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ahmed275

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1990_89-7272

https://www.oyez.org/cases/1990/89-7272

JUSTICE SCALIA announced the judgment of the Court and delivered the opinion of the Court with respect to Part IV, and an opinion with respect to Parts I, II, and III, in which THE CHIEF JUSTICE joins. Petitioner was convicted of possessing 672 grams of cocaine and sentenced to a mandatory term of life in prison without possibility of parole. The Michigan Court of Appeals initially reversed his conviction because evidence supporting it had been obtained in violation of the Michigan Constitution. 176 Mich.App. 524, 440 N.W.2d 75 (1989). On petition for rehearing, the Court of Appeals vacated its prior decision and affirmed petitioner's sentence, rejecting his argument that the sentence was "cruel and unusual" within the meaning of the Eighth Amendment. Id. at 535, 440 N.W.2d at 80. The Michigan Supreme Court denied leave to appeal, 434 Mich. 863 (1990), and we granted certiorari. 495 U.S. 956 (1990). Petitioner claims that his sentence is unconstitutionally "cruel and unusual" for two reasons: first, because it is "significantly disproportionate" to the crime he committed; second, because the sentencing judge was statutorily required to impose it, without taking into account the particularized circumstances of the crime and of the criminal. The Eighth Amendment, which applies against the States by virtue of the Fourteenth Amendment, see Robinson v. California, (1962), provides: "Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted." In Rummel v. Estelle, (1980), we held that it did not constitute "cruel and unusual punishment" to impose a life sentence, under a recidivist statute, upon a defendant who had been convicted, successively, of fraudulent use of a credit card to obtain $80 worth of goods or services, passing a forged check in the amount of $28.36, and obtaining $120.75 by false pretenses. We said that "one could argue without fear of contradiction by any decision of this Court that, for crimes concededly classified and classifiable as felonies, that is, as punishable by significant terms of imprisonment in a state penitentiary, the length of the sentence actually imposed is purely a matter of legislative prerogative." Id. at. We specifically rejected the proposition asserted by the dissent, id. at (opinion of Powell, J.), that unconstitutional disproportionality could be established by weighing three factors: (1) gravity of the offense compared to severity of the penalty, (2) penalties imposed within the same jurisdiction for similar crimes, and (3) penalties imposed in other jurisdictions for the same offense. Id. at, and n. 27. A footnote in the opinion, however, said: "This is not to say that a proportionality principle would not come into play in the extreme example mentioned by the dissent, . . . if a legislature made overtime parking a felony punishable by life imprisonment." Id. at, n. 11. Two years later, in Hutto v. Davis, (1982), we similarly rejected an Eighth Amendment challenge to a prison term of 40 years and fine of $20,000 for possession and distribution of approximately nine ounces of marijuana. We thought that result so clear in light of Rummel that our per curiam opinion said the Fourth Circuit, in sustaining the constitutional challenge, "could be viewed as having ignored, consciously or unconsciously, the hierarchy of the federal court system," which could not be tolerated "unless we wish anarchy to prevail," 454 U.S. at. And we again explicitly rejected application of the three factors discussed in the Rummel dissent. See 454 U.S. at, and n. 2. However, whereas in Rummel we had said that successful proportionality challenges outside the context of capital punishment "have been exceedingly rare," 445 U.S. at (discussing as the solitary example Weems v. United States, (1910), which we explained as involving punishment of a "unique nature," 445 U.S. at), in Davis we misdescribed Rummel as having said that "successful challenges . . .' should be `exceedingly rare,'" 454 U.S. at (emphasis added), and at that point inserted a reference to, and description of, the Rummel "overtime parking" footnote, 454 U.S. at, n. 3. The content of that footnote was imperceptibly (but, in the event, ominously) expanded: Rummel's "not [saying] that a proportionality principle would not come into play" in the fanciful parking example, 445 U.S. at, n. 11, became "not[ing] . . . that there could be situations in which the proportionality principle would come into play, such as" the fanciful parking example, Davis, supra at, n. 3 (emphasis added). This combination of expanded text plus expanded footnote permitted the inference that gross disproportionality was an example of the "exceedingly rare" situations in which Eighth Amendment challenges "should be" successful. Indeed, one might say that it positively invited that inference, were that not incompatible with the sharp per curiam reversal of the Fourth Circuit's finding that 40 years for possession and distribution of nine ounces of marijuana was grossly disproportionate, and therefore unconstitutional. A year and a half after Davis, we uttered what has been our last word on this subject to date. Solem v. Helm, (1983), set aside under the Eighth Amendment, because it was disproportionate, a sentence of life imprisonment without possibility of parole, imposed under a South Dakota recividist statute for successive offenses that included three convictions of third-degree burglary, one of obtaining money by false pretenses, one of grand larceny, one of third-offense driving while intoxicated, and one of writing a "no account" check with intent to defraud. In the Solem account, Weems no longer involved punishment of a "unique nature," Rummel, supra at, but was the "leading case," Solem, 463 U.S. at, exemplifying the "general principle of proportionality," id. at, which was "deeply rooted and frequently repeated in common law jurisprudence," id. at, had been embodied in the English Bill of Rights "in language that was later adopted in the Eighth Amendment," id. at, and had been "recognized explicitly in this Court for almost a century," id. at. The most recent of those "recognitions" were the "overtime parking" footnotes in Rummel and Davis, 463 U.S. at. As for the statement in Rummel that "one could argue without fear of contradiction by any decision of this Court that, for crimes concededly classified and classifiable as felonies . . . the length of the sentence actually imposed is purely a matter of legislative prerogative," Rummel, supra at: according to Solem, the really important words in that passage were "one could argue,'" 463 U.S. at, n. 14 (emphasis added in Solem). "The Court [in Rummel] . . . merely recognized that the argument was possible. To the extent that the State . . . makes this argument here, we find it meritless." Id. at, n. 14. (Of course Rummel had not said merely "one could argue," but "one could argue without fear of contradiction by any decision of this Court." (Emphasis added.)) Having decreed that a general principle of disproportionality exists, the Court used as the criterion for its application the three-factor test that had been explicitly rejected in both Rummel and Davis. 463 U.S. at. Those cases, the Court said, merely "indicated [that] no one factor will be dispositive in a given case," id. at, n. 17 -- though Davis had expressly, approvingly, and quite correctly described Rummel as having "disapproved each of [the] objective factors," 454 U.S. at (emphasis added). See Rummel, 445 U.S. at, and n. 27. It should be apparent from the above discussion that our 5-to-4 decision eight years ago in Solem was scarcely the expression of clear and well accepted constitutional law. We have long recognized, of course, that the doctrine of stare decisis is less rigid in its application to constitutional precedents, see Payne v. Tennessee, ante at; Smith v. Allwright,,, and n. 10 (1944); Mitchell v. W. T. Grant Co.,, (1974) (Powell, J., concurring); Burnet v. Coronado Oil & Gas Co.,, (1932) (Brandeis, J., dissenting), and we think that to be especially true of a constitutional precedent that is both recent and in apparent tension with other decisions. Accordingly, we have addressed anew, and in greater detail, the question whether the Eighth Amendment contains a proportionality guarantee -- with particular attention to the background of the Eighth Amendment (which Solem discussed in only two pages, see 463 U.S. at) and to the understanding of the Eighth Amendment before the end of the 19th century (which Solem discussed not at all). We conclude from this examination that Solem was simply wrong; the Eighth Amendment contains no proportionality guarantee. B Solem based its conclusion principally upon the proposition that a right to be free from disproportionate punishments was embodied within the "cruell and unusuall Punishments" provision of the English Declaration of Rights of 1689, and was incorporated, with that language, in the Eighth Amendment. There is no doubt that the Declaration of Rights is the antecedent of our constitutional text. (This document was promulgated in February, 1689, and was enacted into law as the Bill of Rights, 1 Wm. & Mary, Sess. 2, ch. 2, in December, 1689. See Sources of Our Liberties 222-223 (R. Perry & J. Cooper eds.1959); L. Schwoerer, Declaration of Rights, 1689, pp. 279, 295-298 (1981).) In 1791, five State Constitutions prohibited "cruel or unusual punishments," see Del. Declaration of Rights, § 16 (1776); Md.Declaration of Rights, § XXII (1776); Mass.Declaration of Rights, Art. XXVI (1780); N.C.Declaration of Rights, §X (1776); N.H.Bill of Rights, Art. XXXIII (1784), and two prohibited "cruel" punishments, Pa.Const., Art. IX, § 13 (1790); S.C.Const., Art. IX, § 4 (1790). The new Federal Bill of Rights, however, tracked Virginia's prohibition of "cruel and unusual punishments," see Va.Declaration of Rights, § 9 (1776), which most closely followed the English provision. In fact, the entire text of the Eighth Amendment is taken almost verbatim from the English Declaration of Rights, which provided "[t]hat excessive Baile ought not to be required nor excessive Fines imposed nor cruell and unusuall Punishments inflicted." Perhaps the Americans of 1791 understood the Declaration's language precisely as the Englishmen of 1689 did -- though, as we shall discuss later, that seems unlikely. Or perhaps the colonists meant to incorporate the content of that antecedent by reference, whatever the content might have been. Solem suggested something like this, arguing that, since Americans claimed "all the rights of English subjects," "their use of the language of the English Bill of Rights is convincing proof that they intended to provide at least the same protection," 463 U.S. at. Thus, not only is the original meaning of the 1689 Declaration of Rights relevant, but also the circumstances of its enactment, insofar as they display the particular "rights of English subjects" it was designed to vindicate. As Solem observed, 463 U.S. at, the principle of proportionality was familiar to English law at the time the Declaration of Rights was drafted. The Magna Carta provided that "[a] free man shall not be fined for a small offence, except in proportion to the measure of the offense; and for a great offence he shall be fined in proportion to the magnitude of the offence, saving his freehold. . . ." Art. 20 (translated in Sources of Our Liberties, supra at 15). When imprisonment supplemented fines as a method of punishment, courts apparently applied the proportionality principle while sentencing. Hodges v. Humkin, 2 Bulst. 139, 140, 80 Eng.Rep. 1015, 1016 (K.B. 1615) (Croke, J.) ("[I]mprisonment ought always to be according to the quality of the offence"). Despite this familiarity, the drafters of the Declaration of Rights did not explicitly prohibit "disproportionate" or "excessive" punishments. Instead, they prohibited punishments that were "cruell and unusuall." The Solem Court simply assumed, with no analysis, that the one included the other. 463 U.S. at. As a textual matter, of course, it does not: a disproportionate punishment can perhaps always be considered "cruel," but it will not always be (as the text also requires) "unusual." The error of Solem's assumption is confirmed by the historical context and contemporaneous understanding of the English guarantee. Most historians agree that the "cruell and unusuall Punishments" provision of the English Declaration of Rights was prompted by the abuses attributed to the infamous Lord Chief Justice Jeffreys of the King's Bench during the Stuart reign of James II. See, e.g., Schwoerer, supra, at 93; 4 W. Blackstone, Commentaries *372. They do not agree, however, on which abuses. See Ingraham v. Wright,, (1977); Furman v. Georgia,, (1972) (MARSHALL, J., concurring). Jeffreys is best known for presiding over the "Bloody Assizes" following the Duke of Monmouth's abortive rebellion in 1685; a special commission led by Jeffreys tried, convicted, and executed hundreds of suspected insurgents. Some have attributed the Declaration of Rights provision to popular outrage against those proceedings. E.g., Sources of Our Liberties, supra at 236, n. 103; Note, What Is Cruel and Unusual Punishment, 24 Harv.L.Rev. 54, 55, n. 2 (1910); see also 3 J. Story, Commentaries on the Constitution of the United States § 1896 (1833). But the vicious punishments for treason decreed in the Bloody Assizes (drawing and quartering, burning of women felons, beheading, disembowling, etc.) were common in that period -- indeed, they were specifically authorized by law, and remained so for many years afterwards. See Granucci, "Nor Cruel and Unusual Punishments Inflicted:" The Original Meaning, 57 Calif.L.Rev. 839, 855-856 (1969); 4 Blackstone, supra at *369-*370. Thus, recently historians have argued, and the best historical evidence suggests, that it was not Jeffreys' management of the Bloody Assizes that led to the Declaration of Rights provision, but rather the arbitrary sentencing power he had exercised in administering justice from the King's Bench, particularly when punishing a notorious perjurer. See Granucci, supra, at 855-860; Schwoerer, supra at 92-93. Accord, 1 J. Stephen, A History of the Criminal Law of England 490 (1883); 1 J. Chitty, Criminal Law 712 (5th Am. ed. 1847) (hereinafter Chitty). Jeffreys was widely accused of "inventing" special penalties for the King's enemies, penalties that were not authorized by common law precedent or statute. Letter to a Gentleman at Brussels, giving an account of the people's revolt (Windsor, Dec. 2, 1688), cited in L. Schwoerer, The Declaration of Rights, 1689, p. 93, n. 207 (1981). The preamble to the Declaration of Rights, a sort of indictment of James II that calls to mind the preface to our own Declaration of Independence, specifically referred to illegal sentences and King's Bench proceedings. "Whereas the late King James the Second, by the Assistance of diverse evill Councellors Judges and Ministers imployed by him did endeavour to subvert and extirpate the Protestant Religion, and the Lawes and Liberties of this Kingdome." "* * * *" "By Prosecutions in the Court of Kings Bench for Matters and Causes cognizable onely in Parlyament and by diverse other Arbitrary and Illegall Courses." "* * * *" "[E]xcessive Baile hath beene required of Persons committed in Criminall Cases to elude the Benefit of the Lawes made for the Liberty of the Subjects." "And excessive Fines have been imposed." "And illegall and cruell Punishments inflicted." "* * * *" "All which are utterly and directly contrary to the knowne Lawes and Statutes and Freedome of this Realme." 1 Wm. & Mary, Sess. 2, ch. 2 (1689). The only recorded contemporaneous interpretation of the "cruell and unusuall Punishments" clause confirms the focus upon Jeffreys' King's Bench activities, and upon the illegality, rather than the disproportionality, of his sentences. In 1685, Titus Oates, a Protestant cleric whose false accusations had caused the execution of 15 prominent Catholics for allegedly organizing a "Popish Plot" to overthrow King Charles II in 1679, was tried and convicted before the King's Bench for perjury. Oates' crime, "bearing false witness against another, with an express premeditated design to take away his life, so as the innocent person be condemned and executed," had, at one time, been treated as a species of murder, and punished with death. 4 Blackstone, supra at *196. At sentencing, Jeffreys complained that death was no longer available as a penalty, and lamented that "a proportionable punishment of that crime can scarce by our law, as it now stands, be inflicted upon him." Second Trial of Titus Oates, 10 How.St.Tr. 1227, 1314 (K.B. 1685). The law would not stand in the way, however. The judges met, and, according to Jeffreys, were in unanimous agreement that "crimes of this nature are left to be punished according to the discretion of this court, so far as that the judgment extend not to life or member." Ibid. Another justice taunted Oates that "we have taken special care of you," id. at 1316. The court then decreed that he should pay a fine of "1000 marks upon each Indictment," that he should be "stript of [his] Canonical Habits," that he should stand in the pillory annually at certain specified times and places, that, on May 20, he should be whipped by "the common hangman" "from Aldgate to Newgate," that he should be similarly whipped on May 22 "from Newgate to Tyburn," and that he should be imprisoned for life. Ibid. "The judges, as they believed, sentenced Oates to be scourged to death." 2 T. Macaulay, History of England 204 (1899) (hereinafter Macaulay). Accord, D. Ogg, England In The Reigns of James II and William III pp. 154-155 (1984). Oates would not die, however. Four years later, and several months after the Declaration of Rights, he petitioned the House of Lords to set aside his sentence as illegal. 6 Macaulay 138-141. "Not a single peer ventured to affirm that the judgment was legal: but much was said about the odious character of the appellant," and the Lords affirmed the judgment. 6 id. at 140-141. A minority of the Lords dissented, however, and their statement sheds light on the meaning of the "cruell and unusuall Punishments" clause: "1st, [T]he King's Bench, being a Temporal Court, made it a Part of the Judgment, That Titus Oates, being a Clerk, should, for his said Perjuries, be divested of his canonical and priestly Habit . . . ; which is a Matter wholly out of their Power, belonging to the Ecclesiastical Courts only." "2dly, [S]aid Judgments are barbarous, inhuman, and unchristian; and there is no Precedent to warrant the Punishments of whipping and committing to Prison for Life, for the Crime of Perjury; which yet were but Part of the Punishments inflicted upon him." "* * * *" "4thly, [T]his will be an Encouragement and Allowance for giving the like cruel, barbarous and illegal Judgments hereafter, unless this Judgment be reversed." "5thly, . . . [T]hat the said Judgments were contrary to Law and ancient Practice, and therefore erroneous, and ought to be reversed." "6thly, Because it is contrary to the Declaration, on the Twelfth of February last, . . . that excessive Bail ought not to be required, nor excessive Fines imposed, nor cruel nor unusual Punishments afflicted." 1 Journals of the House of Lords 367 (May 31, 1689), quoted in Second Trial of Titus Oates, supra at 1325. Oates' cause then aroused support in the House of Commons, whose members proceeded to pass a bill to annul the sentence. A "free conference" was ultimately convened in which representatives of the House of Commons attempted to persuade the Lords to reverse their position. See 6 Macaulay 143-145. Though this attempt was not successful, the Commons' report of the conference confirms that the "cruell and unusuall Punishments" clause was directed at the Oates case (among others) in particular, and at illegality, rather than disproportionality, of punishment in general. "[T]he Commons had hoped, That, after the Declaration [of Rights] presented to their Majesties upon their accepting the Crown (wherein their Lordships had joined with the Commons in complaining of the cruel and illegal Punishments of the last Reign; and in asserting it to be the ancient Right of the People of England that they should not be subjected to cruel and unusual Punishments; and that no Judgments to the Prejudice of the People in that kind ought in any wise to be drawn into Consequence, or Example); and after this Declaration had been so lately renewed in that Part of the Bill of Rights which the Lords have agreed to; they should not have seen Judgments of this Nature affirmed, and been put under a Necessity of sending up a Bill for reversing them; since those Declarations will not only be useless, but of pernicious Consequence to the People, if, so soon after, such Judgments as these stand affirmed, and be not taken to be cruel and illegal within the Meaning of those Declarations." "That the Commons had a particular Regard to these Judgments, amongst others, when that Declaration was first made; and must insist upon it, That they are erroneous, cruel, illegal, and of ill Example to future Ages. . . . " "* * * *" "That it seemed no less plain, That the Judgments were cruel, and of ill Example to future Ages." "That it was surely of ill Example for a Temporal Court to give Judgment, 'That a Clerk be divested of his Canonical Habits; and continue so divested during his Life.'" "That it was of ill Example, and illegal, That a Judgment of perpetual Imprisonment should be given in a Case, where there is no express Law to warrant it." "It was of ill Example, and unusual, That an Englishman should be exposed upon a Pillory, so many times a Year, during his Life. " "That it was illegal, cruel, and of dangerous Example, That a Freeman should be whipped in such a barbarous manner, as, in Probability, would determine in Death." "That this was avowed, when these Judgments was [sic] given by the then Lord Chief Justice of the King's Bench; who declared; 'That all the Judges had met; and unanimously agreed, That where the Subject was prosecuted at Common Law for a Misdemeanor, it was in the Discretion of the Court, to inflict what Punishment they pleased, not extending to Life, or Member.'" "That as soon as they had set up this Pretence to a discretionary Power, it was observable how they put it in Practice, not only in this, but in other Cases, and for other Offences, by inflicting such cruel and ignominious Punishments, as will be agreed to be far worse than Death itself to any Man who has a sense of Honour or Shame. . . ." 10 Journal of the House of Commons 247 (Aug. 2, 1689) (emphasis added). In all these contemporaneous discussions, as in the prologue of the Declaration, a punishment is not considered objectionable because it is disproportionate, but because it is "out of [the Judges'] Power," "contrary to Law and ancient practice," without "Precedents" or "express Law to warrant," "unusual," "illegal," or imposed by "Pretence to a discretionary Power." Accord, 2 Macaulay 204 (observing that Oates' punishment, while deserved, was unjustified by law). Moreover, the phrase "cruell and unusuall" is treated as interchangeable with "cruel and illegal." In other words, the "illegall and cruell Punishments" of the Declaration's prologue, see supra at, are the same thing as the "cruell and unusuall Punishments" of its body. (JUSTICE MARSHALL's concurrence in Furman v. Georgia, 408 U.S. at, observes that an earlier draft of the body prohibited "illegal" punishments, and that the change "appears to be inadvertent." See also 1 Chitty 712 (describing Declaration of Rights as prohibiting "cruel and illegal" punishments).) In the legal world of the time, and in the context of restricting punishment determined by the Crown (or the Crown's judges), "illegall" and "unusuall" were identical for practical purposes. Not all punishments were specified by statute; many were determined by the common law. Departures from the common law were lawful only if authorized by statute. See 1 J. Stephen, A History of the Criminal Law of England 489-490 (1883); 1 Chitty 710. A requirement that punishment not be "unusuall" -- that is, not contrary to "usage" (Lat. "usus") or "precedent" -- was primarily a requirement that judges pronouncing sentence remain within the bounds of common law tradition. 1 id. at 710-712; Ingraham v. Wright, 430 U.S. at (English provision aimed at "judges acting beyond their lawful authority"); Granucci, 57 Calif.L.Rev. at 859; Cf. 4 W. Blackstone, Commentaries *371-*373. In sum, we think it most unlikely that the English Cruell and Unusuall Punishments Clause was meant to forbid "disproportionate" punishments. There is even less likelihood that proportionality of punishment was one of the traditional "rights and privileges of Englishmen" apart from the Declaration of Rights, which happened to be included in the Eighth Amendment. Indeed, even those scholars who believe the principle to have been included within the Declaration of Rights do not contend that such a prohibition was reflected in English practice -- nor could they. See Granucci, supra at 847. For, as we observed in Woodson v. North Carolina,, (1976), in 1791, England punished over 200 crimes with death. See also 1 Stephen, supra at 458, 471-472 (until 1826, all felonies, except mayhem and petty larceny, were punishable by death). By 1830, the class of offenses punishable by death was narrowed to include "only" murder; attempts to murder by poisoning, stabbing, shooting, etc.; administering poison to procure abortion; sodomy; rape; statutory rape; and certain classes of forgery. See 1 Stephen, supra at 473-474. It is notable that, during his discussion of English capital punishment reform, Stephen does not once mention the Cruell and Unusuall Punishments Clause, though he was certainly aware of it. See 1 Stephen, supra at 489-490. Likewise, in his discussion of the suitability of punishments, Blackstone does not mention the Declaration. See 4 Blackstone, supra at *9-*19. C Unless one accepts the notion of a blind incorporation, however, the ultimate question is not what "cruell and unusuall punishments" meant in the Declaration of Rights, but what its meaning was to the Americans who adopted the Eighth Amendment. Even if one assumes that the Founders knew the precise meaning of that English antecedent, but see Granucci, supra at 860-865, a direct transplant of the English meaning to the soil of American constitutionalism would, in any case, have been impossible. There were no common law punishments in the federal system, See United States v. Hudson, 7 Cranch 32 (1812), so that the provision must have been meant as a check not upon judges, but upon the Legislature. See, e.g., In re Kemmler,, (1890). Wrenched out of its common law context, and applied to the actions of a legislature, the word "unusual" could hardly mean "contrary to law." But it continued to mean (as it continues to mean today) "such as [does not] occu[r] in ordinary practice," Webster's American Dictionary (1828), "[s]uch as is [not] in common use," Webster's Second International Dictionary 2807 (1954). According to its terms, then, by forbidding "cruel and unusual punishments," see Stanford v. Kentucky,, (1989) (plurality opinion); In re Kemmler, supra at, the Clause disables the Legislature from authorizing particular forms or "modes" of punishment -- specifically, cruel methods of punishment that are not regularly or customarily employed. E.g., Louisiana ex rel. Francis v. Resweber,, (1947) (plurality opinion); In re Kemmler, supra at. See also United States v. Collins, 25 F.Cas. (No. 14,836) 545 (CC R.I. 1854) (Curtis, J.). The language bears the construction, however -- and here we come to the point crucial to resolution of the present case -- that "cruelty and unusualness" are to be determined not solely with reference to the punishment at issue ("Is life imprisonment a cruel and unusual punishment?"), but with reference to the crime for which it is imposed, as well ("Is life imprisonment cruel and unusual punishment for possession of unlawful drugs?"). The latter interpretation would make the provision a form of proportionality guarantee. The arguments against it, however, seem to us conclusive. First of all, to use the phrase "cruel and unusual punishment" to describe a requirement of proportionality would have been an exceedingly vague and oblique way of saying what Americans were well accustomed to saying more directly. The notion of "proportionality" was not a novelty (though then, as now, there was little agreement over what it entailed). In 1778, for example, the Virginia Legislature narrowly rejected a comprehensive "Bill for Proportioning Punishments" introduced by Thomas Jefferson. See 4 W. Blackstone, Commentaries 18 (H. Tucker ed. 1803) (discussing efforts at reform); 1 Writings of Thomas Jefferson 218-239 (A. Lipscomb ed.1903). Proportionality provisions had been included in several state constitutions. See, e.g., Pa.Const., § 38 (1776) (punishments should be, "in general, more proportionate to the crimes"); S.C.Const., Art. XL (1778) (same); N.H.Bill of Rights, Art. XVIII (1784) ("[A]ll penalties ought to be proportioned to the nature of the offence"). There is little doubt that those who framed, proposed, and ratified the Bill of Rights were aware of such provisions, yet chose not to replicate them. Both the New Hampshire Constitution, adopted 8 years before ratification of the Eighth Amendment, and the Ohio Constitution, adopted 12 years after, contain, in separate provisions, a prohibition of "cruel and unusual punishments" ("cruel or unusual," in New Hampshire's case) and a requirement that "all penalties ought to be proportioned to the nature of the offence." N.H. Bill of Rights, Arts. XVIII, XXXIII (1784). Ohio Const., Art. VIII, §§ 13, 14 (1802). Secondly, it would seem quite peculiar to refer to cruelty and unusualness for the offense in question, in a provision having application only to a new government that had never before defined offenses, and that would be defining new and peculiarly national ones. Finally, and most conclusively, as we proceed to discuss, the fact that what was "cruel and unusual" under the Eighth Amendment was to be determined without reference to the particular offense is confirmed by all available evidence of contemporary understanding. The Eighth Amendment received little attention during the proposal and adoption of the Federal Bill of Rights. However, what evidence exists from debates at the state ratifying conventions that prompted the Bill of Rights, as well as the floor debates in the First Congress which proposed it, "confirm[s] the view that the cruel and unusual punishments clause was directed at prohibiting certain methods of punishment." Granucci, 57 Calif.L.Rev. at 842 (emphasis added). See Schwartz, Eighth Amendment Proportionality Analysis and the Compelling Case of William Rummel, 71 J.Crim.L. & Criminology 378, 378-382 (1980); Welling & Hipfner, Cruel and Unusual?: Capital Punishment in Canada, 26 U.Toronto L.J. 55, 61 (1976). In the January, 1788, Massachusetts Convention, for example, the objection was raised that Congress was "nowhere restrained from inventing the most cruel and unheard-of punishments, and annexing them to crimes; and there is no constitutional check on [it], but that racks and gibbets may be amongst the most mild instruments of [its] discipline." 2 J. Elliot, Debates on the Federal Constitution 111 (2d ed. 1854) (emphasis added). In the Virginia Convention, Patrick Henry decried the absence of a bill of rights, stating: "What says our [Virginia] Bill of Rights? -- 'that excessive bail ought not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.' . . ." "In this business of legislation, your members of Congress will loose the restriction of not imposing excessive fines, demanding excessive bail, and inflicting cruel and unusual punishments. These are prohibited by your declaration of rights. What has distinguished our ancestors? -- That they would not admit of tortures, or cruel and barbarous punishment." 3 id. at 447. The actions of the First Congress, which are, of course, persuasive evidence of what the Constitution means, Marsh v. Chambers,, (1983); Carroll v. United States,, (1925); cf. 17 U. S. Maryland, 4 Wheat. 316, (1819), belie any doctrine of proportionality. Shortly after this Congress proposed the Bill of Rights, it promulgated the Nation's first Penal Code. See 1 Stat. 112-119 (1790). As the then-extant New Hampshire Constitution's proportionality provision didactically observed, "[n]o wise legislature" -- that is, no legislature attuned to the principle of proportionality -- "will afix the same punishment to the crimes of theft, forgery and the like, which they do to those of murder and treason," N.H. Const., Pt. I, Art. XVIII (1784). Jefferson's Bill For Proportioning Crimes and Punishments punished murder and treason by death; counterfeiting of public securities by forfeiture of property plus six years at hard labor, and "run[ning] away with any sea-vessel or goods laden on board thereof" by treble damages to the victim and five years at hard labor. See 1 Writings of Thomas Jefferson at 220-222, 229-231 (footnote omitted). Shortly after proposing the Bill of Rights, the First Congress ignored these teachings. It punished forgery of United States securities, "run[ning] away with [a] ship or vessel, or any goods or merchandise to the value of fifty dollars," treason, and murder on the high seas with the same penalty: death by hanging. 1 Stat. 114. The law books of the time are devoid of indication that anyone considered these newly enacted penalties unconstitutional by virtue of their disproportionality. Cf. United States v. Tully, 28 F.Cas. (No. 16,545) 226 (CC Mass. 1812) (Story and Davis, JJ.) (Force or threat thereof not an element of "run[n]ing away with [a] ship or vessel"). The early commentary on the Clause contains no reference to disproportionate or excessive sentences, and again indicates that it was designed to outlaw particular modes of punishment. One commentator wrote: "The prohibition of cruel and unusual punishments, marks the improved spirit of the age, which would not tolerate the use of the rack or the stake, or any of those horrid modes of torture, devised by human ingenuity for the gratification of fiendish passion." J. Bayard, A Brief Exposition of the Constitution of the United States 154 (2d ed. 1840). Another commentator, after explaining (in somewhat convoluted fashion) that the "spirit" of the Excessive Bail and Excessive Fines Clauses forbade excessive imprisonments, went on to add: "Under the [Eighth] amendment, the infliction of cruel and unusual punishments is also prohibited. The various barbarous and cruel punishments inflicted under the laws of some other countries, and which profess not to be behind the most enlightened nations on earth in civilization and refinement, furnish sufficient reasons for this express prohibition. Breaking on the wheel, flaying alive, rending assunder with horses, various species of horrible tortures inflicted in the inquisition, maiming, mutilating and scourging to death, are wholly alien to the spirit of our humane general constitution." B. Oliver, The Rights of An American Citizen 186 (1832). Chancellor Kent; in a paragraph of his Commentaries arguing that capital punishment "ought to be confined to the few cases of the most atrocious character," does not suggest that the "Cruel and Unusual Punishments" Clauses of State or Federal Constitutions require such proportionality -- even though the very paragraph in question begins with the statement that "cruel and unusual punishments are universally condemned." 2 J. Kent, Commentaries on American Law 10-11 (1827). And Justice Story had this to say: "The provision [the Eighth Amendment] would seem wholly unnecessary in a free government, since it is scarcely possible that any department of such a government should authorize or justify such atrocious conduct. It was, however, adopted as an admonition to all departments of the national government to warn them against such violent proceedings as had taken place in England in the arbitrary reigns of some of the Stuarts." 3 J. Story, Commentaries on the Constitution of the United States § 1896 (1833). Many other Americans apparently agreed that the Clause only outlawed certain modes of punishment: during the 19th century, several States ratified constitutions that prohibited "cruel and unusual," "cruel or unusual," or simply "cruel" punishments and required all punishments to be proportioned to the offense. Ohio Const., Art. VIII, §§ 13, 14 (1802); Ind.Const., Art. I, §§ 15-16 (1816); Me.Const., Art. I, § 9 (1819); R.I.Const., Art. I, § 8 (1842); W.Va.Const., Art. II, § 2 (1861-1863); Ga.Const., Art. I, §§ 16, 21 (1868). Perhaps the most persuasive evidence of what "cruel and unusual" meant, however, is found in early judicial constructions of the Eighth Amendment and its state counterparts. An early (perhaps the earliest) judicial construction of the federal provision is illustrative. In Barker v. People, 20 Johns. *457 (N.Y.Sup.Ct. 1823), aff'd, 3 Cow. 686 (N.Y. 1824), the defendant, upon conviction of challenging another to a duel, had been disenfranchised. Chief Justice Spencer assumed that the Eighth Amendment applied to the States, and, in finding that it had not been violated, considered the proportionality of the punishment irrelevant. "The disenfranchisement of a citizen," he said, "is not an unusual punishment; it was the consequence of treason, and of infamous crimes, and it was altogether discretionary in the legislature to extend that punishment to other offences." Barker v People, supra at *459. Throughout the 19th century, state courts interpreting state constitutional provisions with identical or more expansive wording (i.e., "cruel or unusual") concluded that these provisions did not proscribe disproportionality, but only certain modes of punishment. For example, in Aldridge v. Commonwealth, 4 Va. 447 (1824), the General Court of Virginia had occasion to interpret the cruel and unusual punishments clause that was the direct ancestor of our federal provision, see supra at. In rejecting the defendant's claim that a sentence of so many as 39 stripes violated the Virginia Constitution, the court said: "As to the ninth section of the Bill of Rights, denouncing cruel and unusual punishments, we have no notion that it has any bearing on this case. That provision was never designed to control the Legislative right to determine ad libitum upon the adequacy of punishment, but is merely applicable to the modes of punishment. . . . [T]he best heads and hearts of the land of our ancestors had long and loudly declaimed against the wanton cruelty of many of the punishments practised in other countries, and this section in the Bill of Rights was framed effectually to exclude these, so that no future Legislature, in a moment perhaps of great and general excitement, should be tempted to disgrace our Code by the introduction of any of those odious modes of punishment." 4 Va. at 449-450 (emphasis in original). Accord, Commonwealth v. Hitchings, 71 Mass. 482, 486 (1855); Garcia v. Territory, 1 N.M. 415, 417-419 (1869); Whitten v. Georgia, 47 Ga. 297, 301 (1872); Cummins v. People, 42 Mich. 142, 143-144, 3 N.W. 305 (1879); State v. Williams, 77 Mo. 310, 312-313 (1883); State v. White, 44 Kan. 514, 520-521, 25 P. 33, 34-35 (1890); People v. Morris, 80 Mich. 634, 638, 45 N.W. 591, 592 (1890); Hobbs v. State, 133 Ind. 404, 408-410, 32 N.E. 1019, 1020-1021 (1893); State v. Hogan, 63 Ohio St. 202, 218, 58 N.E. 572, 575 (1900); see also In re Bayard, 25 Hun. 546, 549-550 (1881). In the 19th century, judicial agreement that a "cruel and unusual" (or "cruel or unusual") provision did not constitute a proportionality requirement appears to have been universal. One case, late in the century, suggested in dictum, not a full-fledged proportionality principle, but at least the power of the courts to intervene "in very extreme cases, where the punishment proposed is so severe and out of proportion to the offense as to shock public sentiment and violate the judgment of reasonable people." State v. Becker, 3 S.D. 29, 41, 51 N.W. 1018, 1022 (1892). That case, however, involved a constitutional provision proscribing all punishments that were merely "cruel," S.D.Const., Art. VI, § 23 (1889). A few decisions early in the present century cited it (again in dictum) for the proposition that a sentence "so out of proportion to the offense . . . as to shock public sentiment and violate the judgment of reasonable people'" would be "cruel and unusual." Jackson v. United States, 102 F. 473, 488 (CA9 1900); Territory v. Ketchum, 10 N.M. 718, 723, 65 P. 169, 171 (1901). II We think it enough that those who framed and approved the Federal Constitution chose, for whatever reason, not to include within it the guarantee against disproportionate sentences that some State Constitutions contained. It is worth noting, however, that there was good reason for that choice -- a reason that reinforces the necessity of overruling Solem. While there are relatively clear historical guidelines and accepted practices that enable judges to determine which modes of punishment are "cruel and unusual," proportionality does not lend itself to such analysis. Neither Congress nor any state legislature has ever set out with the objective of crafting a penalty that is "disproportionate"; yet, as some of the examples mentioned above indicate, many enacted dispositions seem to be so -- because they were made for other times or other places, with different social attitudes, different criminal epidemics, different public fears, and different prevailing theories of penology. This is not to say that there are no absolutes; one can imagine extreme examples that no rational person, in no time or place, could accept. But, for the same reason, these examples are easy to decide, they are certain never to occur. The real function of a constitutional proportionality principle, if it exists, is to enable judges to evaluate a penalty that some assemblage of men and women has considered proportionate -- and to say that it is not. For that real-world enterprise, the standards seem so inadequate that the proportionality principle becomes an invitation to imposition of subjective values. This becomes clear, we think, from a consideration of the three factors that Solem found relevant to the proportionality determination: (1) the inherent gravity of the offense, (2) the sentences imposed for similarly grave offenses in the same jurisdiction, and (3) sentences imposed for the same crime in other jurisdictions. 463 U.S. at. As to the first factor: of course, some offenses, involving violent harm to human beings, will always and everywhere be regarded as serious, but that is only half the equation. The issue is what else should be regarded to be as serious as these offenses, or even to be more serious than some of them. On that point, judging by the statutes that Americans have enacted, there is enormous variation -- even within a given age, not to mention across the many generations ruled by the Bill of Rights. The State of Massachusetts punishes sodomy more severely than assault and battery, compare Mass.Gen.Laws § 272:34 (1988) ("not more than twenty years" in prison for sodomy) with § 265:13A ("not more than two and one-half years" in prison for assault and battery); whereas, in several States, sodomy is not unlawful at all. In Louisiana, one who assaults another with a dangerous weapon faces the same maximum prison term as one who removes a shopping basket "from the parking area or grounds of any store . . . without authorization." La.Rev.Stat.Ann. §§ 14:37, 14:68.1 (West 1986). A battery that results in "protracted and obvious disfigurement" merits imprisonment "for not more than five years," § 14:34.1, one-half the maximum penalty for theft of livestock or an oilfield seismograph, §§ 14:67.1, 14:67.8. We may think that the First Congress punished with clear disproportionality when it provided up to seven years in prison and up to $1,000 in fine for "cut[ting] off the ear or ears, . . . cut[ting] out or disabl[ing] the tongue, . . . put[ting] out an eye, . . . cut[ting] off . . . any limb or member of any person with intention . . . to maim or disfigure," but provided the death penalty for "run[ning] away with [a] ship or vessel, or any goods or merchandise to the value of fifty dollars." Act of Apr. 30, 1790, ch. 9, §§ 8, 13, 1 Stat. 113-115. But then perhaps the citizens of 1791 would think that today's Congress punishes with clear disproportionality when it sanctions "assault by . . . wounding" with up to six months in prison, 18 U.S.C. § 113(d), unauthorized reproduction of the "Smokey Bear" character or name with the same penalty, 18 U.S.C. § 711, offering to barter a migratory bird with up to two years in prison, 16 U.S.C. § 707(b), and purloining a "key suited to any lock adopted by the Post Office Department" with a prison term of up to 10 years, 18 U.S.C. § 1704. Perhaps both we and they would be right, but the point is that there are no textual or historical standards for saying so. The difficulty of assessing gravity is demonstrated in the very context of the present case: Petitioner acknowledges that a mandatory life sentence might not be "grossly excessive" for possession of cocaine with intent to distribute, see Hutto v. Davis, (1982). But surely whether it is a "grave" offense merely to possess a significant quantity of drugs -- thereby facilitating distribution, subjecting the holder to the temptation of distribution, and raising the possibility of theft by others who might distribute -- depends entirely upon how odious and socially threatening one believes drug use to be. Would it be "grossly excessive" to provide life imprisonment for "mere possession" of a certain quantity of heavy weaponry? If not, then the only issue is whether the possible dissemination of drugs can be as "grave" as the possible dissemination of heavy weapons. Who are we to say no? The members of the Michigan Legislature, and not we, know the situation on the streets of Detroit. The second factor suggested in Solem fails for the same reason. One cannot compare the sentences imposed by the jurisdiction for "similarly grave" offenses if there is no objective standard of gravity. Judges will be comparing what they consider comparable. Or, to put the same point differently: when it happens that two offenses judicially determined to be "similarly grave" receive significantly dissimilar penalties, what follows is not that the harsher penalty is unconstitutional, but merely that the legislature does not share the judges' view that the offenses are similarly grave. Moreover, even if "similarly grave" crimes could be identified, the penalties for them would not necessarily be comparable, since there are many other justifications for a difference. For example, since deterrent effect depends not only upon the amount of the penalty, but upon its certainty, crimes that are less grave but significantly more difficult to detect may warrant substantially higher penalties. Grave crimes of the sort that will not be deterred by penalty may warrant substantially lower penalties, as may grave crimes of the sort that are normally committed once in a lifetime by otherwise law-abiding citizens who will not profit from rehabilitation. Whether these differences will occur, and to what extent, depends, of course, upon the weight the society accords to deterrence and rehabilitation, rather than retribution, as the objective of criminal punishment (which is an eminently legislative judgment). In fact, it becomes difficult even to speak intelligently of "proportionality" once deterrence and rehabilitation are given significant weight. Proportionality is inherently a retributive concept, and perfect proportionality is the talionic law. Cf. Bill For Proportioning Punishments, 1 Writings of Thomas Jefferson at 218, 228-229 ("[W]hoever . . . shall maim another, or shall disfigure him . . . shall be maimed or disfigured in like sort"). As for the third factor mentioned by Solem -- the character of the sentences imposed by other States for the same crime -- it must be acknowledged that that can be applied with clarity and ease. The only difficulty is that it has no conceivable relevance to the Eighth Amendment. That a State is entitled to treat with stern disapproval an act that other States punish with the mildest of sanctions follows a fortiori from the undoubted fact that a State may criminalize an act that other States do not criminalize at all. Indeed, a State may criminalize an act that other States choose to reward -- punishing, for example, the killing of endangered wild animals for which other States are offering a bounty. What greater disproportion could there be than that? "Absent a constitutionally imposed uniformity inimical to traditional notions of federalism, some State will always bear the distinction of treating particular offenders more severely than any other State." Rummel, 445 U.S. at. Diversity not only in policy, but in the means of implementing policy, is the very raison d'etre of our federal system. Though the different needs and concerns of other States may induce them to treat simple possession of 672 grams of cocaine as a relatively minor offense, see Wyo.Stat. § 35-7-1031(c) (1988) (6 months); W.Va.Code § 60A-4-401(c) (1989) (6 months), nothing in the Constitution requires Michigan to follow suit. The Eighth Amendment is not a ratchet, whereby a temporary consensus on leniency for a particular crime fixes a permanent constitutional maximum, disabling the States from giving effect to altered beliefs and responding to changed social conditions. III Our 20th-century jurisprudence has not remained entirely in accord with the proposition that there is no proportionality requirement in the Eighth Amendment, but neither has it departed to the extent that Solem suggests. In Weems v. United States, (1910), a government disbursing officer convicted of making false entries of small sums in his account book was sentenced by Philippine courts to 15 years of cadena temporal. That punishment, based upon the Spanish Penal Code, called for incarceration at "hard and painful labor'" with chains fastened to the wrists and ankles at all times. Several "accessor[ies]" were superadded, including permanent disqualification from holding any position of public trust, subjection to "[government] surveillance" for life, and "civil interdiction," which consisted of deprivation of "`the rights of parental authority, guardianship of person or property, participation in the family council[, etc.]'" Weems, supra at. Justice McKenna, writing for himself and three others, held that the imposition of cadena temporal was "Cruel and Unusual Punishment." (Justice White, joined by Justice Holmes, dissented.) That holding, and some of the reasoning upon which it was based, was not at all out of accord with the traditional understanding of the provision we have described above. The punishment was both (1) severe and (2) unknown to Anglo-American tradition. As to the former, Justice McKenna wrote: "No circumstance of degradation is omitted. It may be that even the cruelty of pain is not omitted. He must bear a chain night and day. He is condemned to painful as well as hard labor. What painful labor may mean we have no exact measure. It must be something more than hard labor. It may be hard labor pressed to the point of pain." 217 U.S. at. As to the latter: "It has no fellow in American legislation. Let us remember that it has come to us from a government of a different form and genius from ours. It is cruel in its excess of imprisonment and that which accompanies and follows imprisonment. It is unusual in its character." Id. at. Other portions of the opinion, however, suggest that mere disproportionality, by itself, might make a punishment cruel and unusual: "Such penalties for such offenses amaze those who . . . believe that it is a precept of justice that punishment for crime should be graduated and proportioned to offense." Id. at. "[T]he inhibition [of the Cruel and Unusual Punishments Clause] was directed not only against punishments which inflict torture, 'but against all punishments which, by their excessive length or severity, are greatly disproportioned to the offenses charged.'" Id. at, quoting O'Neil v. Vermont,, (1892) (Field, J., dissenting). Since it contains language that will support either theory, our later opinions have used Weems, as the occasion required, to represent either the principle that "the Eighth Amendment bars not only those punishments that are 'barbaric,' but also those that are 'excessive' in relation to the crime committed," Coker v. Georgia,, (1977), or the principle that only a "unique . . . punishmen[t]," a form of imprisonment different from the "more traditional forms . . . imposed under the Anglo-Saxon system," can violate the Eighth Amendment, Rummel, supra at. If the proof of the pudding is in the eating, however, it is hard to view Weems as announcing a constitutional requirement of proportionality, given that it did not produce a decision implementing such a requirement, either here or in the lower federal courts, for six decades. In Graham v. West Virginia, (1912), for instance, we evaluated (and rejected) a claim that life imprisonment for a third offense of horse theft was "cruel and unusual." We made no mention of Weems, although the petitioner had relied upon that case. See also Badders v. United States, (1916). Opinions in the Federal Courts of Appeals were equally devoid of evidence that this Court had announced a general proportionality principle. Some evaluated "cruel and unusual punishment" claims without reference to Weems. See, e.g., Bailey v. United States, 284 F. 126 (CA7 1922); Tincher v. United States, 11 F.2d 18, 21 (CA4 1926). Others continued to echo (in dictum) variants of the dictum in State v. Becker, 3 S.D. 29, 51 N.W. 1018 (1892), to the effect that courts will not interfere with punishment unless it is "manifestly cruel and unusual," and cited Weems for the proposition that sentences imposed within the limits of a statute "ordinarily will not be regarded as cruel and unusual." See, e.g., Sansone v. Zerbst, 73 F.2d 670, 672 (CA10 1934); Bailey v. United States, 74 F.2d 451, 453 (CA10 1934). Not until more than half a century after Weems did the Circuit Courts begin performing proportionality analysis. E.g., Hart v. Coiner, 483 F.2d 136 (CA4 1973). Even then, some continued to state that "[a] sentence within the statutory limits is not cruel and unusual punishment." Page v. United States, 462 F.2d 932, 935 (CA3 1972). Accord, Rener v. Beto, 447 F.2d 20, 23 (CA5 1971); Anthony v. United States, 331 F.2d 687, 693 (CA9 1964). The first holding of this Court unqualifiedly applying a requirement of proportionality to criminal penalties was issued 185 years after the Eighth Amendment was adopted. In Coker v. Georgia, supra, the Court held that, because of the disproportionality, it was a violation of the Cruel and Unusual Punishments Clause to impose capital punishment for rape of an adult woman. Five years later, in Enmund v. Florida, (1982), we held that it violates the Eighth Amendment, because of disproportionality, to impose the death penalty upon a participant in a felony that results in murder, without any inquiry into the participant's intent to kill. Rummel, (1980), treated this line of authority as an aspect of our death penalty jurisprudence, rather than a generalizable aspect of Eighth Amendment law. We think that is an accurate explanation, and we reassert it. Proportionality review is one of several respects in which we have held that "death is different," and have imposed protections that the Constitution nowhere else provides. See, e.g., Turner v. Murray,, (1986); Eddings v. Oklahoma, (1982); id. at (O'CONNOR, J., concurring); Beck v. Alabama, (1980). We would leave it there, but will not extend it further. IV Petitioner claims that his sentence violates the Eighth Amendment for a reason in addition to its alleged disproportionality. He argues that it is "cruel and unusual" to impose a mandatory sentence of such severity, without any consideration of so-called mitigating factors such as, in his case, the fact that he had no prior felony convictions. He apparently contends that the Eighth Amendment requires Michigan to create a sentencing scheme whereby life in prison without possibility of parole is simply the most severe of a range of available penalties that the sentencer may impose after hearing evidence in mitigation and aggravation. As our earlier discussion should make clear, this claim has no support in the text and history of the Eighth Amendment. Severe, mandatory penalties may be cruel, but they are not unusual in the constitutional sense, having been employed in various forms throughout our Nation's history. As noted earlier, mandatory death sentences abounded in our first Penal Code. They were also common in the several States -- both at the time of the founding and throughout the 19th century. See Woodson v. North Carolina, 428 U.S. at. There can be no serious contention, then, that a sentence which is not otherwise cruel and unusual becomes so simply because it is "mandatory." See Chapman v. United States,, (1991). Petitioner's "required mitigation" claim, like his proportionality claim, does find support in our death penalty jurisprudence. We have held that a capital sentence is cruel and unusual under the Eighth Amendment if it is imposed without an individualized determination that that punishment is "appropriate" -- whether or not the sentence is "grossly disproportionate." See Woodson v. North Carolina, supra; Lockett v. Ohio, (1978); Eddings v. Oklahoma, supra; Hitchcock v. Dugger, (1987). Petitioner asks us to extend this so-called "individualized capitalsentencing doctrine," Sumner v. Shuman,, (1987), to an "individualized mandatory life in prison without parole sentencing doctrine." We refuse to do so. Our cases creating and clarifying the "individualized capital sentencing doctrine" have repeatedly suggested that there is no comparable requirement outside the capital context, because of the qualitative difference between death and all other penalties. See Eddings v. Oklahoma, 455 U.S. at; id. at (O'CONNOR, J., concurring); Lockett v. Ohio, supra at; Woodson v. North Carolina, supra at; Rummel v. Estelle, supra at. "The penalty of death differs from all other forms of criminal punishment, not in degree, but in kind. It is unique in its total irrevocability. It is unique in its rejection of rehabilitation of the convict as a basic purpose of criminal justice. And it is unique, finally, in its absolute renunciation of all that is embodied in our concept of humanity." Furman v. Georgia, 408 U.S. at (Stewart, J., concurring). It is true that petitioner's sentence is unique in that it is the second most severe known to the law; but life imprisonment with possibility of parole is also unique in that it is the third most severe. And if petitioner's sentence forecloses some "flexible techniques" for later reducing his sentence, see Lockett, supra at (Burger, C.J.) (plurality opinion), it does not foreclose all of them, since there remain the possibilities of retroactive legislative reduction and executive clemency. In some cases, moreover, there will be negligible difference between life without parole and other sentences of imprisonment -- for example, a life sentence with eligibility for parole after 20 years, or even a lengthy term sentence without eligibility for parole, given to a 65-year-old man. But even where the difference is the greatest, it cannot be compared with death. We have drawn the line of required individualized sentencing at capital cases, and see no basis for extending it further. The judgment of the Michigan Court of Appeals is Affirmed.

Petitioner Harmelin was convicted under Michigan law of possessing more than 650 grams of cocaine and sentenced to a mandatory term of life in prison without possibility of parole. The State Court of Appeals affirmed, rejecting his argument that the sentence was "cruel and unusual" within the meaning of the Eighth Amendment. He claims here that the sentence is cruel and unusual because it is "significantly disproportionate" to the crime he committed, and because the sentencing judge was statutorily required to impose it, without taking into account the particularized circumstances of the crime and of the criminal. Held: The judgment is affirmed. 176 Mich. App. 524, 440 N.W.2d 75, affirmed. JUSTICE SCALIA delivered the opinion of the Court with respect to Part IV, concluding that Harmelin's claim that his sentence is unconstitutional because it is mandatory in nature, allowing the sentencer no opportunity to consider "mitigating factors," has no support in the Eighth Amendment's text and history. Severe, mandatory penalties may be cruel, but they are not unusual in the constitutional sense, having been employed in various forms throughout the Nation's history. Although Harmelin's claim finds some support in the so-called "individualized capital sentencing doctrine" of this Court's death penalty jurisprudence, see, e.g., Woodson v. North Carolina,, that doctrine may not be extended outside the capital context, because of the qualitative differences between death and all other penalties, see, e.g., id. at. . JUSTICE SCALIA, joined by THE CHIEF JUSTICE, concluded in Parts I, II, and III that, because the Eighth Amendment contains no proportionality guarantee, Harmelin's sentence cannot be considered unconstitutionally disproportional. . (a) For crimes concededly classified and classifiable as felonies -- i.e., as punishable by significant terms of imprisonment in a state penitentiary -- the length of the sentence actually imposed is purely a matter of legislative prerogative. Rummel v. Estelle,,. Solem v. Helm,, which decreed a "general principle of proportionality," id. at, and used as the criterion for its application a three-factor test that had been explicitly rejected in Rummel, supra, at , and n. 27, and Hutto v. Davis,,, was wrong, and should be overruled. . (b) Although Solem, supra at, correctly discerned that the Eighth Amendment prohibition was derived from the "cruell and unusuall Punishments" provision of the English Declaration of Rights of 1689, Solem's conclusion that the latter provision embodied a right to be free from disproportionate punishments is refuted by the circumstances of the declaration's enactment and the contemporaneous understanding of the English guarantee. The guarantee was directed at the arbitrary use of the sentencing power by the King's Bench in particular cases, and at the illegality, rather than the disproportionality, of punishments thereby imposed. . (c) That the Americans who adopted the Eighth Amendment intended its Cruel and Unusual Punishments Clause as a check on the ability of the Legislature to authorize particular modes of punishment -- i.e., cruel methods of punishment that are not regularly or customarily employed -- rather than as a guarantee against disproportionate sentences is demonstrated by the available evidence of contemporary understanding, including the context of adoption, the debates of the state ratifying conventions and the First Congress, and early commentary and judicial decisions. It is particularly telling that those who framed and approved the Federal Constitution chose not to include within it the explicit guarantee against disproportionate sentences that some State Constitutions contained. . (d) There are no adequate textual or historical standards to enable judges to determine whether a particular penalty is disproportional. The first two of the factors that Solem found relevant -- the inherent gravity of the defendant's offense and the sentences imposed for similarly grave offenses in some jurisdictions -- fail for lack of an objective standard of gravity. Since, as the statutes Americans have enacted in different times and places demonstrate, there is enormous variation of opinion as to what offenses are serious, the proportionality principle is an invitation for judges to impose their own subjective values. Moreover, although the third Solem factor -- the character of the sentences imposed by other States for the same crime -- can be applied with clarity and ease, it is irrelevant to the Eighth Amendment. Traditional notions of federalism entitle States to treat like situations differently in light of local needs, concerns, and social conditions. . (e) Although this Court's 20th-century jurisprudence has not remained entirely in accord with the proposition that there is no Eighth Amendment proportionality requirement, it has not departed to the extent that Solem suggests. While Weems v. United States, -- which was cited by Solem, supra at, as the "leading case" -- did contain language suggesting that mere disproportionality might make a punishment cruel and unusual, 217 U.S. at, it also contained statements indicating that the unique punishment there at issue was unconstitutional because it was unknown to Anglo-American tradition, id. at. It is hard to view Weems as announcing a constitutional proportionality requirement, given that it did not produce a decision implementing such a requirement, either in this Court or the lower federal courts, for six decades. This Court's first such opinion, Coker v. Georgia,,, was a death penalty case. The Coker line of authority should not be treated as a generalized aspect of Eighth Amendment law, since proportionality review is one of several respects in which "death is different," requiring protections that the Constitution nowhere else provides. . JUSTICE KENNEDY, joined by JUSTICE O'CONNOR and JUSTICE SOUTER, concluded: 1. This Court's decisions recognize that the Eighth Amendment's Cruel and Unusual Punishments Clause encompasses a narrow proportionality principle that applies to noncapital sentences. See, e.g., Weems v. United States,,; Rummel v. Estelle,,, and n. 11; Hutto v. Davis,,, and n. 3; Solem v. Helm,. Although these decisions have not been totally clear or consistent, close analysis yields some common principles that give content to the uses and limits of proportionality review. First, the fixing of prison terms for specific crimes involves a substantial penological judgment that, as a general matter, is properly within the province of the legislature, and reviewing courts should grant substantial deference to legislative determinations. Second, there are a variety of legitimate penological schemes based on theories of retribution, deterrence, incapacitation, and rehabilitation, and the Eighth Amendment does not mandate adoption of any one such scheme. Third, marked divergences both in sentencing theories and the length of prescribed prison terms are the inevitable, often beneficial, result of the federal structure, and differing attitudes and perceptions of local conditions may yield different, yet rational, conclusions regarding the appropriate length of terms for particular crimes. Fourth, proportionality review by federal courts should be informed by objective factors to the maximum extent possible, and the relative lack of objective standards concerning length, as opposed to type, of sentence has resulted in few successful proportionality challenges outside the capital punishment context. Finally, the Eighth Amendment does not require strict proportionality between crime and sentence, but rather forbids only extreme sentences that are grossly disproportionate to the crime. . 2. Tn light of the foregoing principles, Harmelin's sentence does not violate the Cruel and Unusual Punishments Clause. Although a sentence of life imprisonment without parole is the second most severe penalty permitted by law, it is not grossly disproportionate to Harmelin's crime of possessing more than 650 grams of cocaine. His suggestion that the crime was nonviolent and victimless is false to the point of absurdity. Studies demonstrate the grave threat that illegal drugs, and particularly cocaine, pose to society in terms of violence, crime, and social displacement. The amount of cocaine Harmelin possessed has a potential yield of between 32,500 and 65,000 doses, and the Michigan Legislature could with reason conclude that possession of this large an amount is momentous enough to warrant the deterrence and retribution of a life sentence without parole. Given the severity of Harmelin's crime, there is no need to conduct a comparative analysis between his sentence and sentences imposed for other crimes in Michigan and for the same crime in other jurisdictions. This Court's decisions indicate that such an analysis is appropriate in the rare case in which a threshold comparison of the crime committed and the sentence imposed leads to an inference of gross disproportionality, see Solem, supra at; Weems, supra at, but not in the usual case where no such inference arises, see, e.g., Rummel, supra at. . SCALIA, J., announced the judgment of the Court and delivered the opinion of the Court with respect to Part IV, in which REHNQUIST C.J., and O'CONNOR, KENNEDY, and SOUTER, JJ., joined, and an opinion with respect to Parts I, II, and III, in which REHNQUIST, C.J., joined. KENNEDY, J., filed an opinion concurring in part and concurring in the judgment, in which O'CONNOR and SOUTER, JJ., joined, post, p.. WHITE, J., filed a dissenting opinion, in which BLACKMUN and STEVENS, JJ., joined, post, p.. MARSHALL, J., filed a dissenting opinion, post, p.. STEVENS, J., filed a dissenting opinion, in which BLACKMUN, J., joined, post, p..

1960_155

https://www.oyez.org/cases/1960/155

MR. JUSTICE CLARK delivered the opinion of the Court. The State of Michigan levies "on the privilege of ownership" a 5 1/2-mill tax per dollar on the value of each common share of stock in national banks located in the State. It requires federal and state savings and loan associations in the State to pay, in addition to other taxes not here involved, for its shareholders an intangibles tax of 2/5 a mill on each dollar of the paid-in value of their shares. In addition, state associations also pay a franchise tax of 1/4 mill per dollar of their capital and legal reserves. Appellant Michigan National Bank, with banking offices in eight Michigan cities, brought this suit to recover taxes paid under protest for the year 1952, claiming that the levy under Michigan's Act No. 9 resulted in a tax on national bank shares at least eight times greater than that levied on "other moneyed capital in the hands of individual citizens" in the State, in violation of § 5219 of the Revised Statutes of the United States. Initially, its attack referred to moneyed capital in the hands of insurance and finance companies, credit unions and individuals, as well as savings and loan associations. Before trial in the Michigan Court of Claims, however, its claim was limited to the latter only, asserting that these institutions were in substantial competition with a phase of the national banking business, i.e., residential mortgage loans, and were preferentially taxed. The resulting tax discrimination, appellant says, renders Act No. 9 invalid under the controlling decisions of this Court. Michigan's highest court has upheld the statute against this claim. 358 Mich. 611, 101 N.W.2d 245. We noted probable jurisdiction, 364 U.S. 810. We have concluded that, in practical operation, Michigan's tax structure does not have a discriminatory effect, and is therefore valid. This determination obviates the necessity of our considering the voluminous and confusing statistics relevant to the issue of whether or not there exists competition between banks and savings and loan associations in the State. The sole authorization upon which Michigan's Act No. 9 may rest is § 5219. First Nat. Bank v. Anderson, (1926); Des Moines Nat. Bank v. Fairweather, (1923). That authorization is qualified by a proviso that a state tax on national bank shares shall not be "at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State coming into competition with the business of national banks." We have assumed, without deciding, that the national banks located in Michigan and savings and loan associations there are in competition in a substantial phase of the business carried on by national banks, i.e., residential mortgage loans. The sole question here is whether Act No. 9 effects a tax discrimination between national banks and savings and loan associations. BACKGROUND RELATING TO THE PROBLEM Michigan first authorized the organization of savings and loan associations in 1887. They operate today under the same law as "cooperative" or mutual associations which accumulate capital only through the sale of shares to members, and by retention of a permitted surplus and a reserve from profits. They may make loans only on first mortgage real estate notes, and can neither carry on a banking business nor received deposits. Their reserves must equal 10% of liabilities to their members, and the associations' surplus is limited to 5% of assets. Earnings above the permitted reserves and surplus must be paid to members currently and at stated periods. The Congress authorized the organization of federal savings and loan associations in 1933 in the Home Owners' .loan Act, 48 Stat. 128, as amended, 12 U.S.C. §§ 1461-1468. They operate along the same general lines as state associations. The shares of members in both are insured by the Federal Savings and Loan Insurance Corporation. National banks, of course, engage in the general banking business as authorized by the National Bank Act. Prior to 1916, they were not permitted to make real estate mortgage loans except on certain farm lands. In that year, the Congress authorized the banks to make residential loans for a term of not over a year, and to the extent of 50% of the value of the mortgaged property. This term was first enlarged in 1927 to five years, and then to 10 years in 1935 by 49 Stat. 706, which also authorized an increase to 60% as the maximum proportion of property value permitted to be loaned. In 1934, national banks were authorized to purchase FHA guaranteed mortgages. Ten years later, that authority was enlarged to include VA loans which the Comptroller of the Currency by decision found to be in the same category as FHA mortgages. It was not until this time that national banks became any significant factor in the residential mortgage field. By 1952, the ratio of their deposits to their total assets had more than doubled, amounting to 92% of their assets, having totaled only 41% thereof at the time of the passage of § 5219. Michigan National was organized in 1941 with 150,000 shares of $10 par value and total resources of about $68,000,000. In 1952, it had outstanding 500,000 shares of the same par value (all of the increase having been issued as dividends) and resources of some $306,000,000. In 1952, its gross earnings on its capital account were 91%, which, after all expenses and taxes (except dividends and federal income tax), remained at over 31%. The 16 building and loan associations' average net earnings for the same year (before dividends and federal income taxes) amounted to 3.4% of their capital, approximately their normal annual earning. A $1,000 investment in Michigan National's stock (58.8 shares) in 1941 was worth $6,691.20 (157.5 shares) by 1952, an annual average increase in value of 61%. This does not include $1,308.80 in cash dividends paid over the same period. BACKGROUND AND CONSTRUCTION OF THE LEGISLATION 1. Section 5219. Congress enacted the Section in 1864, and this Court has passed on it over 55 times in the near century of the Section's existence. During that period, the Court has kept clearly in view, as was said in the last case in which it wrote, that "the various restrictions [§ 5219] . . . places on the permitted methods of taxation are designed to prohibit only those systems of state taxation which discriminate in practical operation against national banking associations or their shareholders as a class." Tradesmens Nat. Bank v. Oklahoma Tax Comm'n,, (1940). Reverting to one of the first and controlling cases dealing with the Section, Mercantile Bank v. New York, (1887), we find that Mr. Justice Matthews declared for a unanimous Court that the purpose of the Congress in passing the provision was "to prohibit the States from imposing such a burden as would prevent the capital of individuals from freely seeking investment in institutions which it was the express object of the law to establish and promote." At p.. The Court further held deposits in savings banks to be moneyed capital, but approved their total exemption from state taxes, along with other enumerated property, on the ground that the State had shown "just reason" so to do. In essence, the case stands for the proposition that the State cannot, by its tax structure, create "an unequal and unfriendly competition" with national banks. This case followed in the light of Hepburn v. School Directors, 23 Wall. 480, where Chief Justice Waite had pointed out that the taxable value of the stock in a national bank is not necessarily determined by its nominal or par value, but rather by "the amount of moneyed capital which the investment represents for the time being. . . . Therefore, some plan must be devised to ascertain what amount of money at interest is actually represented by a share of stock." At p.. The question of tax equivalence thus posed has echoed and re-echoed through the cases. A year subsequent to the decision in Mercantile Bank, supra, the same point was raised in Bank of Redemption v. Boston, (1888), where the exemption of deposits in savings banks was approved in an opinion which again was written by Mr. Justice Matthews. The Court, in comparing the tax levied on the two institutions, i.e., national banks and savings banks, said: "But shares of the national banks, while they constitute the capital stock of the corporations, do not represent the whole amount of the capital actually employed by them. They have deposits, too, shown in the present record to amount, in Massachusetts, to $132,042,332. The banks are not assessed for taxation on any part of these, although these deposits constitute a large part of the actual capital profitably employed by the banks in the conduct of their banking business. But it is not necessary to establish the exact equality in result of the two modes of taxation." At p.. A quarter of a century later, Mr. Justice Pitney in Amoskeag Savings Bank v. Purdy, (1913), in commenting on the factors to be considered in determining the burden of the tax, said: "There are other considerations to be weighed in determining the actual burden of the tax, one of which is the mode of valuing bank shares -- by adopting 'book values' [capital, surplus, undivided profits] -- which may be more or less favorable than the method adopted in valuing other kinds of personal property." At p.. The point was made even more clearly by Mr. Justice Brandeis in First Nat. Bank v. Louisiana Tax Comm'n, (1933), where he said: "There is a fundamental difference between banks, which make loans mainly from money of depositors, and the other financial institutions, which make loans mainly from the money supplied otherwise than by deposits. " At p.. And so we are taught that, in determining the burden of the tax -- its discriminatory character -- we look to its effect, not its rate. See Amoskeag Savings Bank, supra; Convington v. First Nat. Bank, (1905), and Tradesmens Nat. Bank v. Oklahoma Tax Comm'n, supra, the last case of this Court on the point. 2. Michigan's Act No. 9. Act No. 9, we have stated, levies a tax of 5 1/2 mills on the book value of each share of stock in national banks, while the separately imposed tax on all savings and loan association shares, exclusive of other taxes, is 2/5 of a mill on the paid-in value of the shares plus, on state associations only, 1/4 of a mill on the value of the paid-in capital and legal reserves. It appears from the record that, prior to the enactment of this tax, an inequity in the State's tax structure was thought to exist between state and national banks. Upon study of the problem and the recommendation of the Taxation Committee of the Michigan Bankers Association, the State Legislature decided to tax all banks "exactly alike." It embodied the proposal of the Association into Act No. 9. While we have no legislative history in the record before us, according to the amicus curiae brief of the Bankers Association filed in the trial court, the sponsors of Act No. 9 thought it would be "reasonable from the viewpoint of the public, equitable from the viewpoint of the competitors, and practical from the viewpoint of the banks themselves." The opinion of responsible officials of this Association, filed in this case some seven years after Act No. 9 had been in effect and the taxes therein provided paid without protest, save for appellant and four other banks, was: "Actual experience with the taxation system shows that it has produced a reasonable amount of revenue to the State; that it has not created any competitive disadvantage among the various types of institutions; and that it has proven to be simple to administer." Michigan's Supreme Court has also held that no discrimination in the tax was proven. While the basis of this holding is not too clear, we take it that the finding of total tax equality as between the national banks and the associations, insofar as Act No. 9 was concerned, meant that, in the court's view, the Michigan Legislature, in fixing the rate (5 1/2 mills) on the banks, had either (1) taken into consideration the moneyed capital on hand in each type of institution, i.e., deposits, which were not present as to savings and loan associations, or (2) if such method of valuation of bank stock was not permissible, that the Legislature intended to exempt from taxation any difference between the taxes levied on national banks and savings and loan associations because of the functions of the latter as repositories for the "small savings and accumulations of the industrious and thrifty." Such differences, the Michigan Supreme Court said, were "justified as partial exemptions" under Mercantile Bank, supra, and subsequent cases. While we are not bound by either of these interpretations placed on Act No. 9 by Michigan's highest court, 358 Mich. 611, 639-640, 101 N.W.2d 245, 259-260, we do accept as controlling its interpretation that, in fixing the rate on national bank shares, the Legislature took into account the moneyed capital controlled thereby. We believe that, granted satisfaction of the other qualifications of § 5219, a State's tax system offends only if, in practical operation, it discriminates against national banks or their shareholders as a class. That is to say, we could not strike down Act No. 9, as interpreted by Michigan's highest court, unless it were manifest that an investment in national bank shares was placed at a disadvantage by the practical operation of the State's law. According to our cases, discussed above, that clearly appears to have been the purpose of the Congress in enacting § 5219. We have made a comprehensive examination of the record, and fail to find such a discriminatory effect to be manifest in Michigan's tax system. As has been repeatedly indicated in our decisions, a dollar invested in national bank shares controls many more dollars of moneyed capital, the measuring rod of § 5219. On the other hand, the same dollar invested in a savings and loan share controls no more moneyed capital than its face value. The bank share has the power and control of its proportionate interest in all of the money available to the bank for investment purposes. In the case of Michigan National, this control is more than 21 times greater than the share's proportionate interest in the capital stock, surplus, and undivided profits would indicate. As to all national banks in the United States, the record shows that capital accounts amounting to about $7,000,000,000 control some $100,000,000,000 of deposits (92% of the total assets of all these banks), or an amount 14 times greater. Savings and loan associations have no similar assets of that character, their only source of moneyed capital being the share accounts of members, and, at least in the case here, the relatively small amount of retained earnings and surplus permitted under law. Relating the statistics to the immediate problem, the capital, surplus and undivided profits of Michigan National totaled about $13,000,000, to which the 5 1/2-mill tax was applied. The tax amounted to $68,181. The 16 savings and loan associations with which appellant was in competition had a paid-in share value of $134,000,000, to which was applied the 2/5-mill tax. The resultant tax was about $53,260. Had the same tax rate (2/5-mill) been applied to the moneyed capital, i.e., deposits, of Michigan National ($283,000,000), the product would have more than equaled the tax revenue from the application of the 5 1/2-mill rate against its capital account. In fact, it would have amounted to about $113,000, or 1.7 times the 1952 tax bill on appellant's shares. Similar results could be obtained as to all national banks in Michigan. Their total capital accounts, $166,700,000, when taxed at the 5 1/2-mill rate, yield some $917,000 in taxes. The 2/5-mill rate, if applied to their total deposits, $3,516,000,000, results in $1,406,000 in taxes. This is more than 1.5 times the 1952 taxes assessed under Act No. 9. While it is obvious that the taxable value of the shares in these two types of financial institutions is determined by different methods and that they are being taxed at different rates, it does not follow that § 5219 is automatically violated. "[I]t is not a valid objection to a tax on national bank shares that other moneyed capital in the state [is] . . . taxed at a different rate or assessed by a different method unless it appears that the difference in treatment results in fact in a discrimination unfavorable to the holders of the shares of national banks." Tradesmens Nat. Bank v. Oklahoma Tax Comm'n, supra, at. Cf. Amoskeag Savings Bank v. Purdy, supra; Covington v. First Nat. Bank, supra. We must remember the interpretation placed on Act No. 9 by Michigan's Supreme Court. It held in effect that the Legislature had taken into account, in fixing the different rates on national bank stock and savings and loan shares, the additional moneyed capital controlled by the former. Since Michigan National's share owner's investment has the equivalent profitmaking power of an amount 21 times greater than itself, and the investor in savings and loan share accounts has no similarly multiplied power, the national bank share would not be "unfavorably" treated unless it was taxed in excess of 21 times the levy on savings and loan share accounts. Cf. Bank of Redemption v. Boston, supra, at. Here, the ratio is only 13.8 to one, and, if the additional franchise tax upon state associations is included, the proportion drops to 8.5 to one. This is not to say that the value of the bank's deposits is a factor in the computation of the tax to be paid under the Michigan statutes. However, the deposits are relevant to the determination of whether or not the tax, as computed under the statutes, is a greater burden than that placed on "other moneyed capital." It is said, however, that this method would be contrary to Minnesota v. First Nat. Bank, (1927). It was argued in that case that an equivalence of tax between national banks and other moneyed capital existed because, if the tax rate applicable to other moneyed capital was applied to the assets of the bank without deducting liabilities, the ultimate tax would be approximately the same. However, Mr. Justice (later Chief Justice) Stone, writing for the Court, rejected that argument because it "ignores the fact that the tax authorized by § 5219 is against the holders of the bank shares and is measured by the value of the shares, and not by the assets of the bank without deduction of its liabilities. . . ." At. However, that case was decided on the authority of First Nat. Bank v. Hartford,, which Mr. Justice Stone also wrote and handed down the same day. There the comparison between the widespread capital exempted and that of national banks which was taxed led to the invalidation of Wisconsin's tax statute. The error the Court found was that Wisconsin "construed the decisions of this Court as requiring equality in taxation only of moneyed capital invested in businesses substantially identical with the business carried on by national banks." At. While Minnesota's Act, as construed, was not so broad, it taxed capital (including state bank shares) other than that invested in national bank shares at a lower rate. Since both national and state banks were permitted to deduct deposits, it followed that it would have been discriminatory to tax one at a lower rate than the other. However, implicit in the ruling is the proposition that if the same base is employed in the valuation of the shares of the competing institutions, as here, and the practical effect of the different rate does not result in a discrimination against moneyed capital in the hands of national banks, when compared with other competing moneyed capital, it does not violate § 5219. "[T]he bank share tax must be compared with . . . the tax on capital invested by individuals in the shares of corporations whose business competes with that of national banks." Minnesota v. First Nat. Bank, supra, at. In short, resulting discrimination in the effect of the tax is the test. Moreover, these cases were both handed down prior to congressional enactment of the Home Owners' Loan Act of 1933, which is "in pari materia" with § 5219 and appears "to throw a cross light" (L. Hand in United States v. Aluminum Co. of America, 148 F.2d 416, 429 (1945)) on Michigan's savings and loan tax statute. The 1933 Act, permitting the creation of federal savings and loan associations, contained a provision respecting local taxation which stated in part: ". . . no State . . . shall impose any tax on such [federal] associations or their franchise, capital, reserves, surplus, loans, or income greater than that imposed by such authority on other similar local mutual or cooperative thrift and home financing institutions." 48 Stat. 134. Unless Congress had recognized that States taxing national bank shares were free, in spite of § 5219, to exempt their own savings and loan associations from local taxation, it would have used language similar or referring to § 5219, as it did in other federal statutes creating different types of thrift institutions. To insure that the federal creatures received the same benefits, if any, as state agencies, Congress tied the taxation limitations to state action affecting the latter, rather than to § 5219. Although the federal statute was enacted prior to Michigan's savings and loan tax statute, its accommodation to such state measures, actual or potential, illustrates the assimilation by Congress of state savings and loan associations to their federal analogues, and not to the very different national fiscal institutions which national banks are. Furthermore, the power of the State to grant liberal tax treatment to its own associations, viewed even without the light of congressional action, is amply supported by the exemption doctrine of Mercantile Bank, supra, recognized as still vital long after Michigan's law of 1887 under which the savings and loan associations of that State are organized. These considerations weigh heavily in evaluating Michigan's enactment under § 5219. Under this standard, Michigan's tax structure does not, in practical effect, result in any discrimination. Its system looks to the moneyed capital controlled by the shareholder. If it is a share in a bank -- either federal or state -- the legislature considers the deposits available for investment, and fixes a rate commensurate with that increased earning and investment power of the shareholder. The resulting tax is not on the assets of the bank, nor on deposits, but on the control the shareholder has in the moneyed capital market. Thus, controlling some 21 times the cash value of his share, a Michigan National shareholder pays the higher rate. On the other hand, a savings and loan shareholder controls no deposits. He has only the cash value of his share (and the comparatively minute reserves allowed by law), insofar as the moneyed capital market is concerned. Consequently, he pays the lower rate. As the Michigan Bankers Association has indicated, this approach is realistic from a business standpoint, does not result in discrimination, is economically sound, and is fair to each type of taxpayer. If it results, as it did in 1952, in giving Michigan National a tax advantage, it cannot complain. It may be that, at some future time, although the statistics indicate it to be improbable, the bank deposits may fall to such a level that the 5 1/2-mill rate would be violative of § 5219. But here we are concerned with only one year, 1952, and for that year, the tax levied does not approach the permissible maximum. Such a possibility, however, may account for the action of the Legislature in setting the taxes at the lower than maximum levels now applied. Having assumed the element of competition between Michigan National and the savings and loan associations, a prerequisite to the application of § 5219, and in the light of both the clear doctrine of our earlier cases and the phenomenal growth and earning power of appellant despite Act No. 9, we cannot say that its burden in 1952 was so heavy as would "prevent the capital of individuals from freely seeking investment" in its shares. We have considered appellant's other points, and have concluded each is without merit. Affirmed.

R.S. § 5219 permits States to tax the shares of national banks, but not "at a greater rate than . . . other moneyed capital . . . coming into competition with the business of national banks." Michigan taxes the shareholders of national banks at a higher rate on the value of their shares of stock than it taxes the shareholders of federal and state savings and loan associations on the paid-in value of their shares. Both classes of institutions make residential mortgage loans, but national banks accept deposits which are employed in making loans and which amount to many times the aggregate value of their shares of stock, whereas savings and loan associations accept no deposits and make their loans mainly out of the proceeds of the sale of their shares of stock. Held: Even if savings and loan associations are in competition with national banks, the tax levied on the shareholders of national banks is not so discriminatory in practical effect as to violate R.S. § 5219. . (a) The restrictions of § 5219 on the permitted methods of state taxation of national banks were designed to prohibit only those systems of state taxation which discriminate in practical effect against national banks or their shareholders as a class. . (b) Michigan's taxes on the shares of national banks and on savings and loan associations, respectively, do not in practical effect discriminate against national banks or their shareholders as a class. . 358 Mich. 611, 101 N.W.2d 245, affirmed.

1976_75-1707

https://www.oyez.org/cases/1976/75-1707

MR. JUSTICE BLACKMUN delivered the opinion of the Court. This case presents a challenge to Ohio Rev.Code Ann. § 4141.29(D)(1)(a) (1973). That statute, at the times relevant to this suit, imposed a disqualification for unemployment benefits when the claimant's unemployment was "due to a labor dispute other than a lockout at any factory . . . owned or operated by the employer by which he is or was last employed." The challenge is based on the Supremacy Clause and on the Due Process and Equal Protection Clauses of the Fourteenth Amendment. The case also raises questions concerning abstention. I In November, 1974, plaintiff-appellee, Leonard Paul Hodory, was employed as a millwright apprentice with United States Steel Corporation (USS) at its works in Youngstown, Ohio. The United Mine Workers at that time were out on strike at coal mines owned by USS and by Republic Steel Corporation throughout the country. These company-owned mines supplied the fuel used in the operation of manufacturing facilities of USS and Republic. As a result of the strike, the fuel supply at the Youngstown plant was reduced. The plant eventually was shut down, and appellee was furloughed on November 12, 1974. Hodory applied to appellant Ohio Bureau of Employment Services for unemployment benefits. On January 3, 1975, he was notified by the Bureau that his claim was disallowed under Ohio Rev.Code Ann. § 4141.29(D)(1)(a) (1973). That statute then provided that a worker may not receive unemployment benefits if "[h]is unemployment was due to a labor dispute other than a lockout at any factory, establishment, or other premises located in this or any other state and owned or operated by the employer by which he is or was last employed; and for so long as his unemployment is due to such labor dispute. The written notification to appellee recited:" "A labor dispute started at coal mines owned and operated by U.S. Steel Corporation, and claimant is unemployed because of this labor dispute." App. i. Other notifications to Hodory for subsequent unemployment weeks contained similar recitals. Id. at ii and iii. Appellee promptly filed a request for reconsideration. In accord with the provisions of Ohio Rev.Code Ann. § 4141.28 (G) (1973), his request, along with a number of others, was referred on March 7 to the Board of Review. Meanwhile, on January 27, Hodory filed a complaint in the United States District Court for the Northern District of Ohio against the Bureau and its director, Albert G. Giles. The complaint was based on 42 U.S.C. § 1983, and sought declaratory and injunctive relief on behalf of appellee and "all others similarly situated" who had been or in the future would be denied benefits under § 4141.29(D)(1)(a). Record, Doc. 3, pp. 1 and 3. Hodory asserted, among other things, that the Ohio statute was in conflict with §§ 303(a)(1) and (3) of the Social Security Act of 1935, as amended, 42 U.S.C. §§ 503(a)(1) and (3), and that the statute as applied was irrational, and had no valid public purpose, in violation of the Due Process and Equal Protection Clauses of the Fourteenth Amendment. The gravamen of Hodory's complaint was the assertion that the State may not deny benefits to those who, like him, are unemployed under circumstances where the unemployment is "not the fault of the employee." A three-judge court was requested. Appellants, in their answer, asserted, among other things, that Hodory had failed to exhaust his state administrative remedies. A three-judge court was convened. The case was tried on the pleadings and interrogatories. In its opinion filed March 5, 1976, 408 F. Supp. 1016, that court concluded that abstention was not required, and would not be proper; that the action was properly maintained as a class action; and that the appellants had failed to demonstrate a rational and legitimate interest in discriminating against "individuals who were unemployed through no fault of their own, and neither participated in nor benefited from the labor dispute involving another union and their employer." Id. at 1022. The court then held that § 4141.29(D)(1)(a), as applied to Hodory and the class members, violated the Equal Protection and Due Process Clauses. The Bureau and its director took a direct appeal here pursuant to 28 U.S.C. § 1253. In their jurisdictional statement, appellants argued only that (1) the "labor dispute" disqualification provision is not unconstitutional as applied to appellee and the class; (2) the disqualification provision is not in conflict with the Social Security Act; (3) a state system of unemployment compensation may predicate disqualification upon any reasonable basis; and (4) USS and Republic, as employers of the class members, were denied substantive and procedural due process by the failure of the District Court to order them joined as parties defendant. Appellants made no claim therein based on abstention. We noted probable jurisdiction. 429 U.S. 814 (1976). A claim that the District Court should have abstained from deciding the case has been raised, however, in the brief amicus curiae filed by the AFL-CIO. A like claim is at least suggested by Republic Steel. Brief as Amicus Curiae 16-17. We feel those claims merit consideration. We follow the proper course for federal courts by considering first whether abstention is required, then whether there is a statutory ground of resolution, and finally, only if the challenge persists, whether the statute violates the Constitution. II Abstention There are, of course, two primary types of federal abstention. The first, usually referred to as Pullman abstention, involves an inquiry focused on the possibility that the state courts may interpret a challenged state statute so as to eliminate, or at least to alter materially, the constitutional question presented. Railroad Comm'n v. Pullman Co., (1941). See Bellotti v. Baird, (1976). The second type is Younger abstention, in which the court is primarily concerned, in an equitable setting, with considerations of comity and federalism, both as they relate to the State's interest in pursuing an ongoing state proceeding, and as they involve the ability of the state courts to consider federal constitutional claims in that context. Younger v. Harris, (1971). See Huffman v. Pursue, Ltd., (1975); Juidice v. Vail, (1977); Trainor v. Hernandez, ante at (concurring opinion). A. In the present case, appellants, who in effect are the State of Ohio, argued before the District Court that appellee was free to pursue his pending administrative appeal and have his constitutional claim adjudicated in the Court of Common Pleas, and that principles of comity therefore required abstention. Although appellants in their written submission to that court cited Pullman, the argument was clearly to the effect that Younger abstention should apply. The District Court held that abstention was unwarranted. It first asserted that, in Gibson v. Berryhill, (1973), this Court "stated specifically that administrative remedies need not be exhausted where the federal court plaintiff states a good cause of action under 42 U.S.C. § 1983." 408 F. Supp. at 1019. The court then stated that § 4141.29(D)(1)(a), "on its face, would appear to except the plaintiff from unemployment benefits for the period he was laid off due to coal miners' strike," and that "the Employment Bureau has denied benefits to plaintiff . . . solely on the basis of the challenged labor dispute disqualification." 408 F. Supp. at 1019. The court held that exhaustion of administrative remedies would be futile because the administrative appeal process would not permit a challenge to the constitutionality of the statute, and the Ohio courts had held the statute to be constitutional. Id. at 1019, and n. 1. Although the court observed that Huffman v. Pursue, Ltd., supra, broadened the Younger doctrine "to include a prohibition against federal court interference with certain ongoing civil proceedings in the state courts," 408 F. Supp. at 1019-1020, the court held that Huffman "was limited to the enjoining of ongoing state-initiated judicial proceedings," 408 F. Supp. at 1020 (emphasis in original), and did not apply to a challenge to administrative actions. Finally, the court held that abstention, along the Pullman line, "would not be proper in this case" because the challenged statute is not an ambiguous one "involving unsettled questions of state law which could be rendered constitutionally inoffensive by a limiting construction in the state courts." 408 F. Supp. at 1020. The court concluded that it would be improper to require the appellee "to undertake three administrative appeals" before he could challenge the statute in state court "where, moreover, the issue as to the constitutionality of the labor dispute disqualification has apparently been settled." Ibid. In this Court, as has been noted, appellants have not argued that Younger requires a remand with directions to the District Court to abstain, and at oral argument they resisted the suggestion of such a remand. Tr. of Oral Arg. 9-10. Instead, it is amicus Republic Steel that has made the suggestion. Younger v. Harris reflects "a system in which there is sensitivity to the legitimate interests of both State and National Governments, and in which the National Government, anxious though it may be to vindicate and protect federal rights and federal interests, always endeavors to do so in ways that will not unduly interfere with the legitimate activities of the States." 401 U.S. at 44. See Huffman v. Pursue, Ltd., 420 U.S. at; Juidice v. Vail, 430 U.S. at; Trainor v. Hernandez, ante at,, and id. at (concurring opinion). Younger and these cited cases express equitable principles of comity and federalism. They are designed to allow the State an opportunity to "set its own house in order" when the federal issue is already before a state tribunal. It may not be argued, however, that a federal court is compelled to abstain in every such situation. If the State voluntarily chooses to submit to a federal forum, principles of comity do not demand that the federal court force the case back into the State's own system. In the present case, Ohio either believes that the District Court was correct in its analysis of abstention or, faced with the prospect of lengthy administrative appeals followed by equally protracted state judicial proceedings, now has concluded to submit the constitutional issue to this Court for immediate resolution. In either event, under these circumstances Younger principles of equity and comity do not require this Court to refuse Ohio the immediate adjudication it seeks. B. Amicus AFL-CIO argues that Pullman abstention is proper here. The basis for the claimed applicability of Pullman is found in the facts that there were other steelworkers, at other Ohio facilities, laid off at the same time as appellee and assertedly for the same reason, and yet they were awarded unemployment compensation by the Bureau. See Brief for Appellants 3. Benefits were granted on the ground that the company-owned coal mines did not supply a sufficient amount of fuel to the plants there involved to effect a plant shut-down. Amicus argues that, if appellee were to pursue his administrative appeal, he might be granted benefits on the same ground. The problems with this approach, however, are several. First, appellee did not press any such claim before the Bureau or on administrative appeal, Tr. of Oral Arg. 9, and there is no indication that a claimant may be awarded benefits on the basis of a claim not made to the Bureau or Board of Review. Second, there is no indication that the plant at which appellee worked is situated similarly to the plants as to which benefits were granted. The Bureau apparently applied a test under which the closing of a plant was held not to be "due to" the labor dispute if the plant received less than 500 of its coal from the employer's struck mines. Id. at 7-8. There has been no claim or showing that the 50% test is unreasonable or improper and there has been no claim that appellee's plant was not dependent on the struck mines for more than 50% of its coal. What amicus suggests is that the court abstain on the basis of speculation that the unchallenged facts may not be as the Bureau obviously saw them, or that the Board might overturn an unchallenged standard of causation, or that the Board might even come up with a hitherto unknown and unclaimed reason for awarding benefits to appellee, such as a theory that, because the coal strike was nationwide it was not "at the employers' mines.'" See Brief for AFL-CIO as Amicus Curiae 8. None of these suggestions is based on fact or solid legal precedent. As has been noted, Pullman abstention is an equitable doctrine that comes into play when it appears that abstention may eliminate or materially alter the constitutional issue presented. There is a point, however, at which the possible benefits of abstention become too speculative to justify or require avoidance of the question presented. That point has been reached and surpassed here. We conclude that Pullman abstention is not appropriate. III Preemption Appellee argues that the Ohio statute is in conflict with, or preempted by, certain provisions of the Social Security Act, 42 U.S.C. § 501 et seq., and the Federal Unemployment Tax Act, 26 U.S.C. §§ 3301-3311. This argument was raised in the District Court, but was not resolved there. It would have been preferable, of course, for that court to have dealt with this statutory issue first. See Hagans v. Lavine,, (1974). The issue, however, entails no findings of fact, and has been fully briefed here by both parties. We therefore perceive no need to remand to the District Court, and we proceed to decide the question. Appellee points to two statutes as the source of his claimed federal requirement that he be paid unemployment compensation. The first is 42 U.S.C. § 503(a)(1), to the effect that the Secretary of Labor shall make no certification for payment of federal funds to state unemployment compensation programs unless state law provides for such methods of administration "as are found by the Secretary of Labor to be reasonably calculated to insure full payment of unemployment compensation when due." Appellee's argument necessarily is that payment is "due" him. Appellee cites only a single page of the voluminous legislative history of the Social Security Act in support of his assertion that the Act forbids disqualification of persons laid off due to a labor dispute at a related plant. That page contains the sentence: "To serve its purposes, unemployment compensation must be paid only to workers involuntarily unemployed." Report of the Committee on Economic Security, as reprinted in Hearings on S. 1130 before the Senate Committee on Finance, 74th Cong., 1st Sess., 1311, 1328 (1935). The cited Report was one to the President of the United States and became the cornerstone of the Social Security Act. On its face, the quoted sentence may be said to give some support to appellee's claim that "involuntariness" was intended to be the key to eligibility. A reading of the entire Report and consideration of the sentence in context, however, show that Congress did not intend to require that the States give coverage to every person involuntarily unemployed. The Report recognized that federal definition of the scope of coverage would probably prove easier to administer than individualized state plans, id. at 1323, but it nonetheless recommended the form of unemployment compensation scheme that exists today, namely, federal involvement primarily through tax incentives to encourage state-run programs. The Report's section entitled "Outline of Federal Act" concludes with the statement: "The plan for unemployment compensation that we suggest contemplates that the States shall have broad freedom to set up the type of unemployment compensation they wish. We believe that all matters in which uniformity is not absolutely essential should be left to the States. The Federal Government, however, should assist the States in setting up their administrations and in the solution of the problems they will encounter." Id. at 1326. See also id. at 1314. Following this statement, the Report contains a section entitled "Suggestions for State Legislation." It reads: "Benefits. -- The States should have freedom in determining their own waiting periods, benefit rates, maximum benefit periods, etc. We suggest caution lest they insert benefit provisions in excess of collections in their laws. To arouse hopes of benefits which cannot be fulfilled is invariably bad social and governmental policy." Id. at 1327. This statement reflects two things. First, it reflects the understanding that unemployment compensation schemes generally do not grant full benefits immediately and indefinitely, even to those involuntarily unemployed. The States were expected to create waiting periods, benefit rates, and maximum benefit periods, so as to bring the amount paid out in line with receipts. Second, the statement reflects concern that the States might grant eligibility greater than their funds could handle. By way of advice on particular statutes, the Report's "Suggestions" contains the following: "Willingness-to-work test. -- To serve its purposes, unemployment compensation must be paid only to workers involuntarily unemployed. The employees compensated must be both able and willing to work and must be denied benefits if they refuse to accept other suitable employment. Workers, however, should not be required to accept positions with wage, hour, or working conditions below the usual standard for the occupation or the particular region, or outside of the State, or where their rights of self-organization and collective bargaining would be interfered with." Id. at 1328. This, as has been noted, is the origin of appellee's argument that all persons involuntarily unemployed were intended to be compensated. Placed in context, however, it is clear that the single sentence is only an expression of caution that funds should not be dispensed too freely, and is not a direction that funds must be dispensed. Appellee's claim of support in the legislative history accordingly fails. Indeed, that history shows, rather, that Congress did not intend to restrict the ability of the States to legislate with respect to persons in appellee's position. See also H.R.Rep. No. 615, 74th Cong., 1st Sess., 8-9 (1935); S.Rep. No. 628, 74th Cong., 1st Sess., 12-13 (1935). Appellee would find support in the "labor dispute disqualification" contained in § 5(d) of draft bills issued by the Social Security Board shortly after passage of the Social Security Act. Social Security Board, Draft Bills for State Unemployment Compensation of Pooled Fund and Employer Reserve Account Types (1936). Appellee argues that this proposed section evinced an intention that "innocent" persons not be disqualified from unemployment compensation. The Social Security Board, however, on the cover page of the draft bills booklet explicitly stated: "These drafts are merely suggestive. . . . Therefore, they cannot properly be termed 'model' bills or even recommended bills. This is in keeping with the policy of the Social Security Board of recognizing that it is the final responsibility and the right of each state to determine for itself just what type of legislation it desires and how it shall be drafted." We therefore are most reluctant to read implications of the draft bills into the Social Security Act. More important, however, appellee's argument fails on its face. The draft bills themselves denied "innocents" certain compensation. They did so not only in the various provisions as to minimum time spent at the job, waiting periods, and maximum benefits, but also in the labor dispute disqualification itself. The labor dispute provisions are triggered by a dispute at the same "establishment" and they disqualify any member of a "grade or class of workers" any of whose members were interested in the dispute. As the commentary and case law in jurisdictions that adopted versions of the draft bills immediately recognized, this division could serve to disqualify even a person who actively opposed a strike, and could extend to persons laid off because of a dispute at another plant owned by the same employer. The law that appellee challenges is different in form from the draft bills, but we cannot say that it is qualitatively different. We do not find in the draft bills any significant support for appellee's argument that the Social Security Act forbids his disqualification from benefits. Appellee also claims support from this Court's decision in California Human Resources Dept. v. Java, (1971). In that case, the Court held that the requirement of 42 U.S.C. § 503(a)(1) that payments be made "when due" forbids suspension of payments during an appeal subsequent to a full consideration on the merits. Appellee relies on the Court's statement: "The objective of Congress was to provide a substitute for wages lost during a period of unemployment not the fault of the employee." 42 U.S. at. Appellee argues that this statement is a holding that the Act forbids disqualification of persons in his position. We do not agree. Nothing in Java purported to define the class of persons eligible for benefits. The Court's sole concern there was with the treatment of those who already had been determined under state law to be eligible. Finally, appellee argues that statements in the legislative history of the Employment Security Amendments of 1970, 84 Stat. 695, indicate a congressional understanding that persons in his position must not be disqualified. These statements (identical in both House and Senate Reports) relate to the amendment prohibiting States from canceling accumulated wage credits on grounds such as an employee's change of jobs. The statements are concerned with a situation unrelated to the one in which appellee finds himself. To the extent that they might be seen as shedding light on the area, they are far from persuasive authority in appellee's favor, since they recognize that the States continue to be free to disqualify a claimant whose unemployment is due to a labor dispute "in the worker's plant, etc." As an alternative or addition to his argument based on the Social Security Act, appellee urges that the Federal Unemployment Tax Act, 26 U.S.C. §§ 331-3311, as amended, shows "congressional intent to preempt the state, particularly with respect to the scope of inclusiveness in the unemployment program." Brief for Appellee 13. We do not understand appellee to argue that the States are preempted by the Federal Unemployment Tax Act from imposing any sort of labor dispute disqualification. If total preemption is not claimed, we find nothing in any of appellee's citations that would show preemption in the particular area of concern to him. Indeed, study of the various provisions cited shows that, when Congress wished to impose or forbid a condition for compensation, it was able to do so in explicit terms. There are numerous examples, in addition to the one set forth in n. 16, less related to labor disputes but showing congressional ability to deal with specific aspects of state plans. The fact that Congress has chosen not to legislate on the subject of labor dispute disqualifications confirms our belief that neither the Social Security Act nor the Federal Unemployment Tax Act was intended to restrict the States' freedom to legislate in this area. IV Constitutionality We come, then, to the question whether the Ohio labor dispute disqualification provision is constitutional. The statute does not involve any discernible fundamental interest or affect with particularity any protected class. Appellee concedes that the test of constitutionality, therefore, is whether the statute has a rational relation to a legitimate state interest. Brief for Appellee 29. See New Orleans v. Dukes, (1976). Our statement last Term in Massachusetts Bd. of Retirement v. Murgia, (1976), explains the analysis: "We turn then to examine this state classification under the rational basis standard. This inquiry employs a relatively relaxed standard reflecting the Court's awareness that the drawing of lines that create distinctions is peculiarly a legislative task and an unavoidable one. Perfection in making the necessary classifications is neither possible nor necessary Dandridge v. Williams, [397 U.S. 471,] [(1970)]. Such action by a legislature is presumed to be valid." Id. at. Appellee challenges the statute only in its application to persons in his situation. We find it difficult, however, to discern the precise nature of the situation that appellee claims may not be the subject of disqualification. His discussion focuses to a great extent on his claim that he is "involuntarily unemployed," but he cannot be arguing that no person involuntarily unemployed may be disqualified, for he approves the draft bills' labor dispute provision. Brief for Appellee 53. That provision, as discussed above, would disqualify an involuntarily unemployed nonunion worker who opposed a strike but whose grade or class of workers nevertheless went out on strike. Appellee's claim of irrationality appears to be based, rather, on his view of the statute's broad sweep, in that it disqualifies an individual "regardless of the geographical remoteness of the location of the dispute, and regardless of any arguable actual, or imputable, participation or direct interest in the dispute on the part of the disqualified person. " Id. at 34. Appellee thus focuses on the interests of the recipient of unemployment compensation. The unemployment compensation statute, however, touches upon more than just the recipient. It provides for the creation of a fund produced by contributions from private employers. The rate of an employer's contribution to the fund varies according to benefits paid to that employer's eligible employees. Ohio Rev.Code Ann. § 4141.25 (1973). Any action with regard to disbursements from the unemployment compensation fund thus will affect both the employer and the fiscal integrity of the fund. Appellee in effect urges that the Court consider only the needs of the employee seeking compensation. The decision of the weight to be given the various effects of the statute, however, is a legislative decision, and appellee's position is contrary to the principle that "the Fourteenth Amendment gives the federal courts no power to impose upon the States their views of what constitutes wise economic or social policy." Dandridge v. Williams,, (1970). In considering the constitutionality of the statute, therefore, the Court must view its consequences not only for the recipient of benefits, but also for the contributors to the fund and for the fiscal integrity of the fund. Looking only at the face of the statute, an acceptable rationale immediately appears. The disqualification is triggered by "a labor dispute other than a lockout." In other words, if a union goes on strike, the employer's contributions are not increased, but if the employer locks employees out, all his employees thus put out of work are compensated and the employer's contributions accordingly are increased. Although one might say that this system provides only "rough justice," its treatment of the employer is far from irrational. "If the classification has some 'reasonable basis,' it does not offend the Constitution simply because the classification 'is not made with mathematical nicety or because in practice it results in some inequality.' Lindsley v. Natural Carbonic Gas Co.,,." Dandridge v. Williams, 397 U.S. at. The rationality of this treatment is, of course, independent of any "innocence" of the workers collecting compensation. Appellants assert three additional rationales for the disqualification provision. First, they argue that granting benefits to workers laid off due to a strike at a parent company's subsidiary plant in effect would be subsidizing the union members. Brief for Appellants 12. The District Court correctly rejected this rationale, as applied to appellee and his class, because payments to appellee would in no way directly subsidize the striking coal miners, and the fact that appellee happened to be a member of a union (other than the striking union) is not a legitimate reason, standing alone, to deny him benefits. 408 F. Supp. at 1022. The court continued: "Moreover, close scrutiny of the reasons for the State's classification reveals that what the state is actually intending to prevent is not the 'subsidizing' of unemployed union members per se, but the subsidizing of union-initiated work stoppages." (Emphasis in original.) Ibid. This statement of the State's purpose reflects its second proffered justification, namely, that the granting of benefits would place the employer at an unfair disadvantage in negotiations with the unions. The District Court rejected this justification on the grounds that payments of funds to the steelworkers "could hardly be deemed to put the coal miners in a position to refuse to negotiate with the steel companies until the companies reached a financial crisis, thereby causing the companies to yield to the unreasonable and economically unsound demands of the coal miners to prevent bankruptcy." Ibid. Although the District Court was reacting to appellants' own hyperbole in speaking of financial crises and bankruptcy, it must be recognized that effects less than pushing the employer to bankruptcy may be rationally viewed as undesirable. The employer's costs go up with every laid-off worker who is qualified to collect unemployment. The only way for the employer to stop these rising costs is to settle the strike so as to return the employees to work. Qualification for unemployment compensation thus acts as a lever increasing the pressures on an employer to settle a strike. The State has chosen to leave this lever in existence for situations in which the employer has locked out his employees, but to eliminate it if the union has made the strike move. Regardless of our views of the wisdom or lack of wisdom of this form of state "neutrality" in labor disputes, we cannot say that the approach taken by Ohio is irrational. The third rationale offered by the State is its interest in protecting the fiscal integrity of its compensation fund. This has been a continuing concern of Congress and the States with regard to unemployment compensation systems. See Report of the Committee on Economic Security, cited supra at; Hearing on H.R. 6900 before the Senate Committee on Finance, 94th Cong., 1st Sess. (1975). It is clear that protection of the fiscal integrity of the fund is a legitimate concern of the State. We need not consider whether it would be "rational" for the State to protect the fund through a random means, such as elimination from coverage of all persons with an odd number of letters in their surnames. Here, the limitation of liability tracks the reasons found rational above, and the need for such limitation unquestionably provides the legitimate state interest required by the equal protection equation. The District Court's opinion contains a paragraph declaring that, in addition to violating the Equal Protection Clause, the disqualification denied appellee due process. 408 F. Supp. at 1022. There is, however, no claim of denial of procedural due process, cf. Mathews v. Eldridge, (1976), and we are unable to discern the basis for a claim that appellee has been denied substantive due process. The judgment of the District Court is reversed It is so ordered.

Appellee, an employee of United States Steel Corporation (USS) at a plant in Ohio, was furloughed when the plant was shut down because of a reduction in fuel supply resulting from a nationwide strike of workers at USS's coal mines. Appellee applied to appellant Ohio Bureau of Employment Services for unemployment benefits, but his claim was disallowed under an Ohio statute that disqualified a worker from such benefits if his unemployment was "due to a labor dispute other than a lockout at any factory . . . owned or operated by the employer by which he is or was last employed." While appellee's request for reconsideration was pending before the Board of Review, he filed a class action in Federal District Court against appellants, the Bureau and its director, for declaratory and injunctive relief, asserting that the Ohio statute conflicted with certain provisions of the Social Security Act (SSA) and that, as applied, it was irrational and had no valid public purpose, in violation of the Due Process and Equal Protection Clauses of the Fourteenth Amendment. Concluding that abstention was not proper, the District Court held that the statute, as applied to appellee and the class members, violated those Clauses. Held: 1. Abstention is not required under either Younger v. Harris,, or Railroad Comm'n v. Pullman Co.,. . (a) Where Ohio has concluded to submit the constitutional issue to this Court for immediate resolution, Younger principles of equity and comity do not require this Court to refuse Ohio the immediate adjudication it seeks. . (b) Nor is Pullman abstention appropriate where the possible benefits of abstention have become too speculative to justify or require avoidance of the constitutional question. . 2. The Ohio statute is neither in conflict with, nor is it preempted by 42 U.S.C. § 503(a) (the provision of the SSA that precludes the Secretary of Labor from certifying payment of federal funds to state unemployment compensation programs unless state law provides for such methods of administration as the Secretary finds are "reasonably calculated to insure full payment of unemployment compensation when due"), or the Federal Unemployment Tax Act (FUTA). . 3. The Ohio statute, which has a rational relation to a legitimate state interest, is constitutional. . (a) The statute does not involve any discernible fundamental interest or affect with particularity any protected class, and the test of constitutionality, therefore, is whether the statute has a rational relation to a legitimate state interest. P.. (b) In considering the constitutionality of the statute, this Court must view its consequences not only for the recipient of the benefits, but also for the contributors to the compensation fund, and, although the system may provide only "rough justice" and a rough form of state "neutrality" in labor disputes, the statute cannot be said to be irrational, and the need for limitation of the liability of the compensation fund is a legitimate state interest. . 408 F. Supp. 1016, reversed. BLACKMUN, J., delivered the opinion of the Court, in which all Members joined except REHNQUIST, J., who took no part in the consideration or decision of the case.

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.

1976_75-1221

https://www.oyez.org/cases/1976/75-1221

MR. JUSTICE POWELL delivered the opinion of the Court. The question for decision is how unearned premium reserves for accident and health (A&H) insurance policies should be allocated between a primary insurer and a reinsurer for federal tax purposes. We granted certiorari in these three cases to resolve a conflict between the Circuits and the Court of Claims. 425 U.S. 990 (1976). I An insurance company is considered a life insurance company under the Internal Revenue Code if its life insurance reserves constitute more than 50% of its total reserves, IRC of 1954, § 801(a), 26 U.S.C. § 801(a), and qualifying companies are accorded preferential tax treatment. A company close to the 50% line will ordinarily achieve substantial tax savings if it can increase its life insurance reserves or decrease nonlife reserves so as to come within the statutory definition. The taxpayers here are insurance companies that assumed both life insurance risks and A&H -- nonlife -- risks. The dispute in these cases is over the computation for tax purposes of nonlife reserves. The taxpayers contend that, by virtue of certain reinsurance agreements -- or treaties, to use the term commonly accepted in the insurance industry -- they have maintained nonlife reserves below the 50% level. The Government argues that the reinsurance agreements do not have that effect, that the taxpayers fail to meet the 50% test, and that, accordingly, they do not qualify for preferential treatment. Specifically, the dispute is over the unearned premium reserve, the basic insurance reserve in the casualty insurance business and an important component of "total reserves," as that term is defined in § 801(c). A&H policies of the type involved here generally are written for a two- or three-year term. Since policyholders typically pay the full premium in advance, the premium is wholly "unearned" when the primary insurer initially receives it. See Rev.Rul. 61-167, 1961-2 Cum.Bull. 130, 132. The insurer's corresponding liability can be discharged in one of several ways: granting future protection by promising to pay future claims; reinsuring the risk with a solvent insurer; or returning a pro rata portion of the premium in the event of cancellation. Each method of discharging the liability may cost money. The insurer thus establishes on the liability side of its accounts a reserve, as a device to help assure that the company will have the assets necessary to meet its future responsibilities. See O. Dickerson, Health Insurance 604-605 (3d ed. 1968) (hereinafter Dickerson). Standard accounting practice in the casualty field, made mandatory by all state regulatory authorities, calls for reserves equal to the gross unearned portion of the premium. A simplified example may be useful: a policyholder takes out a three-year A&H policy for a premium, paid in advance, of $360. At first, the total $360 is unearned, and the insurer's books record an unearned premium reserve in the full amount of $360. At the end of the first month, one thirty-sixth of the term has elapsed, and $10 of the premium has become "earned." The unearned premium reserve may be reduced to $350. Another $10 reduction is permitted at the end of the second month, and so on. II The reinsurance treaties at issue here assumed two basic forms. Under the first form, Treaty I, the taxpayer served as reinsurer, and the "other party" was the primary insurer or "ceding company," in that it ceded part or all of its risk to the taxpayer. Under the second form, Treaty II, the taxpayer served as the primary insurer and ceded a portion of the business to the "other party," that party being the reinsurer. Both types of treaties provided that the other party would hold the premium dollars derived from A&H business until such time as the premiums were earned -- that is, attributable to the insurance protection provided during the portion of the policy term that already had elapsed. The other party also set up on its books the corresponding unearned premium reserve, relieving the taxpayer of that requirement. In each case, the taxpayer and the other party reported their affairs annually in this fashion to both the Internal Revenue Service and the appropriate state insurance departments. These annual statements were accepted by the state authorities without criticism. Despite this acceptance, the Government argues here that the unearned premium reserves must be allocated or attributed for tax purposes from the other parties, as identified above, to the taxpayers, thereby disqualifying each of the taxpayers from preferential treatment. A No. 75-1221, United States v. Consumer Life Ins. Co. In 1957, Southern Discount Corp. was operating a successful consumer finance business. Its borrowers, as a means of assuring payment of their obligations in the event of death or disability, typically purchased term life insurance and term A&H insurance at the time they obtained their loans. This insurance -- commonly known as credit life and credit A&H -- is usually coextensive in term and coverage with the term and amount of the loan. The premiums are generally paid in full at the commencement of coverage, the loan term ordinarily running for two or three years. Prohibited from operating in Georgia as an insurer itself, Southern served as a sales agent for American Bankers Life Insurance Co., receiving in return a sizable commission for its services. With a view to participating as an underwriter and not simply as agent in this profitable credit insurance business, Southern formed Consumer Life Insurance Co., the taxpayer here, as a wholly owned subsidiary incorporated in Arizona, the State with the lowest capital requirements for insurance companies. Although Consumer Life's low capital precluded it from serving as a primary insurer under Georgia law, it was nonetheless permitted to reinsure the business of companies admitted in Georgia. Consumer Life therefore negotiated the first of two reinsurance treaties with American Bankers. Under Treaty I, Consumer Life served as reinsurer and American Bankers as the primary insurer or ceding company. Consumer Life assumed 100% of the risks on credit life and credit A&H business originating with Southern, agreeing to reimburse American Bankers for all losses as they were incurred. In return, Consumer Life was paid a premium equivalent to 87 1/2% of the premiums received by American Bankers. But the mode of payment differed as between life and A&H policies. With respect to life insurance policies, American Bankers each month remitted to the reinsurer -- Consumer Life -- the stated percentage of all life insurance premiums collected during the prior month. With respect to A&H coverage, however, American Bankers each month remitted the stated percentage of the A&H premiums earned during the prior month, the remainder to be paid on a pro rata basis over the balance of the coverage period. Again an example might prove helpful. Assume that a policyholder buys from American Bankers on January 1 a three-year credit life policy and a three-year credit A&H policy, paying on that date a $360 premium for each policy. On February 1, under Treaty I, American Bankers would be obligated to pay Consumer Life 87 1/2% of $360 for reinsurance of life risks. This represents the total life reinsurance premium; there would be no further payments for life reinsurance. But for A&H reinsurance, American Bankers would remit on February 1 only the stated percentage of $10, since only $10 would have been earned during the prior month. It would remit the same amount on March 1 for A&H coverage provided during February, and so on for a total of 36 months. Treaty I permitted either party to terminate the agreement upon 30 days' notice. But termination was to be prospective; reinsurance coverage would continue on the same terms until the policy expiration date for all policies already executed. This is known as a "runoff provision." Because it held the unearned A&H premium dollars, and also under an express provision in Treaty I, American Bankers set up an unearned premium reserve equivalent to the full value of the premiums. Meantime, Consumer Life, holding no unearned premium dollars, established on its books no unearned premium reserve for A&H business. Annual statements filed with the state regulatory authorities in Arizona and Georgia reflected this treatment of reserves, and the statements were accepted without challenge or disapproval. By 1962, Consumer Life had accumulated sufficient surplus to qualify under Georgia law as a primary insurer. Treaty I was terminated, and Southern began placing its credit insurance business directly with Consumer Life. The parties then negotiated Treaty II, under which American Bankers served as reinsurer of the A&H policies issued by Consumer Life. Ultimately, Consumer Life retained the lion's share of the risk, but Treaty II was set up in such a way that American Bankers held the premium dollars until they were earned. This required rather complicated contractual provisions, since Consumer Life, as primary insurer, did receive the A&H premium dollars initially. Roughly described, Treaty II provided as follows: Consumer Life paid over the A&H premiums when they were received. American Bankers immediately returned 50% of this sum as a ceding commission meant to cover Consumer Life's initial expenses. Then, at the end of each quarter, American Bankers paid to Consumer Life "experience refunds" based on claims experience. If there were no claims, American Bankers would refund 47% of the total earned premiums. If there were claims (and naturally there always were), Consumer Life received 47% less the sums paid to meet claims. It is apparent that American Bankers would never retain more than 3% of the total earned premiums for the quarter. Only if claims exceeded 47% would this 3% be encroached, but, even in that event, Treaty II permitted American Bankers to recoup its losses by reducing the experience refund in later quarters. Actual claims experience never approached the 47% level. Again, since American Bankers held the unearned premiums, it set up the unearned premium reserve on its books. Consumer Life, which initially had set up such a reserve at the time it received the premiums, took credit against them for the reserve held by American Bankers. Annual statements filed by both companies consistently reflected this treatment of reserves under Treaty II, and at no time did state authorities take exception. The taxable years 1958 through 1960, and 1962 through 1964, are at issue here. For each of those years, Consumer Life computed its § 801 ratio based on the reserves shown on its books and accepted by the state authorities. According to those figures, Consumer Life qualified for tax purposes as a life insurance company. The Commissioner of Internal Revenue determined, however, that the A&H reserves held by American Bankers should be attributed to Consumer Life, thereby disqualifying the latter from favorable treatment. Consumer Life paid the deficiency assessed by the Commissioner and brought suit for a refund. The Court of Claims, disagreeing with its trial judge, held for the taxpayer. B No. 75-1260, First Railroad & Banking Company of Georgia v. United States. The relevant taxable entity in this case is First of Georgia Life Insurance Co., a subsidiary of the petitioner First Railroad & Banking Co. of Georgia. Georgia Life was party to a Treaty II type agreement, reinsuring its A&H policies with an insurance company, another subsidiary of First Railroad. On the basis of the reserves carried on its books and approved by state authorities, Georgia Life qualified as a life insurance company for the years at issue here, 1961-1964. Consequently First Railroad excluded Georgia Life's income from its consolidated return, pursuant to § 1504(b)(2) of the Code. The Commissioner determined that Georgia Life did not qualify for life insurance company status or exclusion from the consolidated return, and so assessed a deficiency. First Railroad paid and sued for a refund. It prevailed in the District Court, but the Court of Appeals for the Fifth Circuit reversed, relying heavily on Economy Finance Corp. v. United States, 501 F.2d 466 (CA7 1974), cert. denied, 420 U.S. 947, rehearing denied, 421 U.S. 922 (1975), motion for leave to file second petition for rehearing pending, No. 74-701. C No. 75-1285, United States v. Penn Security Life Ins. Co. Penn Security Life Insurance Co., a Missouri corporation, is, like Consumer Life, a subsidiary of a finance company. Under three separate Treaty I type agreements, it reinsured the life and A&H policies of three unrelated insurers during the years in question, 1963-1965. The other companies reported the unearned premium reserves, and the Missouri authorities approved this treatment. Because one of the three treaties did not contain a runoff provision like that present in Consumer Life, the Government conceded that the reserves held by that particular ceding company should not be attributed to the taxpayer. But the other two treaties were similar in all relevant respects to Treaty I in Consumer Life. After paying the deficiencies assessed by the Commissioner, Penn Security sued for a refund in the Court of Claims. Both the trial judge and the full Court of Claims ruled for the taxpayer. III The Government commences its argument by suggesting that these reinsurance agreements were sham transactions without economic substance, and therefore should not be recognized for tax purposes. See, e.g., Gregory v. Helvering,, (1935); Knetsch v. United States, (1960). We do not think this is an accurate characterization. Both taxpayers who were parties to Treaty I agreements entered into them only after arm's-length negotiation with unrelated companies. The ceding companies gave up a large portion of premiums, but, in return, they had recourse against the taxpayers for 100% of claims. The ceding companies were not just doing the taxpayers a favor by holding premiums until earned. This delayed payment permitted the ceding companies to invest the dollars, and, under the treaties, they kept all resulting investment income. Nor were they mere "paymasters," as the Government contends, for indemnity reinsurance of this type does not relieve the ceding company of its responsibility to policyholders. Had the taxpayers become insolvent, the insurer still would have been obligated to meet claims. Treaty II also served most of the basic business purposes commonly claimed for reinsurance treaties. See W. Hammond, Insurance Accounting Fire & Casualty 86 (2d ed.1965); Dickerson 563 564. It reduced the heavy burden on the taxpayer's surplus caused by the practice of computing casualty reserves on the basis of gross unearned premiums even though the insurer may have paid out substantial sums in commissions and expenses at the commencement of coverage. By reducing this drain on surplus, the taxpayer was able to expand its business, resulting in a broader statistical base that permitted more accurate loss predictions. Through Treaty II, each taxpayer associated itself with a reinsurance company more experienced in the field. Moreover, under Treaty II, the taxpayers were shielded against a period of catastrophic losses. Even though the reinsurer would eventually recapture any such deep losses, it would be of substantial benefit to the ceding company to spread those payments out over a period of months or years. Both courts below that passed on Treaty II agreements found expressly that the treaties served valid and substantial nontax purposes. Tax considerations well may have had a good deal to do with the specific terms of the treaties, but even a "major motive" to reduce taxes will not vitiate an otherwise substantial transaction. United States v. Cumberland Pub. Serv. Co.,, (1950). IV Whether or not these were sham transactions, however, the Government would attribute the contested unearned premium reserves to the taxpayers, because it finds in § 801(c)(2) a rule that "insurance reserves follow the insurance risk." Brief for United States 34. This assertion, which forms the heart of the Government's case, is based on the following reasoning. Section 801 provides a convenient test for determining whether a company qualifies for favorable tax treatment as a life insurance company, a test determined wholly by the ratio of life reserves to total reserves. Reserves, under accepted accounting and actuarial standards, represent liabilities. Although often carelessly referred to as "reserve funds," or as being available to meet policyholder claims, reserves are not assets; they are entered on the liability side of the balance sheet. Under standard practice, they are mathematically equivalent to the gross unearned premium dollars already paid in, but conceptually the reserve a liability -- is distinct from the cash asset. This much of the argument is indisputably sound. The Government continues: since a reserve is a liability, it is simply an advance indicator of the final liability for the payment of claims. The company that finally will be responsible for paying claims -- the one that bears the ultimate risk -- should therefore be the one considered as having the reserves. In each of these cases, the Government argues, it was the taxpayer that assumed the ultimate risk. The other companies were merely paymasters holding on to the premium dollars until earned in return for a negligible percentage of the gross premiums. A We may assume for present purposes that the taxpayers did take on all substantial risks under the treaties. And, in the broadest sense, reserves are, of course, set up because of future risks. Cf. Helvering v. Le Gierse,, (1941). The question before us, however, is not whether the Government's position is sustainable as a matter of abstract logic. Rather it is whether Congress intended a "reserves follow the risk" rule to govern determinations under § 801. There is no suggestion in the plain language of the section that this is the case. See nn. 1 and | 1 and S. 725fn4|>4, supra. If anything, the language is a substantial obstacle to accepting the Government's position. The word "risk" does not occur. Moreover, in § 801(c)(2), Congress used the phrase "unearned premiums," rather than "unearned premium reserve." The Government argues that, taken in context, "unearned premiums" must be regarded as referring to reserves -- to the liability account for unearned premium reserves, and not the asset represented by the premium dollars. We agree that the reference is to reserves, but still the use of the truncated phrase suggests that Congress intended a mechanical application of the concept. In other words, this phrase suggests that, in Congress' view, unearned premium reserves always would be found in the same place as the unearned premiums themselves. If so, reserves would follow mechanically the premium dollars, as taxpayers contend, and would not necessarily follow the risk. � 1 and S. 742� B The rather sparse legislative history furnishes no better support for the Government's position. Under the early Revenue Acts, all insurance companies were taxed on the same basis as other corporations. Both investment income and premium or underwriting income were included in gross income, although there was a special deduction for additions to reserves. See, e.g., Revenue Act of 1918, § 234(a)(10), 40 Stat. 1079. By 1921, Congress became persuaded that this treatment did not accurately reflect the nature of the life insurance enterprise, since life insurance is often a form of savings for policyholders, similar in some respects to a bank deposit. See Hearings on H.R. 8245 before the Senate Committee on Finance, 67th Cong., 1st Sess., 83 (1921) (testimony of Dr. T. S. Adams, Tax Adviser to Treasury Department). Under this view, premium receipts "were not true income [to the life insurance company], but were analogous to permanent capital investment." Helvering v. Oregon Mutual Life Ins. Co.,, (1940). The 1921 Act therefore provided, for the first time, that life insurance companies would be taxed on investment income alone, and not on premium receipts. Revenue Act of 1921, §§ 242-245, 42 Stat. 261. The same rationale did not apply to other forms of insurance, and Congress continued to tax insurance companies other than life on both underwriting and investment income. §§ 246-247. The 1921 Act was thus built on the assumption that important differences between life and nonlife insurance called for markedly different tax treatment. Strict adherence to this policy rationale would dictate that any company insuring both types of risks be required to segregate its life and nonlife business so that appropriate tax rules could be applied to each. Congress considered this possibility, but chose instead a more convenient rule of thumb, the 50% reserve ratio test. The Treasury official primarily responsible for the 1921 Act explained: "Some companies mix with their life business accident and health insurance. It is not practicable for all companies to disassociate those businesses, so that we have assumed that, if this accident and health business was more than 50 per cent of their business, as measured by their reserves, it could not be treated as a life insurance company. On the other hand, if their accident and health insurance were incidental, and represented less than 50 percent of their business, we treated them as a life insurance company." 1921 Hearings, supra at 85 (testimony of Dr. T. S. Adams). This passage constitutes the only significant reference to the test in the 1921 deliberations. In succeeding years, controversy developed over the preferential treatment enjoyed by life insurance companies. There were claims that they were not carrying their fair share of the tax burden. There were charges that stock companies were favored over mutuals, or vice versa. There was a nagging question over just how to compute a proper deduction for additions to reserves. Congress tried a host of different formulas to ameliorate these problems. See H.R.Rep. No. 34, 86th Cong., 1st Sess., 2-7 (1959); S.Rep. No. 291, 86th Cong., 1st Sess., 3-11 (1959); Alinco Life Ins. Co. v. United States, 178 Ct.Cl. 813, 831-837, 373 F.2d 336, 345-349 (1967). But throughout these years the 50% test was not significantly changed. In 1959, Congress passed legislation that finally established a permanent tax structure for life insurance companies. Life Insurance Company Income Tax Act of 1959, 73 Stat. 112. For the first time since 1921, not only investment income, but also a portion of underwriting income, was made subject to taxation. But even as Congress was rewriting the substantive provisions for taxing life insurance companies, it did not, despite occasional calls for change, make any relevant alterations in § 801. Moreover, the few references to that provision in the committee reports shed little light on the issue presented here. They contain no explicit or implicit support for a rule that reserves follow the risk. C More important than anything that appears in hearings, reports, or debates is a provision added in 1959, § 820, concerning modified coinsurance contracts between life insurance companies. This section, although designed to deal with a problem different from the one presented here, is simply unintelligible if Congress thought that § 801 embodied an unvarying rule that reserves follow the risk. A conventional coinsurance contract is a particular form of indemnity reinsurance. The reinsurer agrees to reimburse the ceding company for a stated portion of obligations arising out of the covered policies. In return, the reinsurer receives a similar portion of all premiums received by the insurer, less a ceding commission to cover the insurer's overhead. The reinsurer sets up the appropriate reserve for its proportion of the obligation and, as is customary, the ceding company takes credit against its reserves for the portion of the risks reinsured. A modified coinsurance contract is a further variation in this esoteric area of insurance. As explained before the Senate Finance Committee, a modified form of coinsurance developed because some major reinsurers were not licensed to do business in New York, and New York did not permit a ceding company to take credit against its reserves for business reinsured with unlicensed companies. Hearings on H.R. 4245 before the Senate Committee on Finance, 86th Cong., 1st Sess., 608 (1959) (statement of Henry F. Rood). Denial of credit places the ceding company in an undesirable position. It has depleted its assets by paying to the reinsurer the latter's portion of premiums, but its liability account for reserves remains unchanged. Few companies would accept the resulting drain on surplus, and unlicensed reinsurers wishing to retain New York business began offering a modified form of coinsurance contract. Obligations would be shared as before, but the ceding company, which must in any event maintain 10% of the reserves, would be permitted to retain and invest the assets backing the reserves. As consideration for this right of retention, modified coinsurance contracts require the ceding company to pay to the reinsurer, under a complicated formula, the investment income on the reinsurer's portion of the investments backing the reserve. See id. at 609; E. Wightman, Life Insurance Statements and Accounts 150-151 (1952); D. McGill, Life Insurance 43540 (rev. ed.1967). The 1959 legislation, as it passed the House, contained no special treatment for these modified contracts. The income involved therefore would have been taxed twice, once as investment income to the ceding company and then as underwriting income to the reinsurer. The Senate thought this double taxation inequitable, and therefore added § 820, to which the House agreed. That section provides that, for tax purposes, modified coinsurance contracts shall be treated the same as conventional coinsurance contracts if the contracting parties consent to such treatment. For consenting companies, Congress not only provided that gross investment income shall be treated as if it were received directly (in appropriate share) by the reinsurer, § 820(c)(1), but also expressly declared that the reserves "shall be treated as a part of the reserves of the reinsurer and not of the reinsured." § 820(c)(3). Under a modified coinsurance contract, the reinsurer bears the risk on its share of the obligations. Thus, if § 801 mandates that reserves follow the risk, the reinsurer could not escape being considered as holding its share of the reserve. Section 820(c)(3), providing for attribution of the reserves to the reinsurer, would be an elaborate redundancy. And although § 820(a)(2) specifics that attribution under § 820 is optional, requiring the consent of the parties, the parties would, in fact, have no option at all. Plainly, § 820 is incompatible with a view that § 801 embodies a rule that reserves follow the risk. The Commissioner himself, interpreting § 801 in light of § 820, has implicitly acknowledged that reserves do not follow the risk. Rev.Rul. 70-508, 1970-2 Cum.Bull. 136. Advice was requested by the parties to a modified coinsurance contract who had not elected the special treatment available under § 820. The ceding company had carried the life insurance reserves on its books, although the reinsurer bore the ultimate risk. The ceding company wanted to know whether it could count those reserves in its ratio for purposes of § 801. Relying on § 801(b) and the Treasury Regulations implementing it, the Commissioner ruled that it could. A "reserves follow the risk" rule would have dictated precisely the opposite result. D Section 820 affords an unmistakable indication that § 801 does not impose the "reserves follow the risk" rule. Instead, Congress intended to rely on customary accounting and actuarial practices, leaving, as § 820 makes evident, broad discretion to the parties to a reinsurance agreement to negotiate their own terms. This does not open the door to widespread abuse. "Congress was aware of the extensive, continuing supervision of the insurance industry by the states. It is obvious that subjecting the reserves to the scrutiny of the state regulatory agencies is an additional safeguard against overreaching by the companies." Mutual Benefit Life Ins. Co. v. Commissioner, 488 F.2d 1101, 1108 (CA3 1973), cert. denied, 419 U.S. 882 (1974). See Lamana-Panno-Fallo Industrial Ins. Co. v. Commissioner, 127 F.2d 56, 58-59 (CA5 1942); Alinco Life Ins. Co. v. United States, 178 Ct.Cl. at 831, 373 F.2d at 345. See also Prudential Ins. Co. v. Benjamin,, (1946); 15 U.S.C. § 1011 (McCarran-Ferguson Act). In presenting the 1959 legislation to the full House, members of the committee that drafted the bill were careful to underscore the continuing primacy of state regulation, with specific reference to the question of reserves. In two of the cases before us, the courts below expressly found that the reserves were held in accordance with accepted actuarial and accounting standards, while the third court did not address the issue. In all three, it was found that no state insurance department required any change in the way the taxpayers computed and reported their reserves. Since the taxpayers neither held the unearned premium dollars nor set up the corresponding unearned premium reserves, and since that treatment was in accord with customary practice as policed by the state regulatory authorities, we hold that § 801(c)(2) does not permit attribution to the taxpayers of the reserves held by the other parties to the reinsurance treaties. V The Government argues that even if attribution of reserves is not required under § 801(c)(2), attribution is required under § 801(c)(3), counting in total reserves "all other insurance reserves required by law." See n 4, supra. Under state statutory law, the Government suggests, these taxpayers were required to set up and maintain the full unearned premium reserves. Our attention is drawn to no statute in any of the affected States that expressly requires this result. Instead the Government returns to its main theme and asserts, in essence, that certain general state statutory provisions embody the doctrine that reserves follow the risk. We would find it difficult to infer such a doctrine from the statutory provisions relied on by the Government even if there were no other indications to the contrary. But other indications are compelling. The insurance departments of the affected States consistently accepted annual reports showing reserves held as the taxpayers claim they should be. It is well established that the consistent construction of a statute "by the agency charged with its enforcement is entitled to great deference by the courts." NLRB v. Boeing Co.,, (1973). See Trafficante v. Metropolitan Life Ins. Co.,, (1972); Udall v. Tallman,, (1965); Skidmore v. Swift & Co.,, (1944). This is no less the rule when federal courts are interpreting state law administered by state regulatory officials, at least where, as here, there is no reason to think that the state courts would construe the statute differently. We find no basis for holding that taxpayers were required by law, within the meaning of § 801(c)(3), to maintain the disputed unearned premium reserves. VI For the reasons stated, we hold for the taxpayers. The judgments in Nos. 75-1221 and 75-1285 are affirmed. The judgment in No. 71260 is reversed, and the case is remanded for further proceedings consistent with this opinion. It is so ordered.

Under § 801(a) of the Internal Revenue Code of 1954, an insurance company is considered a life insurance company for federal tax purposes if its life insurance reserves constitute more than 50% of its "total reserves," as that term is defined in § 801(c). Qualifying companies are accorded preferential tax treatment. The question here is how unearned premium reserves for accident and health (nonlife) insurance policies should be allocated between a primary insurer and a reinsurer for purposes of applying the 50% test. The unearned premium reserve is the basic insurance reserve in the casualty insurance business, and an important component of "total reserves" under § 801(c)(2). The taxpayers contend that, by virtue of certain reinsurance agreements ("treaties"), they have maintained nonlife reserves below the 50% level. These treaties were of two basic types: (1) Treaty I, whereby the taxpayer served as reinsurer, and the "other party" was the primary insurer or ceding company; and (2) Treaty II, whereby the taxpayer served as the primary insurer and ceded a portion of the business to the "other party," the reinsurer. Both types of treaties provided that the other party would hold the premium dollars derived from accident and health business until such time as the premiums were "earned," i.e., attributable to the insurance protection provided during the portion of the policy term already elapsed. The other party also set up on its books the corresponding unearned premium reserve, relieving the taxpayer of that requirement, even though the taxpayer assumed all substantial insurance risks. In each case, the taxpayer and the other party reported their affairs annually in this way to both the Internal Revenue Service and the appropriate state insurance departments. Despite the state authorities' acceptance of these annual statements, the Government argues that the unearned premium reserves must be allocated or attributed for tax purposes from the other parties to the taxpayers, with the result that the taxpayers fail the 50% test, and thus are disqualified from preferential tax treatment, primarily because, in the Government's view, § 801 embodies a rule that "insurance reserves follow the insurance risk." Held: 1. The reinsurance treaties served valid business purposes, and, contrary to the Government's argument, were not sham transactions without economic substance. . 2. Since the taxpayers neither held the unearned premium dollars nor set up the corresponding unearned premium reserves, and since that treatment was in accord with customary practice as policed by the state regulatory authorities, § 801(c)(2) does not permit attribution to the taxpayers of the reserves held by the other parties to the reinsurance treaties. . (a) The language of § 801(c)(2) does not suggest that Congress intended a "reserves follow the risk" rule to govern determinations under § 801. . (b) Nor does the legislative history of § 801 furnish support for the Government's interpretation. Pp. 430 U.S. 742-745. (c) Section 820 of the Code, prescribing the tax treatment of modified coinsurance contracts, affords an unmistakable indication that Congress did not intend § 801 to embody a "reserves follow the risk" rule. 3. Nor is attribution of unearned premium reserves to the taxpayers required under § 801(c)(3), counting in total reserves "all other insurance reserves required by law." There is no indication that state statutory law in these cases required the taxpayers to set up and maintain the contested unearned premium reserves, especially since the insurance departments of the affected States consistently accepted annual reports showing reserves held as the taxpayers claim they should be. . No. 75-1221, 207 Ct.Cl. 638, 524 F.2d 1167, and No. 75-1285, 207 Ct.Cl. 594, 524 F.2d 1155, affirmed; No. 75-1260, 514 F.2d 675, reversed and remanded. POWELL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, BLACKMUN, REHNQUIST, and STEVENS, JJ., joined. WHITE, J., filed a dissenting opinion, in which MARSHALL, J., joined, post, p..

1974_73-1119

https://www.oyez.org/cases/1974/73-1119

PER CURIAM. The State of Alabama brought suit against appellant MTM in state court under the Alabama nuisance law, Ala.Code, Tit. 7, §§ 1081-1108 (1958), seeking to enjoin the continued operation of a nuisance by MTM. It alleged that, because of convictions for violations of local obscenity laws by the Pussycat Adult Theater, an enterprise owned by MTM in Birmingham, Ala., the theater constituted a nuisance under this statute. After a hearing on the complaint, the state court issued a temporary injunction under the nuisance law, closing the theater. After issuance of the temporary injunction, and while action on the request for a permanent injunction was pending in state court, appellant filed this action in the United States District Court for the Northern District of Alabama under the Civil Rights Act of 1871, 42 U.S.C. § 1983. It asked the federal court to enjoin enforcement of the state court temporary injunction and to declare the Alabama nuisance law unconstitutional. Appellant claimed that the challenged statutory provisions and the state court temporary injunction infringed its First, Fifth, and Fourteenth Amendment rights. A three-judge federal court was convened pursuant to 28 U.S.C. § 2281 to consider appellant's complaint. Without resolving the constitutional merits of the complaint, the three-judge court dismissed the complaint without prejudice. In view of the pendency of the state proceedings, the three-judge District Court applied the test enunciated in Younger v. Harris, (1971), and concluded that federal intervention as requested by appellant would be improper. Appellant has brought the case directly to this Court, asserting that jurisdiction exists under 28 U.S.C. § 1253, and arguing that the requirements of Younger v. Harris, supra, did not preclude relief on these facts. We noted probable jurisdiction over this appeal and set this case for argument in tandem with Huffman v. Pursue, Ltd., ante, p.. 415 U.S. 974 (1974). Unless jurisdiction over this direct appeal from the tree-judge court decision below is conferred by 28 U.S.C. § 1253, we are without authority to entertain it. Section 1253 provides: "Except as otherwise provided by law, any party may appeal to the Supreme Court from an order granting or denying, after notice and hearing, an interlocutory or permanent injunction in any civil action, suit or proceeding required by any Act of Congress to be heard and determined by a district court of three judges." Appellant argues that its complaint presented a "suit . . . required . . . to be heard" by a three-judge court, and that the dismissal of its complaint seeking injunctive relief constituted "an order . . . denying . . . an interlocutory or permanent injunction" within the meaning of § 1253. In Gonzalez v. Employees Credit Union, (1974), we recently discussed in some detail the question of what constitutes an order "denying" injunctive relief for purposes of § 1253. There we held that direct appeal to this Court under § 1253 did not lie from the order of a three-judge court dismissing a complaint because of an absence of standing where the three-judge court did not reach the merits of the constitutional claim presented. Although our decision rested at least partially on the ground that a three-judge court was not "required" where the ground for decision below was an absence of standing, 419 U.S. at, we also explored the question of whether an order of a three-judge court "denies" an injunction, for purposes of § 1253, where there is no adverse resolution of the constitutional claims presented. Although noting that certain decisions of this Court and a literal reading of § 1253 might be taken to support the notion that a denial of injunctive relief on any basis by a three-judge court is within the purview of § 1253, we concluded that stare decisis is entitled to less than its usual weight in this area, and that "the opaque terms and prolix syntax" of this statute were not capable of literal reading. 419 U.S. at. In focusing on the question of whether direct review by this Court under § 1253 is available in the absence of a three-judge court decision resting on resolution of the constitutional merits of a complaint, we stated: "Mercantile argues that § 1253 should be read to limit our direct review of three-judge court orders denying injunctions to those that rest upon resolution of the constitutional merits of the case. There would be evident virtues to this rule. It would lend symmetry to the Court's jurisdiction since, in reviewing orders granting injunctions, the Court is necessarily dealing with a resolution of the merits. While issues short of the merits -- such as justiciability, subject matter jurisdiction, equitable jurisdiction, and abstention -- are often of more than trivial consequence, that alone does not argue for our reviewing them on direct appeal. Discretionary review in any case would remain available, informed by the mediating wisdom of a court of appeals. Furthermore, the courts of appeals might in many instances give more detailed consideration to these issues than this Court, which disposes of most mandatory appeals in summary fashion." 419 U.S. at. The conflicting decisions of this Court on the question of whether § 1253 jurisdiction attaches where a three-judge federal court fails to reach the merits of a constitutional claim for injunctive relief do not provide a consistent answer to this question. Compare Lynch v. Household Finance Corp., (1972), with Mengelkoch v. Industrial Welfare Comm'n, (1968); Rosado v. Wyman, (1969); Mitchell v. Donovan, (1970). See Gonzalez v. Employees Credit Union, supra, at n. 11; 9 J. Moore, Federal Practice � 110.03[3], pp. 76-79 (2d ed.1973). It is certain that the congressional policy behind the three-judge court and direct review apparatus -- the saving of state and federal statutes from improvident doom at the hands of a single judge -- will not be impaired by a narrow construction of § 1253. A broad construction of the statute, on the other hand, would be at odds with the historic congressional policy of minimizing the mandatory docket of this Court in the interest of sound judicial administration. Phillips v. United States,, (1941); Gonzalez v. Employees Credit Union, supra, at. In light of these factors, we conclude that a direct appeal will lie to this Court under § 1253 from the order of a three-judge federal court denying interlocutory or permanent injunctive relief only where such order rests upon resolution of the merits of the constitutional claim presented below. In the instant case, the three-judge court below did not reach the merits of appellant's constitutional attack on the Alabama statute, and instead based its order on the impropriety of federal intervention under our decision in Younger v. Harris, (1971). In such circumstances, we are without jurisdiction to consider this appeal. The correctness of the application of Younger on these facts by the District Court is for the Court of Appeals to determine. Accordingly, we vacate the order before us and remand this case to the District Court so that a fresh order may be entered and a timely appeal prosecuted to the Court of Appeals. It is so ordered.

This Court has no jurisdiction over an appeal under 2 U.S.C. § 1253 from a three-judge District Court's order denying injunctive relief against enforcement of a state court temporary injunction under the Alabama nuisance statute closing appellant's theater, where the three-judge court did not reach the merits of appellant's constitutional attack on the nuisance statute, but instead based its order on the impropriety of federal intervention in the state proceedings. 365 F. Supp. 1182, vacated and remanded.

1972_71-1698

https://www.oyez.org/cases/1972/71-1698

"MR. JUSTICE BLACKMUN delivered the opinion of the Court. Chapter 75, subchapter A, of the Internal (...TRUNCATED)

"\n\nRespondent was convicted of violating 26 U.S.C. § 7206(1), which makes it a felony when one \"(...TRUNCATED)

1987_86-772

https://www.oyez.org/cases/1987/86-772

"JUSTICE O'CONNOR announced the judgment of the Court and delivered an opinion, in which THE CHIEF J(...TRUNCATED)

"\n\nTwo years after respondent, a management-level employee in one of petitioner city's agencies, s(...TRUNCATED)

1984_84-351

https://www.oyez.org/cases/1984/84-351

"JUSTICE POWELL delivered the opinion of the Court. This case presents the question whether States a(...TRUNCATED)

"\n\nRespondent, who suffers from diabetes and has no sight in one eye, brought an action in Federal(...TRUNCATED)

1962_392

https://www.oyez.org/cases/1962/392

"Opinion of the Court by MR. JUSTICE STEWART, announced by MR. JUSTICE WHITE. This case comes to us (...TRUNCATED)

"\n\nOne of the appellants owns a newspaper, and the other a radio station, in New Mexico close to t(...TRUNCATED)