System Federation No. 40,,,; Switchmen's Union of North America v. National Mediation Board,,,; Order of Railroad Telegraphers v. Railway Express Agency, Inc.,,; Steele v. Louisville & N. R. Co.,,; Railway Employees' Dept. v. Hanson,,,. If the Railway Labor Act applies to the Belt Railroad, then the carrier's employees can invoke its machinery established for adjustment of labor controversies, and the National Railway Adjustment Board has jurisdiction over respondents' claims. Moreover, the Act's policy of protecting collective bargaining comes into conflict with the rule of California law that state employees have no right to bargain collectively with the State concerning terms and conditions of employment which are fixed by the State's civil service laws. This state civil service relationship is the antithesis of that established by collectively bargained contracts throughout the railroad industry. "[E]ffective collective bargaining has been generally conceded to include the right of the representatives of the unit to be consulted and to bargain about the exceptional as well as the routine rates, rules, and working conditions." Order of Railroad Telegraphers v. Railway Express Agency, Inc., supra, at. If the Federal Act applies to the Belt Railroad, then the policy of the State must give way. ". . . a State may not prohibit the exercise of rights which the federal Acts protect. Thus, in Hill v. Florida,, the State enjoined a labor union from functioning until it had complied with certain statutory requirements. The injunction was invalidated on the ground that the Wagner Act included a 'federally established right to collective bargaining' with which the injunction conflicted." Weber v. Anheuser-Busch, Inc.,,. Under the Railway Labor Act, not only would the employees of the Belt Railroad have a federally protected right to bargain collectively with their employer, but the terms of the collective bargaining agreement that they have negotiated with the Belt Railroad would take precedence over conflicting provisions of the state civil service laws. In Railway Employees' Dept. v. Hanson,,, involving § 2, Eleventh, of the Railway Labor Act, which permits the negotiation of union shop agreements notwithstanding any law of any State, we stated that "A union agreement made pursuant to the Railway Labor Act has, therefore, the imprimatur of the federal law upon it and, by force of the Supremacy Clause of Article VI of the Constitution, could not be made illegal nor vitiated by any provision of the laws of a State." We turn now to the applicability of the Railway Labor Act to the Belt Railroad. Section 1, First, of that Act defines generally the carriers to which it applies as "any carrier by railroad, subject to the Interstate Commerce Act. . . ." (Emphasis supplied.) The Interstate Commerce Act, 24 Stat. 379, as amended, 49 U.S.C. § 1(1), applies to all common carriers by railroad engaged in interstate transportation. The Belt Railroad concededly is a common carrier engaged in interstate transportation. It files its tariffs with the Interstate Commerce Commission, and the Commission has treated it and other state-owned interstate rail carriers as subject to its jurisdiction. See California Canneries Co. v. Southern Pacific Co., 51 I.C.C. 500, 502-503; United States v. Belt Line R. Co., 56 I.C.C. 121; Texas State Railroad, 34 I.C.C.Val.R. 276. Finally, this Court has recognized that practice. United States v. California,,. See also New Orleans V. Texas & P. R. Co., 195 F.2d 887, 889. With the exception of the Supreme Court of California's holding in California v. Brotherhood of Railroad Trainmen, 37 Cal. 2d 412, 232 P.2d 857, federal statutes regulating interstate railroads, or their employees, have consistently been held to apply to publicly owned or operated railroads. Yet none of these statutes referred specifically to public railroads as being within their coverage. In United States v. California, supra, the United States sought to recover a statutory penalty for the State's operation of this Belt Railroad in violation of the Safety Appliance Act, 27 Stat. 531-532, as amended, 45 U.S.C. §§ 2, 6. That Act applied to "any common carrier engaged in interstate commerce by railroad. . . ." (Emphasis supplied.) The State contended there, as it does here, that the Act was inapplicable to the Belt Railroad because a federal statute is presumed not to restrict a constituent sovereign State unless it expressly so provides. This Court said that this presumption "is an aid to consistent construction of statutes of the enacting sovereign when their purpose is in doubt, but it does not require that the aim of a statute fairly to be inferred be disregarded because not explicitly stated." 297 U.S. at. See also California v. United States,,; Case v. Bowles,,. The Court then held unequivocally that the Safety Appliance Act was applicable to the Belt Railroad. "We can perceive no reason for extending it [the presumption] so as to exempt a business carried on by a state from the otherwise applicable provisions of an act of Congress, all-embracing in scope and national in its purpose, which is as capable of being obstructed by state as by individual action." 297 U.S. at. Likewise, three courts have ruled that the Federal Employers' Liability Act, 35 Stat. 65, as amended, 45 U.S.C. § 51, the coverage of which corresponded to that of the Safety Appliance Act, was applicable to public railroads. Mathewes v. Port Utilities Commission, 32 F.2d 913; Higginbotham v. Public Belt Railroad Commission, 192 La. 525, 188 So. 395 (Sup.Ct.La.); Maurice v. State, 43 Cal. App. 2d 270, 110 P.2d 706 (Cal.Dist.Ct. of App.) (involving the Belt Railroad now before us). Similarly, a Federal Court of Appeals has held that the Carriers Taxing Act of 1937, 50 Stat. 435, as amended, 45 U.S.C. (1946 ed.) § 261 (a companion measure of the Railroad Retirement Act of 1937, 50 Stat. 307, as amended, 45 U.S.C. § 228a), the coverage of which was identical with that of the Railway Labor Act, was applicable to this Belt Railroad. California v. Anglim, 129 F.2d 455. At least two federal courts have taken the position that the Railway Labor Act is applicable to railroads owned or operated by the public. National Council v. Sealy, 56 F. Supp. 720, 722-723, aff'd, 152 F.2d 500, 502; New Orleans Public Belt R. Commission v. Ward, 195 F.2d 829; and see the opinion of the Attorney General of California, n 9, supra. Nothing in the legislative history of the Railway Labor Act indicates that it should be treated differently from the above-mentioned railway statutes insofar as its applicability to a state-owned railroad is concerned. Congress apparently did not discuss the applicability of the Railway Labor Act to a state-owned railroad. This omission is readily explainable in view of the limited operations of publicly owned railroads. We are told by the parties that there are today 30 publicly owned railroads, all of which are switching or terminal roads, and only 11 of which are operated directly by the public. The fact that Congress chose to phrase the coverage of the Act in all-embracing terms indicates that state railroads were included within it. In fact, the consistent congressional pattern in railway legislation which preceded the Railway Labor Act was to employ all-inclusive language of coverage with no suggestion that state-owned railroads were not included. The State contends that doubts are created about congressional intent to make the Railway Labor Act applicable to state-owned railroads by the fact that, in certain other federal statutes governing employer-employee relationships, Congress has expressly exempted employees of the United States or of a State. We believe, however, that this argument cuts the other way. When Congress wished to exclude state employees, it expressly so provided. Its failure to do likewise in the Railway Labor Act indicates a purpose not to exclude state employees. The Railway Labor Act is essentially an instrument of industry-wide government. See Elgin, J. & E. R. Co. v. Burley,,, (dissenting opinion). The railroad world for which the Act was designed has been described as "a state within a state. Its population of some three million, if we include the families of workers, has its own customs and its own vocabulary, and lives according to rules of its own making. . . . This state within a state has enjoyed a high degree of internal peace for two generations; despite the divergent interests of its component parts, the reign of law has been firmly established." Garrison, The National Railroad Adjustment Board; A Unique Administrative Agency, 46 Yale L.J. 567, 568-569 (1937). Congress has not only carved this singular industry out of the Labor Management Relations Act of 1947, 61 Stat. 156, 29 U.S.C. § 182, but it has provided, by the Railway Labor Act, techniques peculiar to that industry. An extended period of congressional experimentation in the field of railway labor legislation resulted in the Railway Labor Act and produced its machinery for conciliation, mediation, arbitration and adjustments of disputes. A primary purpose of this machinery of railway government is "To avoid any interruption to commerce or to the operation of any carrier engaged therein. . . ." 48 Stat. 1186 (§ 2), 45 U.S.C. § 151a. See Slocum v. Delaware, L. & W. R. Co.,,. Like the Safety Appliance Act, the Railway Labor Act is "all-embracing in scope and national in its purpose, which is as capable of being obstructed by state as by individual action." United States v. California,,. The fact that, under state law, the employees of the Belt Railroad may have no legal right to strike reduces, but does not eliminate, the possibility of a work stoppage. It was to meet such a possibility that the Act's "reign of law" was established. A terminal railroad facility like the Belt Railroad is a vital link in the national transportation system. Its continuous operation is important to the national flow of commerce. The fact that the Act's application will supersede state civil service laws which conflict with its policy of promoting collective bargaining does not detract from the conclusion that Congress intended it to apply to any common carrier by railroad engaged in interstate transportation, whether or not owned or operated by a State. The principal unions in the railroad industry are national in scope, and their officials are intimately acquainted with the problems, traditions and conditions of the railroad industry. Bargaining collectively with these officials has often taken on a national flavor, and agreements are uniformly negotiated for an entire railroad system. "[B]reakdowns in collective bargaining will typically affect a region or the entire nation." Lecht, Experience under Railway Labor Legislation (1955) 4. It is by no means unreasonable to assume that Congress, aware of these characteristics of labor relations in the interconnected system which comprises our national railroad industry, intended that collective bargaining, as fostered and protected by the Railway Labor Act, should apply to all railroads. Congress no doubt concluded that a uniform method of dealing with the labor problems of the railroad industry would tend to eliminate inequities, and would promote a desirable mobility within the railroad labor force. Finally, the State suggests that Congress has no constitutional power to interfere with the "sovereign right" of a State to control its employment relationships on a state-owned railroad engaged in interstate commerce. In United States v. California, supra, this Court said that the State, although acting in its sovereign capacity in operating this Belt Railroad, necessarily so acted "in subordination to the power to regulate interstate commerce, which has been granted specifically to the national government." 297 U.S. at. "California, by engaging in interstate commerce by rail, has subjected itself to the commerce power, and is liable for a violation of the Safety Appliance Act, as are other carriers. . . ." Id. at. That principle is no less applicable here. If California, by engaging in interstate commerce by rail, subjects itself to the commerce power so that Congress can make it conform to federal safety requirements, it also has subjected itself to that power so that Congress can regulate its employment relationships. See also California v. United States,,; cf. Railway Employees' Dept. v. Hanson,,. The judgment of the Court of Appeals accordingly is affirmed. Affirmed.

The Railway Labor Act applies to the State Belt Railroad, a common carrier owned and operated by the State of California and engaged in interstate commerce, and, notwithstanding the fact that the Railroad's employees are state employees appointed under the state civil service laws, the National Railroad Adjustment Board has jurisdiction over claims based on a collective bargaining agreement between the Railroad and its employees which conflicts with the state civil service laws, as does the Railway Labor Act itself. . (a) Federal statutes regulating interstate railroads, or their employees, have consistently been held applicable to publicly owned or operated railroads, though they do not refer specifically to public railroads as being within their coverage. . (b) Nothing in the legislative history of the Act indicates that it should be treated differently from such other federal railway statutes insofar as its applicability to a state-owned railroad is concerned. . (c) A different result is not required by the fact that, in certain other federal statutes governing employer-employee relationships, Congress has expressly exempted employees of the United States or a State. . (d) The fact that the Act's application will supersede state civil service laws which conflict with its policy of promoting collective bargaining does not detract from the conclusion that Congress intended it to apply to any common carrier by railroad engaged in interstate commerce, whether or not owned or operated by a State. . (e) By engaging in interstate commerce by rail, California has subjected itself to the commerce power of Congress, and Congress can regulate its relationships with the employees of its interstate railroad. P.. 233 F.2d 251 affirmed.