YELLOW FREIGHT SYSTEM, INC., PETITIONER V. NATIONAL LABOR RELATIONS BOARD

No. 90-1913

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Third Circuit

Brief For The National Labor Relations Board In Opposition TABLE OF CONTENTS Question presented Opinions below Jurisdiction Statement Argument Conclusion OPINIONS BELOW

The opinion of the court of appeals (Pet. App. A1-A17) is reported at 930 F.2d 316. The decision and order of the National Labor Relations Board (Pet. App. A18-A43) are reported at 297 N.L.R.B. No. 50.

JURISDICTION

The judgment of the court of appeals was entered on April 11, 1991. The petition for a writ of certiorari was filed on June 13, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether the court of appeals properly concluded that neither 28 U.S.C. 1738 nor common-law principles of issue preclusion deprive the National Labor Relations Board of the discretion to decline to defer to the factual findings contained in an arbitral award confirmed by a state court, where the arbitrator was not presented with the unfair labor practice issue presented to the Board.

STATEMENT

1. Lonnie Bedell was employed by petitioner as a dockworker in Carlstadt, New Jersey. One evening in April 1986 he saw office worker Joann DeGrosa standing in the parking lot and crying. Bedell approached DeGrosa and asked if he could help her. DeGrosa replied that she had been sexually harassed by petitioner's Branch Manager Kenneth Dore and another of petitioner's employees. The next day, Bedell reported the incident to his shop steward. Later that day, Dore approached Bedell and said that the steward had spoken to him regarding Bedell's complaint, that DeGrosa was not a member of the union, and that her allegations therefore were none of Bedell's business. See Pet. App. A2-A3, A22-A23.

The sexual harassment of DeGrosa continued, and petitioner discharged DeGrosa on July 11, 1986. Bedell accompanied DeGrosa to the office of the New Jersey Division of Civil Rights and assisted her in filing sexual harassment charges with the Equal Employment Opportunity Commission (EEOC). He also submitted an affidavit to the EEOC on her behalf. On November 29, 1986, Bedell in the presence of Operating Manager John McNamara, posted on a union bulletin board a newspaper advertisement promoting a week-long television series on "Sexual Harassment on the Job." As he did so, Bedell told McNamara that Dore and the other employee "shouldn't have done that to (Joann) DeGrosa." Pet. App. A3; see id. at A23-A24.

Shortly after posting the advertisement, Bedell's supervisors began to give him more dangerous and arduous assignments, which theretofore had been assigned to employees less senior than Bedell. Bedell continued to be harassed and given undesirable and demeaning assignments until July 1987, when Dore left his post as supervisor of the Carlstadt facility. In December 1987, Bedell voluntarily transferred to petitioner's new terminal at Elizabeth, New Jersey. After his transfer, Dore, as operations manager of that facility, began imposing on Bedell arduous and demeaning assignments different from those Bedell typically had received before he had assisted DeGrosa. On January 19, 1988, Bedell filed a charge of discrimination with the New Jersey Division of Civil Rights, alleging that petitioner was harassing him because he was assisting DeGrosa in her sexual harassment charge. See Pet. App. A3-A4, A24-A29.

On February 3, 1988, Bedell was assigned to move a large number of heavy cartons from the back of a delivery truck to another point on the shipping dock. Bedell put 15 cartons in one cart and 11 in another and rolled each of these carts several feet away from the truck. As Bedell was in the process of placing the remainder of the cartons in a third cart, Supervisor Joseph Smidt told him to consolidate all of the cartons into two carts. See Pet. App. A4, A29. According to Bedell, he told Smidt that he would follow the order but added "and I am not a piece of shit," to protest the continuous harassment he felt he was experiencing. Id. at A4, A30. According to Smidt, when he asked Bedell if he intended to comply, Bedell refused, exclaiming, "because you're a big piece of shit * * * (a)nd you're a scum bag, too." Id. at 4; see id. at A30. Smidt subsequently testified that Bedell came toward him waving his hands up and down and staring with a crazed look in his eyes. Although Smidt is considerably taller, heavier, and younger than Bedell, and a martial arts expert, Smidt also testified that he nonetheless feared bodily injury because he had heard rumors that Bedell carried a gun and had used it to threaten others. After the incident, Smidt ordered Bedell to go to Dore's office, asserting that Bedell had disobeyed a direct order and had assaulted him. Petitioner then discharged Bedell. See id. at A4-A5, A31-A32.

2. Bedell filed a second complaint with the EEOC and, together with his union (Local 641 of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America), challenged his discharge under the contractual grievance procedure set forth in the collective bargaining agreement, which provided for arbitration. At the arbitration hearing, the parties agreed to limit the issue before the arbitrator to whether there was "just cause" for the discharge under the collective bargaining agreement. Pet. App. A5-A6, A38. The arbitrator found that Bedell had not disobeyed a direct order, but denied the grievance because he found that Bedell had assaulted a supervisor. Id. at A53. In so finding, the arbitrator generally credited the testimony of petitioner's witnesses (id. at A51-A52), and generally found Bedell's testimony implausible. The arbitrator explained (id. at A52): "The grievant's credibility was substantially diminished by the fact that he did not previously grieve what he characterized as unfair treatment * * *. If (the prior treatment) was without valid basis, it would constitute harassment which could have been grieved." Bedell and the union appealed the award to the Superior Court of New Jersey, Law Division, Union County (No. L-103501-88). On February 10, 1989, the state court confirmed the arbitrator's award without opinion. Id. at A44-A46.

3. Bedell also filed charges with the National Labor Relations Board (the Board), contending that he had suffered an unfair labor practice. After a hearing, the administrative law judge agreed, concluding that petitioner's discharge of Bedell violated Sections 8(a)(3) and (a)(1) of the National Labor Relations Act (the Act), 29 U.S.C. 158(a)(3) and (a)(1). Pet. App. A20-A43. After hearing testimony from both Bedell and petitioner, the judge found (id. at A29-A34) that the alleged assault upon which petitioner based the discharge did not in fact occur, and that petitioner's reliance on the assault as a basis for discharge thus was "pretextual" (id. at A35). The judge found that petitioner discharged Bedell because he supported DeGrosa's claim that Dore had sexually harassed her. Ibid.

The judge also rejected petitioner's reliance on the arbitration award. Citing the Board's decision in Olin Corp., 268 N.L.R.B. 573 (1984), the judge refused to defer to the award because the discrimination issue had not been before the arbitrator. /1/ Similarly, the judge declined to defer to the credibility decisions of the arbitrator because "the conflicting accounts presented to (the judge) for resolution (we)re necessarily enmeshed with the evidence bearing on the EEOC matters." Pet. App. A38-A39. As the judge put it, "(t)o ignore the testimony as to Bedell's aid to DeGrosa and other EEOC matters is to ignore the whole case." Id. at A39. The Board affirmed the ruling of the administrative law judge. Id. at A18-A19.

4. The court of appeals enforced the Board's order, rejecting petitioner's contentions that either 28 U.S.C. 1738 /2/ or common-law preclusion principles required the Board to defer to the arbitrator's findings. Pet. App. A1-A17.

a. First, the court readily found Section 1738 inapplicable because "(t)he terms of the statute require only courts of the United States to give * * * preclusive effect to state court decisions." Pet. App. A9. Noting that this Court held in University of Tennessee v. Elliott, 478 U.S. 788, 794-795 (1986), that a decision of a state administrative agency was not entitled to preclusive effect under Section 1738 because that agency was not a "court" for purposes of Section 1738, the court concluded that the Board similarly is not a "court" obligated to give preclusive effect under Section 1738. Pet. App. A9-A10. The court also noted that "(t)here are sound policy reasons why the Board should not be constrained by section 1738," id. at A10, explaining:

If section 1738 were applicable to the Board, * * * its effectiveness in remedying unfair labor practices would be dependent upon the states' varying views of claim or issue preclusion. Such a result would compromise the uniformity of rights intended by the passage of the federal labor laws.

Ibid. (citing Garner v. Teamsters Local Union No. 776, 346 U.S. 485, 490 (1953)).

The court also rejected petitioner's contention that the court of appeals itself must defer to the arbitration award even if the Board is not a "court" obligated to defer to the arbitrator's decision, explaining (Pet. App. A11):

If a reviewing court must deny enforcement of a Board order whenever its decision relies on facts inconsistent with those earlier found by an arbitrator and upheld by a state court, then we would in effect be forcing the Board to accord issue preclusive effect to the arbitrator's fact-finding. Whatever the merits of such a legal rule, we have already concluded that it cannot be supported by section 1738. /3/

b. The court of appeals also rejected petitioner's contention that, because of the "federal labor policy strongly encourag(ing)" arbitration, the court should fashion a common-law rule requiring the Board to give preclusive effect to confirmed arbitration awards. Pet. App. A13. Recognizing that "(f)ederal courts have * * * consistently given highly favorable status to consensual arbitration," ibid., the court nevertheless concluded that the "federal policy to ensure the ability of the NLRB to remedy unfair labor practices" is preeminent. The court of appeals noted that Section 10(a) of the National Labor Relations Act, 29 U.S.C. 160(a), provides that "the Board's power to prevent such practices 'shall not be affected by any other means of adjustment or prevention that has been or may be established by agreement, law, or otherwise.'" Pet. App. A13.

The court also explained that the Board, "voluntarily and as a matter of its own discretion," has adopted a policy under which it will defer to an arbitrator's award (Pet. App. A14; see note 1, supra), and that petitioner did not contend that the Board's policy required that it defer to the arbitrator's decision. Petitioner nevertheless contended that in considering the merit of the charges, the Board should be required to defer to the arbitrator's factual finding that Bedell assaulted his supervisor. Quoting the Sixth Circuit's decision in Grand Rapids Die Casting Corp. v. NLRB, 831 F.2d 112, 116 (1987), the court agreed with the Board that "(i)t makes little sense to defer to the arbitrator's specific factual findings where deference overall was refused because of the inadequacy of the factual presentation to the arbitrator." Pet. App. A15. /4/

ARGUMENT

1. Petitioner first contends (Pet. 9-20) that the court of appeals erred in concluding that 28 U.S.C. 1738 does not require the Board to defer to the arbitrator's findings. The language of the statute belies petitioner's contention. That statute requires full faith and credit only "in every court within the United States." Because the Board plainly is an administrative agency and not a court, the court of appeals correctly concluded that Section 1738 does not apply.

As the court of appeals noted, this reading of Section 1738 is bolstered by this Court's analysis in University of Tennessee v. Elliott, 478 U.S. 788 (1986). In that case, this Court concluded that the decisions of state administrative agencies are not entitled to preclusive effect under Section 1738 because those agencies are not "courts." It would be highly irregular to conclude that a state administrative agency is not a "court of (a) State" whose decisions are entitled to preclusive effect, but to interpret the phrase "court within the United States" in the same sentence to include federal administrative agencies. The court of appeals correctly rejected this argument. And it properly rejected petitioner's argument that even if "the Board is not statutorily required to defer to the arbitrator's fact-finding, the same statute works to deny enforcement of its orders whenever it fails to so defer." Pet. App. A11. As the court said, there is no good reason to "accept this effort to effect indirectly what cannot be accomplished directly." Ibid. /5/

Nor is there merit in petitioner's assertion (Pet. 12-14) that the decision of the court of appeals conflicts with Botz v. Helvering, 134 F.2d 538 (1943), or with Thomas v. Washington Gas Light Co., 448 U.S. 261 (1980). In Botz, the Eighth Circuit held that the Board of Tax Appeals (the predecessor to the United States Tax Court) was not obligated to defer to a judgment of a state court because the Commissioner was not a party to the judgment and because the judgment was obtained through fraud. Nothing in the decision supports petitioner's contention that Section 1738 requires administrative agencies to defer to the decisions of state courts. In Washington Gas Light, this Court held that the Benefits Review Board in the District of Columbia was not obligated to defer to the decision of a Virginia workers compensation tribunal. The issue raised by petitioner was not discussed in any of the opinions in that case, which focused on the singular jurisprudence this Court has produced with regard to the applicability of the Full Faith and Credit Clause to workers compensation awards.

In sum, no court has ever held that Section 1738 requires a federal agency to grant preclusive effect to a state court judgment. In the absence of a conflict, this issue does not warrant further review.

2. Petitioner also contends (Pet. 21-29) that, even if Section 1738 does not require the Board to grant preclusive effect to the arbitrator's rulings, this Court should fashion common-law preclusion principles requiring the Board to give preclusive effect to the arbitrator's findings. This contention is meritless. To be sure, courts generally presume that Congress expected that common-law rules of preclusion would apply to an administrative agency acting in a judicial capacity. See, e.g., Astoria Federal Savings & Loan Ass'n v. Solimino, 111 S. Ct. 2166, 2169-2170 (1991). But this "presumption * * * is * * * properly accorded sway only upon legislative default, applying where Congress has failed expressly or impliedly to evince any intention on this issue." Id. at 2170.

In this case, Congress has addressed the issue, by enacting Section 10(a) of the National Labor Relations Act (29 U.S.C. 160(a)), which grants the Board the power to prevent and remedy unfair labor practices and provides that the Board's power to do so "shall not be affected by any other means of adjustment or prevention that has been or may be established by agreement, law, or otherwise." The issue-preclusion rule sought by petitioner is contrary to Section 10(a), because it would prevent the Board from remedying an unfair labor practice because of the parties' private adjustment of a related contractual dispute. Petitioner fails to take account of the significance of the Board's key role in enforcing national labor policy. The Board was not a party to the earlier proceedings; it would be anomalous to conclude that it is prevented from remedying an unfair labor practice solely because of the results of grievance arbitration proceedings regarding the meaning of a private contract. Thus, the court of appeals correctly concluded that Section 10(a) evidences Congress's intent that the Board need not defer to the findings of an arbitrator interpreting a collective bargaining agreement. /6/

Finally, petitioner contends that, even if the Board was not obligated to defer to the arbitrator's entire decision, it was obligated to defer to the arbitrator's factual finding that Bedell assaulted his supervisor. See Pet. 27-29. But as the court of appeals and the administrative law judge both noted, the credibility determinations involved in resolving that factual question were "necessarily enmeshed" with Bedell's protected activity and any animus his employer may have had against it. Pet. App. A16 (quoting id. at A39). Although "(t)he motivations and the credibility of the parties * * * take on an entirely new light once the additional facts related to the unfair labor practice charge are introduced, * * * the arbitrator never heard much of the evidence of Dore's harassment of Bedell in retaliation for Bedell's assistance of DeGrosa." Id. at A15. Thus, it "makes little sense to defer to the arbitrator's specific factual findings where deference overall was refused because of the inadequacy of the factual presentation to the arbitrator." Ibid. (quoting Grand Rapids Die Casting Corp. v. NLRB, 831 F.2d 112, 116 (6th Cir. 1987)).

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

JERRY M. HUNTER

General Counsel

D. RANDALL FRYE

Acting Deputy General Counsel

NORTON J. COME

Deputy Associate General Counsel

LINDA SHER

Assistant General Counsel

LAURENCE S. ZAKSON

Senior Attorney National Labor Relations Board

AUGUST 1991

/1/ Under Olin, the Board generally defers to arbitration awards if (1) all parties have agreed to be bound, (2) the proceedings are fair and regular, (3) the arbitrator's award is not "clearly repugnant" to the Act, (4) the contractual issue is factually parallel to the unfair labor practice issue, and (5) the arbitrator is presented generally with the facts relevant to resolving the unfair labor practice issue. See Olin, 268 N.L.R.B. at 574; Spielberg Mfg. Co., 112 N.L.R.B. 1080, 1082 (1955).

/2/ Section 1738 provides:

The * * * judicial proceedings of any court of any * * * State * * * shall have the same full faith and credit in every court within the United States and its Territories and Possessions as they have by law or usage in the courts of such State.

/3/ Because the court concluded that the Board was not a "court" under Section 1738, it declined to decide whether the state court's affirmance of the arbitrator's decision was sufficient to make the arbitrator's decision (which by itself would not have been entitled to deference, see McDonald v. City of West Branch, 466 U.S. 284, 287 (1984)) a state court order entitled to deference under Section 1738. See Pet. App. A8-A9.

The court also found it unnecessary to consider the Board's contention that Section 10(a) of the National Labor Relations Act, 29 U.S.C. 160(a), had exempted the Board from any effect Section 1738 might have had on agencies in general. See Pet. App. A11 n.3. Section 10(a) provides that the Board's power to remedy unfair labor practices "shall not be affected by any other means of adjustment or prevention that has been or may be established by agreement, law, or otherwise."

/4/ On July 24, 1991, this Court denied petitioner's application for a stay of the court of appeals' judgment pending disposition of the petition for certiorari.

/5/ This case would be a particularly poor vehicle to decide whether Section 1738 requires a federal agency to defer to factual findings made in an arbitral award confirmed by a state court, because of the unusually broad statutory authority granted to the Board by Section 10(a) of the National Labor Relations Act. See note 3, supra. It is, moreover, not at all clear that a judgment such as the one here would be entitled to preclusive effect even in a state court. See ibid.

/6/ Petitioner contends (Pet. 10 n.5, 21-26) that the situation presented here -- in which an arbitrator's award has been confirmed by a state court -- is controlled by the principle of collateral estoppel established in NLRB v. Heyman, 541 F.2d 796 (9th Cir. 1976). But, as the Ninth Circuit itself has recognized implicitly, Heyman is irrelevant in this context. Heyman dealt with the collateral estoppel effect in a subsequent Board proceeding of a finding of fact made by a federal district court adjudicating an action under Section 301 of the Labor-Management Relations Act, 29 U.S.C. 185; the preclusive effect of a finding made by a court exercising its jurisdiction to decide claims that are governed by federal labor policy is a decidedly different question from the preclusive effect of a decision confirming an arbitral award based entirely on contractual interpretation. See Stephenson v. NLRB, 614 F.2d 1210, 1216 n.4 (9th Cir. 1980)(declining to require the Board to give preclusive effect to an arbitral decision; noting that Heyman was "clearly distinguishable").

UNITED STATES OF AMERICA, PETITIONER V. RICHARD WILSON

No. 90-1745

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Sixth Circuit

Reply Brief For The United States

1. Respondent does not deny (Br. in Opp. 5) that the courts of appeals have been "inconsistent" in their analysis of whether the Attorney General or the sentencing court is authorized under 18 U.S.C. 3585(b) to award credit against a federal sentence for a previous period of detention. Indeed, the conflict among the circuits has become even broader since the petition was filed. In United States v. Beston, 936 F.2d 361, 363 (1991), the Eighth Circuit aligned itself with the Sixth and Ninth Circuits in holding that the Attorney General does not have exclusive authority to grant credit for time served in official detention prior to sentencing, although the court disagreed with the Sixth Circuit by holding that the courts and the Attorney General have concurrent authority to grant credit for time served. In United States v. Herrera, 931 F.2d 761, 763-764 (1991), the Eleventh Circuit reaffirmed its view that the Attorney General has the initial responsibility to determine credit for the defendant's time in custody prior to the imposition of sentence. Nonetheless, respondent contends that the conflict among the circuits will not create any "actual administrative or judicial confusion" or "unequal treatment of prisoners" and therefore need not be resolved by this Court. Br. in Opp. 6.

On the contrary, the current situation will cause significant disruption and uncertainty for the Bureau of Prisons (BOP) in the administration of Section 3585(b), and it can be expected to engender substantial litigation until the question is definitively resolved. For example, all prisoners who are sentenced in jurisdictions that recognize the BOP's exclusive authority to compute sentencing credit will arrive at prison without having received any credit against their sentences for previous periods of detention. Ordinarily, the BOP (acting on behalf of the Attorney General) would award those prisoners the sentencing credit to which they are entitled under Section 3585(b). That may not be possible, however, with respect to prisoners who are incarcerated in a jurisdiction that has taken the position that only the courts, and not the BOP, have authority to award sentencing credit. For those prisoners, the BOP may not be authorized to grant sentencing credit under Section 3585(b), in which case the prisoners will have to file lawsuits to receive such credit.

Besides imposing a substantial burden on the courts, this scenario raises a variety of difficult questions. For example, it is unclear whether only the sentencing court can apply Section 3585(b) in a given case, or whether sentencing credit can be granted by any district court. Similarly, it is unclear whether the correct procedure for prisoners in this position would be to file an action under 28 U.S.C. 2241 in the jurisdiction of incarceration, or a motion under 28 U.S.C. 2255 with the sentencing court. The case law suggests that the proper vehicle for obtaining relief may depend on whether the responsibility for awarding credit lies principally with the sentencing court or the BOP. /1/ If that is so, a prisoner who was sentenced in a jurisdiction that assigns the task of awarding sentencing credit to the Attorney General, but who is incarcerated in a jurisdiction that assigns the award of sentencing credit to the sentencing court, could face a bizarre procedural roadblock: The sentencing court would not entertain a Section 2255 motion for the award of credit, because in that court's view the task of awarding credit would be for the Attorney General; on the other hand, a court in the jurisdicition of confinement would not entertain a Section 2241 action for award of credit, because in that jurisdiction the award of credit would be regarded as an incident of sentencing and thus available only through an action in the sentencing court.

The unsettled state of the law will also have disruptive effects for prisoners who have already been granted credit by the BOP under Section 3585(b). For prisoners incarcerated in the Sixth Circuit, for example, it is unclear whether the BOP's application of credit against their sentences is still valid, or whether these prisoners must now look to the courts -- either in the place of sentencing or incarceration -- for credit against their sentences.

The confusion will apply even in cases in which prisoners are awarded credit under Section 3585(b) by the courts that sentenced them. For example, prisoners who are awarded credit by sentencing courts will arrive at prison without having received additional credit for the interim period between sentencing and the commencement of their sentences. See Pet. 8. If a prisoner in that situation is incarcerated in the Sixth Circuit, he would apparently be required to file an action in court to receive credit for that period; if he is transferred to a jurisdiction in which the BOP awards credit, there would still be a question whether the BOP could recalculate the sentence or whether the rule in the jurisdiction in which the prisoner was sentenced would control.

The answers to these questions are unclear. What is clear, however, is that respondent is quite wrong in suggesting that the current situation, in which some circuits assign the awarding of credit to the courts and some assign it to the BOP, can be permitted to continue without creating confusion and administrative difficulty for the federal prison system and the courts. Because the federal prison system is a national system, there is a great need for nationally consistent rules, particularly on a matter of such widespread applicability and significance to prisoners as the calculation of the length of their sentences.

2. Respondent implies (Br. in Opp. 9-11) that the ban on "double counting" in Section 3585(b), see Pet. 10-12, should not apply in this case to bar the award of credit against his federal sentence for the 429 days he spent in state detention prior to sentencing. See Pet. 3-4. He claims that he will not realize any benefit from the previous award of credit against his state sentence -- and, thus, that there is no "double counting" problem -- because he is eligible for parole on the state charges, with or without the credit, before his concurrent federal term expires. /2/

Respondent's argument fails for two reasons. First, his period of federal imprisonment will not necessarily outlast his incarceration on state charges, because he may not be paroled from his state sentence at the earliest possible date. If his federal prison term expires while he is still being held on the state charges, the credit he received against his state sentence will indeed result in his spending less time in prison. /3/ Second, there is in any event no exception to the proscription on double counting in Section 3585(b) for cases in which credit against a previous sentence might not affect the defendant's actual period of incarceration. Section 3585(b) provides that a defendant is entitled to credit against a federal sentence for a period of detention "that has not been credited against another sentence." That limitation applies regardless of whether the sentence against which credit is first awarded is concurrent with the federal sentence or whether it will expire before the federal sentence runs.

For the foregoing reasons, and those stated in the petition, the petition for a writ of certiorari should be granted.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

AUGUST 1991

/1/ Cases decided under the Bail Reform Act of 1966, Pub. L. No. 89-465, Section 4, 80 Stat. 217, which delegated exclusive authority to the Attorney General to award sentencing credit, held that prisoners seeking credit against a sentence could challenge the Attorney General's determination by filing an action under 28 U.S.C. 2241 in the place of incarceration. See, e.g., United States v. Brown, 753 F.2d 455, 456 (5th Cir. 1985)(Section 2241 action is appropriate because the prisoner "does not question the legality of (the) * * * prison term imposed by the sentencing court. His attack instead focuses on the extent to which his sentence has been executed"); United States v. Giddings, 740 F.2d 770, 771-772 (9th Cir. 1984)(prisoner's "claim for credit challenges the Attorney General's execution of sentence rather than the district court's imposition"); see also United States v. Gabor, 905 F.2d 76, 77-78 (5th Cir. 1990); Barden v. Keohane, 921 F.2d 476, 478-479 (3d Cir. 1990); United States v. Mittelsteadt, 790 F.2d 39, 40-41 (7th Cir. 1986); Soyka v. Alldredge, 481 F.2d 303, 305 & n.6 (3d Cir. 1973). In contrast, under the statute in effect before 1966, see Act of Sept. 2, 1960, Pub. L. No. 86-691, Section 1(a), 74 Stat. 738, which contemplated that sentencing courts would give credit for previous detention, courts entertained applications for sentencing credit under 28 U.S.C. 2255. See Myers v. United States, 446 F.2d 232, 234 (9th Cir. 1971); United States v. Carbo, 474 F.2d 698, 699 (9th Cir. 1973); Davis v. United States, 446 F.2d 847, 848 n.2 (7th Cir. 1971); Bujese v. United States, 404 F.2d 615 (3d Cir. 1968); United States v. Giddings, 740 F.2d at 771-772; see also Aldridge v. United States, 405 F.2d 831, 832 (9th Cir. 1969)(before enactment of Bail Reform Act, applying the "conclusive presumption" that the sentencing court has properly applied the statute to credit an eligible period of previous custody in fixing sentence below the mandatory maximum); Myers v. United States, 446 F.2d at 234 (same).

/2/ On the state charges, respondent was sentenced to concurrent ten-year and two-year terms, to run consecutively with a five-year term of imprisonment. These sentences were to be served concurrently with his eight-year term of imprisonment on the federal charge. See Gov't C.A. Br. Addendum A, B, & C.

/3/ Respondent asserts that "(t)he Tennessee prison authorities have never officially credited (him) with the 429 days spent in jail prior to being sentenced." Br. in Opp. 9. The state court, however, awarded credit for that period, see Judgment and Commitment Order, Gov't C.A. Br. Addendum C, and both the Attorney General and the federal district court are entitled to assume that the state authorities will carry out the terms of the state court's order. carry out the terms of the state court's order.

F. DALE ROBERTSON, CHIEF, UNITED STATES FOREST SERVICE, THE UNITED STATES FOREST SERVICE, AND MANUEL LUJAN, JR., SECRETARY OF THE INTERIOR, PETITIONERS V. SEATTLE AUDUBON SOCIETY, ET AL.

No. 90-1596

In The Supreme Court Of The United States

October Term, 1991

On Writ Of Certiorari To The United States Court Of Appeals For The Ninth Circuit

Brief For The Petitioners

PARTIES TO THE PROCEEDING

In addition to the parties named in the caption, Pilchuck Audubon Society, Washington Environmental Council, Washington Native Plants Society, Oregon Natural Resources Defense Council, Inc., Portland Audubon Society, Lane County Audubon Society, and Siuslaw Task Force were plaintiffs in the district court (W.D. Wash.) and appellants in the court of appeals. Washington Contractor Loggers Association and William Pickell were also plaintiffs in the district court and appellees in the court of appeals.

Portland Audubon Society, Headwaters, Lane County Audubon Society, Oregon Natural Resources Council, Siskiyou Audubon Society, Central Oregon Audubon Society, Kalmiopsis Audubon Society, Umpqua Valley Audubon Society, and Natural Resources Defense Council were plaintiffs in the district court (D. Or.) and appellants in the court of appeals. Northwest Forest Resource Council, Huffman & Wright Logging Co., Freres Lumber Co., Inc., Lone Rock Timber Co., Inc., Scott Timber Co., Clear Lumber Manufacturing Corp., Yoncalla Timber Products, Inc., Cornett Lumber Company, Inc., Douglas County Forest Products Company, Medford Corporation, Rogge Forest Products, Inc., Association of O & C Counties, and Benton County were defendants/intervenors in the district court and appellees in the court of appeals.

TABLE OF CONTENTS Question presented Parties to the proceeding Opinions below Jurisdiction Statutory provision involved Statement A. Initial proceedings in the district courts and court of appeals 1. Portland Audubon Society v. Lujan 2. Seattle Audubon Society v. Robertson B. Section 318 of the Department of the Interior and Related Agencies Appropriations Act, 1990 C. District court proceedings in light of Section 318 1. Seattle Audubon Society v. Robertson 2. Portland Audubon Society v. Lujan D. The court of appeals decision E. District court proceedings on remand from court of appeals' invalidation of Section 318(b)(6) (A) 1. Seattle Audubon Society v. Robertson 2. Portland Audubon Society v. Lujan Summary of argument Argument: I. The court of appeals misconstrued Section 318 A. Section 318 provides a temporary modification of statutory requirements for designated public lands B. The first sentence of Section 318(b)(6)(A) does not direct a court to decide a case C. The court of appeals' interpretation distorts the congressional compromise II. Section 318 contains no violation of Article III A. Article III plays a limited role in the constitutional constraints on Congress's ability to affect pending cases B. The first sentence of Section 318(b)(6)(A) does not violate Article III C. United States v. Klein does not require a conclusion that the first sentence of Section 318(b)(6)(A) is unconstitutional Conclusion OPINIONS BELOW

The amended opinion of the court of appeals (Pet. App. 1a-17a) is reported at 914 F.2d 1311. The opinion and order of the district court in Seattle Audubon Society v. Robertson, No. 89-160WD (W.D. Wash) (Pet. App. 20a-28a, 29a-34a) are unreported. The opinion of the district court in Portland Audubon Society v. Lujan, No. 87-1160-FR (D. Or.) (Pet. App. 35a-42a) is unreported.

JURISDICTION

The judgment of the court of appeals was entered on September 18, 1990. Petitions for rehearing were denied on January 16, 1991. Pet. App. 18a-19a. The petition for a writ of certiorari was filed on April 12, 1991, and was granted on June 28, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

STATUTORY PROVISION INVOLVED

Section 318(b)(6)(A) of the Department of the Interior and Related Agencies Appropriations Act, 1990, Pub. L. No. 101-121, Tit. III, 103 Stat. 747 (1989), provides:

Without passing on the legal and factual adequacy of the Final Supplement to the Environmental Impact Statement for an Amendment to the Pacific Northwest Regional Guide -- Spotted Owl Guidelines and the accompanying Record of Decision issued by the Forest Service on December 8, 1988 or the December 22, 1987 agreement between the Bureau of Land Management and the Oregon Department of Fish and Wildlife for management of the spotted owl, the Congress hereby determines and directs that management of areas according to subsections (b) (3) and (b) (5) of this section on the thirteen national forests in Oregon and Washington and Bureau of Land Management lands in western Oregon known to contain northern spotted owls is adequate consideration for the purpose of meeting the statutory requirements that are the basis for the consolidated cases captioned Seattle Audubon Society et al., v. F. Dale Robertson, Civil No. 89-160 and Washington Contract Loggers Assoc. et al., v. F. Dale Robertson, Civil No. 89-99 (order granting preliminary injunction) and the case Portland Audubon Society et al., v. Manuel Lujan, Jr., Civil No. 87-1160-FR. The guidelines adopted by subsections (b) (3) and (b) (5) of this section shall not be subject to judicial review by any court of the United States.

Section 318 of the Department of the Interior and Related Agencies Appropriations Act, 1990, Pub. L. No. 101-121, Tit. III, 103 Stat. 745-750 (1989), is reproduced in its entirety at App., infra, 1a-13a. /1/

QUESTION PRESENTED

Whether Section 318(b)(6)(A) of the Department of the Interior and Related Agencies Appropriations Act, 1990, Pub. L. No. 100-121, Tit. III, Section 318(b)(6)(A), 103 Stat. 747 (1989), which provides interim statutory standards not subject to judicial review for management of government forest timber sales that had been challenged in pending federal court actions, violates the constitutional principle of separation of powers.

STATEMENT

This case involves "the ongoing controversy over logging in old growth forests in Oregon and Washington and the impact of that logging on the northern spotted owl." Pet. App. 5a. Old-growth forests are favored natural habitat for the northern spotted owl, Strix occidentalis caurina. The bird's current range extends from northern California, through the coastal and cascade regions of Oregon and Washington, and into southern British Columbia. Because of logging and land conversion activities, approximately 90% of suitable habitat for northern spotted owls now occurs on government land. /2/ The Forest Service manages 79% of the habitat on federal land, and the Bureau of Land Management manages 14% of it; the remaining 7% is on National Park Service land. Sixty percent of northern spotted owl habitat on federal land is in areas classified as "timber production land." 55 Fed. Reg. 26,114-26,115, 26,175 (1990).

In the late 1980's, respondents -- the Seattle Audubon Society, the Portland Audubon Society, and other environmental groups -- filed actions in the Western District of Washington and the District of Oregon challenging the federal government's efforts to continue logging old-growth timber in government-owned forests located in the Pacific Northwest. During the pendency of those federal court proceedings, Congress enacted Section 318 of the Department of the Interior and Related Agencies Appropriations Act, 1990, Pub. L. 101-121, Tit. III, 103 Stat. 745-750 (1989), also known as the Northwest Timber Compromise. Section 318 "sets terms and conditions applicable only for fiscal year 1990 for making timber sales on Federal lands in Oregon and Washington, for managing habitat for northern spotted owls, and for minimizing fragmentation of significant old growth forest stands." H.R. Conf. Rep. No. 264, 101st Cong., 1st Sess. 87 (1989). Its purpose was to "balance the goals of ensuring a predictable flow of public timber for fiscal year 1990 and protecting the northern spotted owl and significant old growth forest stands." Ibid.

The district courts in Oregon and Washington concluded that Section 318 operated as a "temporary modification of the environmental laws" invoked by respondents in their lawsuits. Pet. App. 25a; see also id. at 37a-38a. Accordingly, the district courts determined that the statute by its terms precluded respondents' claims for relief.

The Ninth Circuit reversed, holding that one part of Section 318 -- the first sentence in Section 318(b)(6)(A) -- violates the constitutional principle of separation of powers set forth in United States v. Klein, 80 U.S. (13 Wall.) 128 (1872). The court of appeals determined that Section 318(b)(6)(A) "does not establish new law, but directs the court to reach a specific result and make certain factual findings under existing law in connection with two cases pending in federal court." Pet. App. 14a. In the court's view, "(t)his is what Klein and subsequent cases agree is constitutionally proscribed." Ibid. The court of appeals thus remanded the cases to the district courts for consideration of the merits of respondents' challenges.

A. Initial Proceedings In The District Courts and Court of Appeals

1. Portland Audubon Society v. Lujan

The Bureau of Land Management (BLM), an agency of the Department of the Interior, manages approximately 2.4 million acres of forested land in Oregon. 55 Fed. Reg. 26,189 (1990). Most of these lands are revested Oregon and California Railroad (O & C) grant lands that are administered pursuant to the Oregon and California Lands Act (OCLA), 43 U.S.C. 1181a. /3/ The remainder is interspersed, never-patented public domain lands administered pursuant to the Federal Land Policy and Management Act of 1976 (FLPMA), 43 U.S.C. 1701 et seq.

Between 1979 and 1983, the BLM completed seven separate timber management plans and environmental impact statements to govern timber harvesting on BLM lands, for the next decade, in seven specified areas of western Oregon. /4/ Under these documents, habitat for a total of 66 to 85 pairs of the northern spotted owl was to be protected. GXs 122-128. By agreements between the Oregon Department of Fish and Wildlife and the BLM, the number of protected pairs was raised to 90 in 1983, and to 110 in 1987. GXs 129, 138.

In 1986, BLM commenced preparing replacement plans, called Resource Management Plans, which were then scheduled for completion in 1990. GX 114. /5/ In 1987, the Oregon State office of the BLM -- an administrative unit within the BLM -- prepared an environmental assessment to determine whether significant new information concerning the northern spotted owl had developed since the preparation of the seven timber management plans. GX 125. On April 10, 1987, that office issued a notice stating that BLM would not supplement the prior environmental impact statements; the agency concluded that new information was not significant, and that options for the protection of the northern spotted owl would be available at the time of the expected completion of the new plans. GX 136.

In October 1987, Portland Audubon Society and other environmental groups (hereafter the Portland Audubon respondents) filed a complaint for declaratory and permanent injunctive relief challenging BLM's decision not to prepare a supplement to the environmental impact statements for the timber management plans adopted in the period 1979-1983. J.A. 42-56. The complaint alleged violations of four federal statutes: (1) the National Environmental Policy Act (NEPA), 42 U.S.C. 4321 et seq.; (2) the Oregon and California Lands Act (OCLA), 43 U.S.C. 1181a; (3) the Federal Land Policy and Management Act of 1976 (FLPMA), 43 U.S.C. 1701 et seq.; and (4) the Migratory Bird Treaty Act (MBTA), 16 U.S.C. 703 et seq. On each of these four counts, the Portland Audubon respondents alleged that their cause of action rested upon the provisions of the Administrative Procedure Act (APA) for judicial review of agency action, 5 U.S.C. 702, 706(2)(A). J.A. 53-54.

In April 1988, the district court dismissed the action, holding that Section 314 of the Department of the Interior and Related Agencies Appropriations Act, 1988, Pub. L. No. 100-202, Tit. III, 101 Stat. 1329-254 (1987), precluded judicial review of Portland Audubon's claims. /6/ In January 1989, however, after granting injunctions pending appeal, the court of appeals reversed and remanded for further proceedings. Portland Audubon Society v. Hodel, 866 F.2d 302 (9th Cir.), cert. denied, 492 U.S. 911 (1989). /7/

On remand, in May 1989, the district court again dismissed the Portland Audubon respondents' action on the basis of the statutory bar in Section 314. Portland Audubon Society v. Lujan, 712 F. Supp. 1456 (D. Or. 1989). The court of appeals again enjoined BLM timber sales pending appeal. In September 1989, the appellate court affirmed the district court's dismissal of respondents' NEPA claim, but reversed and remanded the dismissal of respondents' claims under the OCLA, FLPMA and MBTA. Portland Audubon Society v. Lujan, 884 F.2d 1233 (9th Cir. 1989), cert. denied, 494 U.S. 1026 (1990). /8/

2. Seattle Audubon Society v. Robertson

Region 6 of the United States Forest Service, Department of Agriculture, covers the States of Oregon and Washington. It contains 19 national forests, 13 of which are known to contain the northern spotted owl.

In 1976, Congress enacted the National Forest Management Act (NFMA), 16 U.S.C. 1601 et seq. That Act sets forth procedures, criteria, and guidelines for the development of land management plans for National Forest System units. In implementing NFMA, the Forest Service promulgated regulations calling for the development of regional guides. 36 C.F.R. 219.8(a). Regional guides "provide standards and guidelines for addressing major issues and management concerns which need to be considered at the regional level to facilitate forest planning." Ibid.

In 1984, Region 6 completed its regional guide which, inter alia, addressed habitat requirements for the northern spotted owl. J.A. 65. In 1985, on administrative appeal, the Department of Agriculture remanded the northern spotted owl portion of the regional guide to the Forest Service for reconsideration. J.A. 65. The Forest Service prepared a supplemental environmental impact statement and, in December 1988, issued a Record of Decision adopting an amendment to the regional guide. J.A. 67. That amendment called for the creation of Spotted Owl Habitat Areas (SOHAs) around northern spotted owl pairs or individuals and in empty spotted owl habitat. The SOHAs were to range in size from 1000 acres in the more southerly Klamath Mountain Province (Siskiyou National Forest) to 3000 acres in the northwestern Olympic Peninsula Province (Olympic National Forest). J.A. 79-80. Other standards and guidelines prescribed criteria for SOHA selection and spacing of the SOHAs. J.A. 81-87.

In February 1989, Seattle Audubon Society and other environmental groups (hereafter the Seattle Audubon respondents) filed suit against the Chief of the Forest Service in the United States District Court for the Western District of Washington. The Seattle Audubon respondents claimed that the Forest Service's plan for managing the northern spotted owl habitat in Region 6 national forests violated NEPA, the MBTA, and the NFMA. J.A. 74-75. /9/ They sought declaratory and injunctive relief, barring the Forest Service from implementing its plans. Pet. App. 6a, 30a-32a. In a series of rulings issued in the spring of 1989, the district court preliminarily enjoined 163 timber sales in Washington and Oregon. Those sales each involved areas of 40 acres or more of suitable spotted owl habitat. Id. at 6a, 30a-33a.

B. Section 318 of the Department of the Interior and Related Agencies Appropriations Act, 1990

In the midst of the disruption caused by the injunctions issued in the course of respondents' lawsuits, Congress enacted Section 318 of the Department of the Interior and Related Agencies Appropriations Act, 1990, Pub. L. No. 100-121, Tit. III, 103 Stat. 745-750 (1989), in order to "balance the goals of ensuring a predictable flow of public timber for fiscal year 1990 and protecting the northern spotted owl and significant old growth forest stands." H.R. Conf. Rep. No. 264, supra, at 87. Consequently, as effective October 23, 1989, Section 318 "sets terms and conditions applicable only for fiscal year 1990 for making timber sales on Federal lands in Oregon and Washington, and for minimizing fragmentation of significant old growth forest stands." Ibid.

1. Section 318(a) sets the amount of timber sales. It provides that the Forest Service shall offer "an aggregate timber sale level of seven billion seven hundred million board feet" of "net merchantable timber" from the national forests of Oregon and Washington for fiscal years 1989 and 1990. Section 318(a)(1). Of that total, "an aggregate timber sale level for fiscal years 1989 and 1990 of five billion eight hundred million board feet" must come from "the thirteen national forests in Oregon and Washington known to contain northern spotted owls." Ibid. The legislation further provides that BLM shall offer "an aggregate timber sale level of one billion nine hundred million board feet for fiscal years 1989 and 1990 from its administrative districts in western Oregon." Section 318(a)(2).

2. Section 318(b) then prescribes standards for the timber sales. Sections 318(b)(1), 318(b)(2), and 318(b)(4) require the Forest Service to minimize fragmentation of ecologically significant old-growth forest stands in planning timber sales. Section 318(b)(3) forbids Forest Service timber sales within Spotted Owl Habitat Areas (SOHAs) pursuant to the regional guide, and expands the areas of SOHAs in each geographic province. /10/ Aside from these modifications, "(a)ll other standards and guidelines contained in the (Forest Service) Chief's Record of Decision are adopted." Section 318(b)(3)(F). With regard to the BLM, Section 318(b)(5) forbids timber sales in the 110 areas designated for northern spotted owl protection in the December 1987 agreement between the BLM and the Oregon Department of Fish and Wildlife. Section 318(b)(5) also directs the BLM to identify, through consultation with state and federal agencies, 12 additional spotted owl habitat areas, and forbids timber sales in those additional areas.

Section 318(b)(6)(A), in turn, addresses the applicability of certain statutes. The Section begins by stating that Congress is not "passing on the legal and factual adequacy of" the Forest Service's Environmental Impact Statement and Record of Decision and BLM's agreement with the Oregon Department of Fish and Wildlife. It then relates that "the Congress hereby determines and directs that management of areas according to subsections (b)(3) and (b)(5) of this section on the thirteen national forests in Oregon and Washington and Bureau of Land Management lands in western Oregon known to contain northern spotted owls is adequate consideration for the purpose of meeting the statutory requirements that are the basis for" the Portland Audubon and Seattle Audubon cases. The subsection then adds that "(t)he guidelines adopted by subsections (b)(3) and (b)(5) of this section shall not be subject to judicial review by any court of the United States." App., infra, 5a-6a.

3. In order to protect the 1990 timber sale programs from litigation disruptions, Section 318(g) provides streamlined judicial review procedures. The provision provides for expedited judicial review of individual timber sale decisions by suits filed within fifteen days of the initial advertisement of the sale. It prohibits federal courts from issuing a "restraining order or preliminary injunction * * * with respect to any decision * * * (regarding) timber sales in fiscal year 1990 from the thirteen national forests in Oregon and Washington and (BLM) lands in western Oregon known to contain northern spotted owls." Section 318(g)(1). It nevertheless specifically authorizes courts "to enjoin permanently * * * an individual sale" after a determination on the merits that the sale decision was "arbitrary, capricious or otherwise not in accordance with law." Ibid. /11/

C. District Court Proceedings In Light of Section 318

1. Seattle Audubon Society v. Robertson

As a result of the express provisions of Section 318, the government in October 1989 asked the district court to vacate the preliminary injunction it had previously entered barring the 163 planned timber sales in Washington and Oregon. The Seattle Audubon respondents countered that Section 318(b)(6)(A) was unconstitutional, contending that Congress impermissibly directed the result in pending actions and otherwise unlawfully barred judicial review of the one-year guidelines established by the statute. Pet. App. 23a.

In November 1989, the district court granted the government's motion, rejected the Seattle Audubon respondents' constitutional challenge, and vacated the preliminary injunction. Pet. App. 20a-28a, 29a-34a. The court concluded that Section 318(b)(6)(A) "does not require a particular decision on the issues of this case." Pet. App. 24a. On the contrary, the court determined, "Congress has adopted the Forest Service's proposed guidelines, challenged by (respondents), as statutory law for a period of one year." Ibid. Congress has "the power to do this," the court recognized, since "(j)ust as Congress may create a geographic exception to the environmental laws, it may also create a temporal exception." Ibid. The court also rejected the Seattle Audubon respondents' contention that the statute's bar to judicial review was unconstitutional, noting that Congress may restrict federal court jurisdiction, and that Section 318(b)(6)(A) "means only that, as new statutory law, the guidelines (mandated in subsections (b) (3) and (b) (5)) cannot be tested in court for compliance with the National Forest Management Act, the National Environmental Policy Act, or other general environmental statutes." Pet. App. 25a-26a. /12/

2. Portland Audubon Society v. Lujan

In the district court, the government similarly sought to dismiss the Portland Audubon respondents' pending claims in view of newly enacted Section 318. Respondents contended that Section 318(b)(6)(A), which in their view prescribed a rule of decision in the pending action, violated the constitutional principle of separation of powers. Pet. App. 37a.

In December 1989, the district court granted the government's motion and dismissed respondents' statutory claims as moot, without prejudice to refiling after the end of fiscal year 1990. Pet. App. 35a-42a. The court rejected respondents' constitutional challenge, adopting the "reasoning and result" of the district court in the Seattle Audubon Society case. Id. at 37a. /13/

D. The Court of Appeals Decision

In September 1990, the court of appeals reversed, holding that Section 318(b)(6)(A) violates the constitutional principle of separation of powers. Pet. App. 1a-17a. Relying principally on United States v. Klein, 80 U.S. (13 Wall.) 128 (1872), and United States v. Sioux Nation of Indians, 448 U.S. 371 (1980), the court stated that the

critical distinction, for purposes of deciding the limits to Congress' authority to affect pending litigation through statute, is between the repeal or amendment of the law underlying the litigation, which is permissible, and the direction of a particular decision in a case, without repealing or amending the law underlying the litigation, which is not permissible.

Pet. App. 11a-12a.

Turning to Section 318(b)(6)(A), the court determined that the statute "does not, by its plain language, repeal or amend the environmental laws underlying this litigation." Pet. App. 13a. Instead, the court stated, "(t)he clear effect of subsection (b)(6)(A) is to direct (the court) that, if the government follows the plan incorporated in subsections (b)(3) and (b)(5), then the government will have done what is required under the environmental statutes involved in these cases." Ibid.

Having construed the statute in this manner, the court concluded that "(i)n this way Congress, through section 318, seeks to perform functions reserved to the courts by Article III of the Constitution." Pet. App. 14a. In other words, Section 318(b)(6)(A) "does not establish new law, but directs the court to reach a specific result and make certain factual findings under existing law in connection with two cases pending in the federal court." Ibid. In the court's view, "(t)his is what Klein and subsequent cases agree is constitutionally proscribed." Ibid. /14/

Finally, the court of appeals noted that "even if (it) could interpret section 318 as a temporary repeal of the environmental laws at issue in the underlying litigation, then section 318 would amount to an implied partial repeal of the environmental statutes." Pet. App. 16a. Relying on TVA v. Hill, 437 U.S. 153 (1978), and circuit precedent, the court stated that Congress could not partially repeal substantive law in an "appropriations measure." Pet. App. 16a.

E. District Court Proceedings On Remand From Court of Appeals' Invalidation of Section 318(b)(6)(A)

1. Seattle Audubon Society v. Robertson

Subsequent to the court of appeals' decision, the Seattle Audubon respondents renewed their objections to 12 Forest Service timber sales. In December 1990, the district court set aside and enjoined those sales for violations of NEPA, NFMA, and the MBTA, Seattle Audubon Society v. Robertson, No. 89-160WD (W.D. Wash. Dec. 18, 1990), reprinted at Br. in Opp. App. 126a-143a, appeal pending, No. 91-35378 (9th Cir).

Respondents also sought to challenge an additional six Forest Service 1990 timber sales. The district court dismissed those challenges as untimely under the fifteen-day limitations period of Section 318(g)(1), 103 Stat. 749. The court of appeals reversed, ruling that the fifteen-day period had been equitably tolled during the period that respondents were challenging the constitutionality of Section 318(b)(6)(A). Seattle Audubon Society v. Robertson, 931 F.2d 590 (9th Cir. 1991), reprinted at Br. in Opp. App. 66a-84a. On remand, the district court enjoined four of the challenged sales; the remaining two sales had been substantially harvested. Seattle Audubon Society v. Evans, No. 89-160WD (W.D. Wash. May 24, 1991), reprinted at Br. in Opp. App. 85a-88a, appeal pending, No. 91-35564 (9th Cir.). /15/

2. Portland Audubon Society v. Lujan

On remand from the court of appeals, the district court granted partial summary judgment to the government. It found that Portland Audubon's NEPA claim had been dismissed in 1989, and that its claims under the OCLA and the MBTA were meritless. The district court denied the parties summary judgment on the FLPMA claim, which remains pending. Portland Audubon Society v. Lujan, No. 87-1160-FR (D. Or. May 8, 1991), reprinted at Br. in Opp. App. 88a-104a, appeal pending, No. 91-35762 (9th Cir.).

SUMMARY OF ARGUMENT

1. A cardinal principle of constitutional adjudication is that, if fairly possible, statutes should be construed to avoid constitutional difficulties. See, e.g., Communications Workers v. Beck, 487 U.S. 735, 762 (1988). Here, the court of appeals rejected an entirely plausible (and, indeed, the most straightforward) reading of Section 318 -- that it establishes a temporary modification of legal standards governing the management of designated public lands by specifying the required plans and providing that they should not be impeded by the operation of other environmental statutes.

This congressional intent is plain both from a consideration of Section 318 without regard to the first sentence of Section 318(b)(6)(A) and from a consideration of that sentence itself. As a whole, Section 318 establishes mandatory timber sale levels for fiscal 1990 (Section 318(a)), specifies environmental procedures for those mandatory sales (Section 318(b)), and provides a variety of other timber sales-related procedures (Section 318(c)-(k)). The second sentence of Section 318(b)(6)(A), moreover, provides that there shall be no judicial review of the (b)(3) and (b)(5) guidelines -- a directive plainly violated by the court of appeals' ultimate conclusion that the (b)(3) and (b)(5) guidelines may be measured against other environmental statutes to determine their adequacy.

Like Section 318 as a whole, the first sentence of Section 318(b)(6)(A) is perfectly consistent with the understanding that Section 318 is a temporary modification of environmental laws, providing the procedures to govern federal land management in the designated area for one year without impediment from other environmental statutes. The court of appeals' conclusion to the contrary rests on several misconceptions. These include a misapprehension about the significance of the statutory reference to these cases, an overly simplistic dichotomy regarding possible congressional actions that fails to take into account "deeming" provisions and conclusive presumptions, an erroneous conclusion that the statute requires the entry of judgment and findings, and a mistaken assumption that the first sentence must be interpreted as a directive to the courts, rather than to executive agencies.

Finally, the court of appeals' ultimate interpretation -- in which the specified standards simply apply in addition to the other, pre-existing statutory requirements -- is plainly contrary to Congress's intent in fashioning a one-year compromise to streamline timber sales and avert a looming crisis. The court's interpretation severely distorts the nature and effect of that compromise.

2. In addition to misreading the statute, the court misconstrued Article III and United States v. Klein. Article III plays a limited role in restraining Congress's ability to enact legislation that affects pending cases. Numerous constitutional provisions -- the Due Process Clause, the equal protection component of that Clause, the Takings Clause, and the Bill of Attainder and Ex Post Facto Clauses -- address aspects of this issue, and Article III does not function as a general backstop to these provisions. Instead, Article III performs an important, but limited, mission of protecting the adjudicative function.

Contrary to the court of appeals' conclusion, the first sentence of Section 318(b)(6)(A) presents no invasion of the adjudicative function. The sentence provides, at most, a legal characterization, operating as a deeming provision or conclusive presumption. Such congressionally specified legal characterizations are merely a form of prescribing governing substantive legal standards -- a legislative function that does not impinge on the adjudicative function. Because Congress's expressed objective -- that the (b)(3) and (b)(5) guidelines would operate unimpeded by other environmental statutes -- is constitutional, Congress's choice of language in expressing that permissible objective should not determine its constitutional validity. Cf. United States v. Ptasynski, 462 U.S. 74, 86 (1983). Because Congress was providing the standards for management of the public lands, moreover, its authority was especially broad, see Art. IV, Section 3, Cl. 2; California Coastal Comm'n v. Granite Rock Co., 480 U.S. 572, 580 (1987). Indeed, the court of appeals impermissibly intruded on the congressional responsibility for the management of public lands.

United States v. Klein does not require a different conclusion. Klein is distinguishable from the instant case in several important respects. Unlike Klein, this case presents no issue concerning vested property rights, no issue concerning an unconstitutional objective by Congress, and no issue concerning manipulation of jurisdiction to achieve an unconstitutional objective. Although Klein contains some broad and ambiguous language, the decision should, consistent with established principles of constitutional interpretation, be given a careful reading, appropriately limited by the issues presented in the case itself. Klein clearly establishes that Congress may not impinge upon the pardon power; that, in certain circumstances, there may be judicial review of limitations on this Court's jurisdiction; and that Congress may not manipulate this Court's appellate jurisdiction in such a manner that the Court becomes the means through which Congress unconstitutionally infringes on the pardon power. Klein does not, however, require invalidation of Congress's temporary modification, in Section 318, of the standards governing the management of designated public lands.

ARGUMENT

I. THE COURT OF APPEALS MISCONSTRUED SECTION 318

It is a fundamental principle of constitutional adjudication that "federal statutes are to be construed so as to avoid serious doubts as to their constitutionality, and that when faced with such doubts the Court will first determine whether it is fairly possible to interpret the statute in a manner that renders it constitutionally valid." Communications Workers v. Beck, 487 U.S. 735, 762 (1988). This Court has repeatedly reiterated this requirement, and its importance. /16/ The principle is rooted in judicial respect for the other Branches and in a deepseated reluctance to invalidate legislation, or parts of legislation, unless absolutely necessary. See, e.g., Edward J. DeBartolo Corp., 485 U.S. at 575; Crowell v. Benson, 285 U.S. 22, 62 (1932).

Although the court of appeals acknowledged this principle (Pet. App. 15a), the court's analysis fails to honor it. The court agreed that, if Congress had used different language with respect to the applicability of other environmental statutes, Congress could have established Section 318, precisely as written in all other respects, as a comprehensive, one-year plan for public land management that would proceed regardless of those other environmental statutes. Pet. App. 14a-16a. The court nevertheless invalidated the first sentence of Section 318(b)(6)(A) as an unconstitutional intrusion on the Judiciary within the meaning of United States v. Klein, supra, and held that other environmental statutes apply in full to the Section 318 requirements. Pet. App. 12a-16a.

To reach that conclusion, the court of appeals read the first sentence of Section 318(b)(6)(A) to embody an "actual direction of a particular decision in a case" (Pet. App. 11a) to the courts. But this reading of Section 318 is not the most straightforward reading of the provision; it contradicts the language and structure of the provision; and it can easily be avoided to save the provision from any constitutional infirmity.

To understand the flaws in the court of appeals' interpretation, it is instructive to consider (1) the language and structure of Section 318 without regard to the first sentence of Section 318(b)(6)(A); (2) the first sentence of Section 318(b)(6)(A); and (3) the compromise nature of Section 318.

A. Section 318 Provides A Temporary Modification Of Statutory Requirements For Designated Public Lands

The most straightforward reading of Section 318 is that it provides alternative standards or plans for Forest Service and BLM timber sales in the designated areas for fiscal year 1990. When the Section is considered without regard to the first sentence of Section 318(b)(6)(A), it is plain that Congress intended to establish the procedures that would govern timber sales on a one-year basis and on specified public lands, and that Congress intended that these procedures would not be impeded or modified by the applicability of other environmental statutes.

Section 318(a) definitively sets the amount of timber sales from Forest Service and BLM lands in Oregon and Washington. See Section 318(a)(1) ("The Forest Service shall offer * * *.") (emphasis added); Section 318(a)(2) ("The Bureau of Land Management shall offer * * *.") (emphasis added). Section 318(b) then establishes the guidelines for the sales -- requiring minimization of fragmentation of ecologically significant old growth forest stands (Section 318(b)(1)); specifying procedures for addressing any fragmentation necessary to meet the amounts required by Section 318(a) (Section 318(b)(2)); expanding the protected areas in the Forest Service and BLM administrative plans and adopting the modified plans as statutory law (Section 318(b)(3) and (b)(5)); specifying standards for Forest Service selection of sites (Section 318(b)(4)); and providing that the "guidelines adopted by subsections (b)(3) and (b)(5) shall not be subject to judicial review by any court of the United States." Section 318(b)(6)(A) (second sentence).

Additional provisions further elaborate the required procedures. Among other things, the provisions require the creation of advisory boards, which would include business and environmental representatives, for consideration of proposed timber sales (Section 318(c)); streamline the administrative appeal process with respect to individual sales (Section 318(d)); and provide for limited judicial review of individual sales (Section 318(g)).

Without regard to the first sentence of Section 318(b)(6)(A), then, Section 318 clearly can be read as establishing a temporary modification of the governing legal requirements, on a one-year basis, for specified public lands. Rather than by the panoply of existing statutes, the management of these lands would be governed by the highly specific legislation addressed to this particular problem. Section 318 orders the Forest Service and BLM to offer sales that conform to statutory guidelines set forth in subsections (b)(3) and (b)(5), and provides that those statutory guidelines are not subject to judicial review.

Indeed, even after the court of appeals initially issued its decision, the Seattle Audubon district court viewed this reading of Section 318 as sufficiently plausible that it sent a letter to the court of appeals requesting clarification of the court of appeals' decision. The letter stated, in pertinent part:

Congress appears to have intended that Section 318's standards would preempt the field as to 1990 sales. However, the question now arises whether it achieved that, in light of the Court of Appeals September 18 decision. The issue is that: Does Section 318 contain in full the substantive standards the Forest Service must meet as to 1990 sales in the forests covered by the statute? Or does (the) agency have to comply with both the requirements of Section 318 and any that may exist under general statutes such as the National Forest Management Act?

Br. in Opp. App. 137a-138a. The court of appeals responded by amending its decision to explain that the provisions in Section 318 "add additional requirements," and do not "repeal or amend" the other environmental statutes with respect to the Section 318-mandated procedures. See Br. in Opp. App. 138a; Pet. App. 3a-4a.

By responding in such a fashion, the court of appeals eschewed a plainly available interpretation of Section 318 that would obviate any constitutional problem -- the conclusion that, as the district court put it in its letter, "Congress * * * intended that Section 318's standards would preempt the field as to 1990 sales," Br. in Opp. App. 137a, on the specified public lands. To be sure, an important aspect of the court of appeals' conclusion was its reading of the first sentence of Section 318(b)(6)(A) itself, a reading that will be addressed shortly. For present purposes, however, it is important to underscore that nothing in the rest of Section 318 precludes a conclusion that Congress intended Section 318 to establish a temporary modification of the environmental laws for the public lands at issue, and, indeed, the highly detailed, fully integrated procedures set forth in Section 318 counsel strongly in favor of that interpretation.

In considering the meaning of Section 318 without regard to the first sentence of Section 318(b)(6)(A), moreover, it must be emphasized that the court of appeals' ultimate holding -- that, even if the Forest Service and BLM are in perfect compliance with Sections 318(b)(3) and (b)(5), the (b)(3) and (b)(5) guidelines may be found to violate other environmental statutes -- is flatly inconsistent with the second sentence of Section 318(b)(6)(A). That sentence provides, in its entirety, that "(t)he guidelines adopted by subsections (b)(3) and (b)(5) of this section shall not be subject to judicial review by any court of the United States." App., infra, 6a. A natural reading of this provision is that it insulates the guidelines mandated by subsections (b)(3) and (b)(5) from judicial review. Under the court of appeals' view, however, subsections (b)(3) and (b)(5) simply exist in addition to all other existing statutory requirements. Thus, under the court of appeals' view, a challenge to individual timber sales may be brought on the ground that, even if the BLM and Forest Service follow subsections (b)(3) and (b)(5) to the letter, that adherence is itself inadequate -- and may be rejected by federal courts -- because the guidelines mandated by Section 318(b)(3) and (b)(5) are not sufficient to comply with other statutes. This is precisely the challenge that prevailed in the wake of the court of appeals' decision, and that led to the district court's enjoining 16 Forest Service sales in the Seattle Audubon litigation. See Br. in Opp. App. 85a-86a; id. at 126a-143a. The court of appeals' analysis permits judicial review of whether the actions required by Sections 318(b)(3) and (b)(5) satisfy other environmental statutes -- a clear conflict with the second sentence of Section 318(b)(6)(A). /17/

Far from representing the only possible reading of Section 318, the court of appeals' conclusion -- that the Section 318 specifications are simply additions to existing statutory requirements -- represents a strained construction. The critical question thus becomes whether the first sentence of Section 318(b)(6)(A) compels that interpretation.

B. The First Sentence of Section 318(b)(6)(A) Does Not Direct A Court To Decide A Case

The court of appeals not only failed to appreciate the significance of the other provisions of Section 318; it also misconstrued the first sentence of Section 318(b)(6)(A) itself.

The language of Section 318(b)(6)(A) that the court of appeals held unconstitutional is:

the Congress hereby determines and directs that management of areas according to subsections (b)(3) and (b)(5) of this section on the thirteen national forests in Oregon and Washington and Bureau of Land Management lands in western Oregon known to contain northern spotted owls is adequate consideration for the purpose of meeting the statutory requirements that are the basis for the (cases brought by the Seattle Audubon and Portland Audubon respondents).

Rather than a directive to the courts to enter judgment, it is appropriate to interpret this language, taken together with subsections (b)(3) and (b)(5), as the district courts did: as consistent with a temporary substitution of alternative standards for those otherwise applicable under the environmental laws. Under this reading, just as Sections 318(b)(3) and (b)(5) are substitute guidelines for the plans the agencies had developed, so too the quoted language from Section 318(b)(6)(A) can be read as a declaration that Congress is satisfied with those statutory plans and guidelines, and as a directive that the Forest Service and BLM should not attempt to make an independent evaluation of their statutory sufficiency in preparing fiscal year 1990 timber sales.

The court of appeals' contrary interpretation proceeds from a series of flawed assumptions. First, the court assumed that the first sentence of Section 318(b)(6)(A) represents an attempt "to instruct federal courts to reach a particular result in pending cases identified by caption and file number." Pet. App. 9a. The court misapprehends the meaning of the statute's reference to the particular cases. Although they are "identified by caption and file number," that identification is not in the context of a command to decide the cases. Rather, the cases are enumerated to identify certain statutes -- the statutes "that are the basis" for those cases (namely, NEPA, FLPMA, OCLA, MBTA, and NFMA). The naming of the cases in the statute, although perhaps unusual, is thus not materially different from enumerating the statutes themselves, and the court of appeals incorrectly ascribed significance to the use of the case names.

Second, the court assumed that congressional enactments that affect pending litigation can be divided into a simple dichotomy -- either a permissible repeal or amendment of existing legislation, or an impermissible direction of the outcome of a case. See, e.g., Pet. App. 11a ("(T)he critical distinction, for purposes of deciding the limits to Congress' authority to affect pending litigation through statute, is between the actual repeal or amendment of the law underlying the litigation, which is permissible, and the actual direction of a particular decision in a case, without repealing or amending the law underlying the litigation, which is not permissible."). The court's dichotomy, however, fails to take into account the entire category of legislation in which Congress deems certain conditions to satisfy, or be within the reach of, pre-existing statutes. /18/ This familiar category is a species of the use of a so-called conclusive or irrebuttable presumption, a legislative drafting device that prescribes a substantive legal rule rather than a presumption in the true sense. /19/

Indeed, the reach of the court of appeals' analysis is unclear with respect to the category of "deeming" legislation. Two alternatives are possible: either (1) this entire category is impermissible because Congress is constitutionally barred from enacting legislation that deems compliance with, or satisfaction of, other statutes, or (2) this category is permissible, but, if Congress mentions a pending case, the legislation is impermissible. Both alternatives are untenable -- the first would significantly and unjustifiably constrict Congress's authority to enact substantive legislation, and the second rests on a meaningless distinction. Thus, the court of appeals' assumption of a rigid dichotomy -- that, if the first sentence of Section 318(b)(6)(A) is found not to be a repeal or amendment of existing legislation, it is necessarily an impermissible direction of the outcome of a case -- is erroneous. /20/

Third, the court erroneously assumed that the first sentence of subsection (b)(6)(A) directs the entry of judgments and of findings of fact. In the court's view, the pertinent sentence "directs the court to reach a specific result and make certain factual findings under existing law in connection with two cases pending in federal court." Pet. App. 14a. Not so. The sentence does not, by its terms, direct the entry of any particular findings or any particular decision. Instead, the sentence is a legislative "deeming" of statutory compliance, just as in other statutes. See notes 18, 19, supra. To be sure, Section 318 affects the outcome of these cases in at least three ways. It eliminates the relevance of the Forest Service and BLM administrative decisions -- the focus of respondents' initial challenge -- to the fiscal 1990 sales (because it modifies the administrative plans and makes them statutory law); it precludes judicial review of the (b)(3) and (b)(5) guidelines (through the second sentence of (b)(6)(A)); /21/ and, if the question of the sufficiency of the (b)(3) and (b)(5) guidelines is nevertheless reached, it establishes that the (b)(3) and (b)(5) guidelines are deemed in compliance with the other statutory requirements. But the legislation reaches these results through changes in the law, not through direction of the outcome of a pending case.

Further support for the conclusion that Congress was not directing the outcome of a case is provided by the first clause of the first sentence of Section 318(b)(6)(A). As noted, at the time that the legislation was enacted, respondents' challenge was to the BLM and Forest Service administrative documents. In the first phrase of the first sentence of (b)(6)(A), Congress specifies that it is not "passing on the legal and factual adequacy" of those documents. Before modifying the administrative plans and adopting them as statutory law for one year, Congress thus makes clear that the administrative documents themselves have received no congressional imprimatur, thereby leaving open the possibility of judicial challenges to those documents after the one-year period covered by Section 318. /22/

Fourth, and even more fundamentally, the court of appeals incorrectly assumed that the first sentence of Section 318(b)(6)(A) must be considered a "directive from Congress to the courts." Pet. App. 13a (emphasis added). An equally plausible construction of the sentence -- and, indeed, more plausible construction -- is that the sentence is a directive to the Forest Service and BLM, confirming that, for fiscal 1990 sales, they should not engage in additional considerations beyond those specified in the (b)(3) and (b)(5) guidelines. Under this reading, the first sentence of (b)(6)(A) is directed to the agencies, and the second sentence -- prohibiting judicial review of the adequacy of the (b)(3) and (b)(5) guidelines -- is directed to the courts. The wording of the provision strongly supports this interpretation. In the first sentence, Congress uses the term "directs"; Congress employs a different tense of that verb in two other places in Section 318, both times with regard to executive agencies. See Section 318(b)(6)(B) ("The Forest Service is directed * * *.") (emphasis added); Section 318(h) (Forest Service, BLM, and Fish and Wildlife Service reports "shall be submitted as directed") (emphasis added). Without using that verb, moreover, Section 318 contains other explicit directives to executive branch agencies (e.g., Section 318(c)(2); Section 318(f)(1)). Furthermore, the first sentence states that the (b)(3) and (b)(5) guidelines are "adequate consideration" for the purpose of meeting environmental statutes, and it is natural to read that term as addressed to the agencies that would be engaged in that consideration.

Thus the court of appeals' conclusion that the first sentence of Section 318(b)(6)(A) is an impermissible directive to the judiciary -- rather than a statement that Congress is satisfied that the (b)(3) and (b)(5) guidelines provide adequate protection and should be considered to occupy the field -- rests on a series of erroneous assumptions.

C. The Court of Appeals' Interpretation Distorts The Congressional Compromise

In addition to misconstruing Section 318 as a whole and the first sentence of Section 318(b)(6)(A) in particular, the court of appeals' interpretation also inflicts considerable damage on Congress's carefully constructed compromise.

In Section 318, Congress was not unilaterally favoring timber interests (or the Executive Branch) and thwarting respondents. Instead, Congress took several steps to enhance environmental protection. Congress significantly modified the existing administrative plans and added new areas to protected Forest Service and BLM lands. In Sections 318(b)(1) and (b)(2), Congress required that fragmentation of ecologically significant old growth stands be minimized, and in Section 318(b)(4), it required that the Forest Service exercise discretion and assign priority in timber sale location near SOHAs "in order to retain spotted owl habitat characteristics." In a highly unusual provision, Congress, in Section 318(f), gave the Seattle Audubon respondents authority to participate in the designation of certain Forest Service lands for timber sales. See note 11, supra. /23/ At the same time, Congress mandated total timber sales of 9.6 billion board feet, /24/ and provided streamlined administrative and judicial review procedures (Section 318(d) and (g)).

In enacting Section 318, Congress clearly sought to fashion a compromise in order to avert a crisis that loomed over the Pacific Northwest. The legislative history reveals both the compromise nature of the legislation, /25/ and the perceived crisis that it was intended to prevent. /26/

The court of appeals' interpretation -- in which the (b)(3) and (b)(5) guidelines now simply apply in addition to all of the existing other requirements -- radically distorts this compromise. Although Congress clearly sought to streamline the administrative and judicial process through its statutory plan, the court of appeals' interpretation has the effect not of providing a comprehensive plan (as Congress plainly intended), but rather, ironically, of adding further to the existing patchwork of statutory requirements. Neither the language nor the structure of Section 318 compels this result, and the canon of construing statutes in favor of their constitutionality points strongly in the other direction. Rather than an intrusive command to the judiciary, Section 318 should properly be construed as a one-year, comprehensive plan for managing designated public lands -- an objective that the court of appeals itself concluded could have been achieved through other language. Pet. App. 12a-16a. /27/

II. SECTION 318 CONTAINS NO VIOLATION OF ARTICLE III

In addition to its error of statutory construction, the court of appeals' constitutional analysis was severely flawed. The court failed to recognize that Article III plays a limited role in addressing the issue of the effect of legislative enactments on pending cases, that Article III is not violated by the first sentence of Section 318(b)(6)(A), and that United States v. Klein does not require a contrary conclusion.

A. Article III Plays A Limited Role In the Constitutional Constraints On Congress's Ability To Affect Pending Cases

The court of appeals viewed the issue of Congress's ability to affect pending cases as a broad question of Article III jurisprudence. See Pet. App. 9a-15a. In fact, however, numerous constitutional constraints restrict Congress's ability to affect pending cases, and Article III plays a limited role within that structure.

It is well established that Congress may enact a statute that changes the law and thereby affects pending cases. As Chief Justice Marshall explained in the seminal case of United States v. The Schooner Peggy, 5 U.S. (1 Cranch) 103, 110 (1801):

It is in the general true that the province of an appellate court is only to enquire whether a judgment when rendered was erroneous or not. But if subsequent to the judgment and before the decision of an appellate court, a law intervenes and positively changes the rule which governs, the law must be obeyed, or its obligation denied. If the law be constitutional, and of that no doubt in the present case has been expressed, I know of no court which can contest its obligation.

Although there has been disagreement regarding the appropriate canon of interpretation to determine whether Congress intended retroactivity, /28/ it is beyond dispute that Congress may constitutionally specify that its enactments changing substantive law are to be applied retroactively. See United States v. Sperry Corp., 110 S. Ct. 387, 396 (1989); Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 728-731 (1984); Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 14-20 (1976).

Various constitutional provisions restrict this legislative ability to change the law and affect pending cases. The Due Process Clause requires a rational legislative purpose for the retroactive application of new legislation. /29/ The equal protection component of the Due Process Clause prohibits invidious or arbitrary discrimination. /30/ The Takings Clause requires just compensation for a taking of property. /31/ The Ex Post Facto Clause provides that Congress may not enact a law that imposes punishment retroactively, /32/ and the Bill of Attainder Clause provides that Congress may not legislatively determine guilt and inflict punishment upon an identifiable individual without the protection of a judicial trial. /33/

Those provisions provide a structured and well-defined inquiry into Congress's ability to affect pending litigation. The role of Article III is not as a back-up for those specific provisions, addressing the same subject a second time if no violation of the directly pertinent provision has been found. When these provisions speak to a particular issue, Article III should not be invoked in an attempt to provide a different answer to the same inquiry. /34/

Article III nevertheless has an important role to play in determining Congress's ability to affect pending litigation. Article III, by vesting the "judicial Power" in the judiciary (Art. III, Sections 1, 2), protects against invasion of the adjudicative function. One example of such an invasion would be a congressional specification of a finding of fact from the record in a particular case or controversy; it would not prohibit, however, a congressional specification of the significance, or legal characterization of, a finding of fact. /35/ Another example would be a provision that the judiciary must reach a decision in violation of the Constitution. Cf. Yakus v. United States, 321 U.S. 414, 468 (1944) (Rutledge, J., dissenting) (requiring courts to "enforce unconstitutional laws or statutes" would violate "the constitutional integrity of the judicial process").

Article III thus should not be interpreted to substitute for the coverage of other constitutional provisions and to undermine the structured analysis provided by those provisions; Article III does stand, however, as a prohibition against congressional invasion of the adjudicative function itself.

B. The First Sentence of Section 318(b)(6)(A) Does Not Violate Article III

Respondents do not contend that the first sentence of Section 318(b)(6)(A) violates due process or equal protection, nor do they contend that it constitutes a taking of property, a bill of attainder, or an ex post facto law. Clearly, any such claim by respondents would be unavailing. The provision is not irrational, arbitrary, or invidious, it takes no property, and it is not punitive. Respondents have no vested rights of any kind, and the provision relates solely to the prospective management of federal lands.

Respondents nevertheless contend -- and the court of appeals concluded -- that the first sentence of Section 318(b)(6)(A) violates Article III. But the first sentence of Section 318(b)(6)(A) presents no invasion of the adjudicative function. As has been discussed, Congress was enacting legislation to provide standards for the management of designated public lands in a particular fiscal year. That Congress chose to employ a deeming provision, or conclusive presumption, does not undermine the provision's validity, nor does it alter the fact that the disputed sentence represents, at most, a determination about the governing legal standard, rather than the "factual finding()" perceived by the court of appeals (see Pet. App. 14a).

Deeming provisions, or other conclusive presumptions, are not inherently impermissible, and do not violate Article III. See, e.g., United States v. Locke, 471 U.S. 84, 98-100 (1985) (giving effect to conclusive presumption in public lands case). To be sure, conclusive presumptions are subject to constitutional challenge as violations of due process. See, e.g., Cleveland Board of Education v. LaFleur, 414 U.S. 632, 644-646 (1974); Vlandis v. Kline, 412 U.S. 441, 446 (1973); Stanley v. Illinois, 405 U.S. 645 (1972). But the conclusive presumption at issue in this case concerns the legal standards governing the management and disposition of certain government timber and forest lands for fiscal year 1990. Respondents have offered no constitutional challenge to the permissibility or reasonableness of the presumption itself, and, in fact, they have no liberty or property interest protectable under the Due Process Clause which would limit Congress's use of a conclusive presumption in defining compliance with such enactments.

The court of appeals' acknowledgment that Congress could have reached essentially the same result through different language is especially telling. Congress is not required to legislate with razor-sharp precision, and courts do not sit as editorial critics of legislative draftsmanship. So long as Congress's intent was clear through the statutory language (i.e., its intent that the specified plan should proceed unimpeded by the applicability of other environmental statutes) and so long as that congressional goal itself violated no constitutional prohibition, the court had no warrant for blacklining the first sentence of Section 318(b)(6)(A) and eliminating it from the statute. So long as the expressed statutory objective is permissible, Congress is not required to engage in circumlocutions, or specialized terms of art, to achieve it. /36/

The court's misguided constitutional analysis is particularly egregious because the subject of the legislation was a prospective prescription for the management of public lands. The Constitution plainly assigns this responsibility to Congress. Art. IV, Section 3, Cl. 2. Congress's authority with respect to the public lands is plenary. See, e.g., California Coastal Comm'n v. Granite Rock Co., 480 U.S. 572, 580 (1987); Kleppe v. New Mexico, 426 U.S. 529, 539 (1976); United States v. City and County of San Francisco, 310 U.S. 16, 29-30 (1940). The courts enter this field only by authority of the judicial review provisions of the Administrative Procedure Act, 5 U.S.C. 701 et seq., or other statutes granting judicial review of agency action. The courts have no independent authority over the disposition of public property. Light v. United States, 220 U.S. 523, 537 (1911). By invalidating the first sentence of Section 318(b)(6)(A) and upsetting Congress's carefully considered plan for management of these designated public lands, the court trenched on Congress's broad authority with respect to the public lands. As a consequence, it can fairly be stated that the separation of powers violation in this case is not, as the Ninth Circuit would have it, a congressional invasion of the judicial domain, but a judicial invasion of the congressional domain.

C. United States v. Klein Does Not Require A Conclusion That The First Sentence Of Section 318(b)(6)(A) Is Unconstitutional

The court of appeals relied extensively on United States v. Klein for its conclusion that the first sentence of Section 318(b)(6)(A) must be invalidated, and that the guidelines in (b)(3) and (b)(5) must be measured against other environmental statutes. In addition to its misinterpretation of Section 318, however, the court gave a substantially overbroad meaning to this Court's decision in Klein.

1. During the Civil War, Congress enacted the Abandoned Property Collection Act, ch. 120, 12 Stat. 820 (1863). The legislation authorized military authorities to seize and sell property found "in insurrectionary districts within the United States" and deposit the proceeds into the Treasury. 12 Stat. 820. The Act further provided that a former owner of such property could sue in the Court of Claims and obtain the net proceeds on proof of his former ownership, his right to the proceeds, and the fact that "he ha(d) never given any aid or comfort to the present rebellion." Section 3, 12 Stat. 821. Also in 1863, President Lincoln issued a proclamation offering that, if persons who had participated in the rebellion (with some exceptions) would take an oath of allegiance, they would receive "a full pardon * * * with restoration of all rights of property." Proclamation No. 11, 13 Stat. 737 (1863).

In the wake of Grant's capture of Vicksburg, Union officers seized the cotton of Victor F. Wilson from his warehouse, sold it, and deposited the net proceeds of more than $125,000 in the United States Treasury. In February 1864, Wilson took the necessary oath and received a presidential pardon. Wilson died shortly thereafter, and, in 1865, Klein, the administrator of Wilson's estate, filed a petition to collect the proceeds from the sale of Wilson's cotton. The Court of Claims ultimately determined that the estate was entitled to recover the proceeds. Kline v. United States (Wilson's Case), 4 Ct. Cl. 559, modified, 7 Ct. Cl. vii (1869). See generally Young, Congressional Regulation of Federal Courts' Jurisdiction and Processes: United States v. Klein Revisited, 1981 Wis. L. Rev. 1189, 1192-1193, 1197-1201; Klein, 80 U.S. (13 Wall.) at 130-132.

This Court subsequently held that receipt of a Presidential pardon established conclusive proof of loyalty and entitled the recipient to return of his property. United States v. Padelford, 76 U.S. (9 Wall.) 531, 542-543 (1870). In the wake of the Padelford decision (and while the government's appeal to this Court from the Court of Claims judgment in Klein's case remained pending), Congress enacted a statute providing that no presidential pardon should be admissible as proof of loyalty; that acceptance, without written protest or disclaimer, of a pardon reciting that the claimant took part in or supported the rebellion in fact should be conclusive evidence of the claimant's disloyalty; and that the Court of Claims and the Supreme Court must dismiss for want of jurisdiction any pending claims based on a Presidential pardon. Act of July 12, 1870, ch. 251, 16 Stat. 235; see Klein, 80 U.S. (13 Wall.) at 132-134, 143-144.

Accordingly, the United States asked this Court to dismiss the case with a mandate to the Court of Claims directing that it also dismiss the claim. Young, supra, 1981 Wis. L. Rev. at 1210 & n.113. This Court denied the motion to dismiss and affirmed the Court of Claims' judgment for Wilson's estate; in doing so, it declared the 1870 provision unconstitutional. United States v. Klein, supra.

The Court first noted that, by the terms of the pardon, property owners retained a continuing interest in their property after receipt of a pardon. "The restoration of the proceeds became the absolute right of the persons pardoned, on application within two years from the close of the war. It was, in fact, promised for an equivalent." 80 U.S. (13 Wall.) at 142. The Court then considered whether the Act of 1870 created a permissible exception to the appellate jurisdiction of the Supreme Court. /37/ The Court rejected that proposition on the ground that the legislation "does not intend to withhold appellate jurisdiction except as a means to an end. Its great and controlling purpose is to deny to pardons granted by the President the effect which this court had adjudged them to have." 80 U.S. (13 Wall.) at 145. The Court observed that "the denial of jurisdiction to this court, as well as to the Court of Claims, is founded solely on the application of a rule of decision, in causes pending, prescribed by Congress. * * * The court is required to ascertain the existence of certain facts and thereupon to declare that its jurisdiction on appeal has ceased, by denying the bill. * * * (T)he court is forbidden to give the effect to evidence which, in its own judgment, such evidence should have, and is directed to give it an effect precisely contrary." Id. at 146-147.

The Court further concluded that the congressional enactment violated the President's authority over pardons:

The rule prescribed is also liable to just exception as impairing the effect of a pardon, and thus infringing the constitutional power of the Executive. * * * To the executive alone is intrusted the power of pardon; and it is granted without limit. Pardon includes amnesty. It blots out the offense pardoned and removes all its penal consequences. It may be granted on conditions. In these particular pardons, * * * restoration of property was expressly pledged, and the pardon was granted on condition that the person who availed himself of it should take and keep a prescribed oath.

Now it is clear that the legislature cannot change the effect of such a pardon any more than the executive can change a law. Yet this is attempted by the provision under consideration.

80 U.S. (13 Wall.) at 147-148.

2. Several important distinctions between Klein and the case at hand are immediately apparent. The underlying question in Klein was the right to previously vested property; the underlying question in this case is prospective rules for the management of public lands for one year. Klein involved an exception to the appellate jurisdiction of this Court; this case involves no such question. /38/ Klein involved an attempt to manipulate the subject matter jurisdiction of the courts in order to reach an unconstitutional result (infringement on the Executive's pardon power); this case involves no such unconstitutional result (and, indeed, it is conceded that Congress could have reached essentially the same result through different language).

The court of appeals nevertheless concluded that Klein requires invalidation of the first sentence of Section 318(b)(6)(A). This interpretation is an overreading of Klein. To be sure, the Klein decision "is not a model of clarity." /39/ In accordance with the settled principle that this Court does not "formulate a rule of constitutional law broader than is required by the precise facts to which it is applied," Liverpool, New York & Philadelphia S.S. Co. v. Commissioners of Emigration, 113 U.S. 33, 39 (1885), however, the decision in Klein should not be given an unnecessarily broad construction.

In our view, three propositions are indisputably established by Klein, and are sufficient to sustain its holding. First, Congress may not impinge upon the Executive's pardon authority. /40/ Second, congressional limitations on this Court's jurisdiction may, in certain circumstances, be subject to judicial review. /41/ Third, Congress may not manipulate the appellate jurisdiction of this Court in such a manner that the Court becomes the means through which Congress unconstitutionally infringes on the pardon power.

A broader reading of Klein is both unnecessary and problematic. For example, although the opinion could be read expansively to suggest that Congress may never establish "rules of decision in * * * cases pending before (the judiciary)," 80 U.S. (13 Wall.) at 146, such an interpretation would undermine the basic principle of The Schooner Peggy and the permissibility of retroactive application of legislation. /42/ Similarly, although Klein contains language which may be read as suggesting that the government cannot be favored by the retroactive application of legislation to pending litigation, see 80 U.S. (13 Wall.) at 146, Congress clearly has authority to enact retroactive legislation that favors the government, subject to various limitations. /43/ Klein thus need not, and should not, be given an unduly broad reading. /44/

In this case, Congress specified the standards to govern the management of public lands, and acted well within its authority under the Property Clause. Nothing in Klein, or in Article III itself, precluded Congress from making such a determination, and the court of appeals erroneously invalidated that congressional enactment.

CONCLUSION

The judgment of the court of appeals should be reversed.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

BARRY M. HARTMAN

Acting Assistant Attorney General

LAWRENCE G. WALLACE

Deputy Solicitor General

CLIFFORD M. SLOAN

Assistant to the Solicitor General

PETER R. STEENLAND, JR.

MARTIN W. MATZEN

ANNE S. ALMY

Attorneys

AUGUST 1991

/1/ Section 318 is also reprinted at Pet. App. 43a-55a. The petition appendix, however, contains two printing errors: one line was inadvertently omitted after the first line in Section (b)(3), on Pet. App. 45a, and one line was inadvertently omitted after the eleventh line of Section (b)(4), on Pet. App. 46a.

/2/ In June 1990, during the pendency of respondents' lawsuits, the United States Fish and Wildlife Service listed the northern spotted owl as a threatened species under the Endangered Species Act, 16 U.S.C. 1531 et seq. See 55 Fed. Reg. 26,114 (1990).

/3/ The saga of the O & C lands is told in Oregon & Cal. R.R. v. United States, 238 U.S. 393 (1915). See also Oregon & Cal. R.R. v. United States, 243 U.S. 549 (1917). Briefly, between 1866 and 1870, Congress made a series of grants of alternate sections of land along the right of way of a railroad to be built between Portland and the California border. A proviso to the land grants required that the lands be sold to actual settlers in amounts not to exceed 160 acres at a price not to exceed $2.50 an acre. After 1894, however, the railroad disposed of some of the land in violation of the proviso; the United States sued to enforce the proviso or forfeit the lands. Ultimately, Congress enacted the Chamberlain-Ferris Revestment Act of June 9, 1916, ch. 137, 39 Stat. 218, which revested unsold lands in the United States, and provided compensation to the railroad.

The term "O & C lands" also encompasses Coos Bay Wagon Road lands reconveyed by the Southern Oregon Company to the United States pursuant to the Act of Feb. 26, 1919, ch. 47, 40 Stat. 1179. See Southern Oregon Co. v. United States, 249 U.S. 589 (1919).

/4/ The BLM lands in western Oregon are divided into five administrative districts. Seven timber management plans and EIS's were prepared because two districts are subdivided into two subareas.

/5/ These plans are still in preparation.

/6/ In pertinent part, Section 314 provided that

there shall be no challenges to any existing plan on the sole basis that the plan in its entirety is outdated, or in the case of the Bureau of Land Management, solely on the basis that the plan does not incorporate information available subsequent to the completion of the existing plan: Provided further, That any and all particular activities to be carried out under existing plans may nevertheless be challenged.

101 Stat. 1329-254.

Congress later reenacted that express provision. See Department of the Interior and Related Agencies Appropriations Act, 1989, Pub. L. No. 100-446, Tit. III, Section 314, 102 Stat. 1825-1826 (1988); Department of the Interior and Related Agencies Appropriations Act, 1990, Pub. L. No. 101-121, Tit. III, Section 312, 103 Stat. 743 (1989). The validity and effect of that provision are not at issue here, but are at issue in a pending Ninth Circuit appeal. Portland Audubon Society v. Lujan, No. 91-35802.

/7/ The court of appeals also vacated the previously entered stay "without prejudice to any appropriate renewed efforts by (respondents) to obtain such temporary remedies, if any, as the district court may deem necessary and proper." 866 F.2d at 309-310.

/8/ Upon issuance of its final decision, the court vacated the stay that it had granted pending appeal. 884 F.2d at 1234, 1242.

/9/ The Washington Contract Loggers Association filed a similarly based action against the Forest Service, "challenging the (Service's) guidelines as overly restricting timber harvesting." Pet. App. 6a. The district court consolidated that action with the Seattle Audubon respondents' lawsuit. Id. at 31a.

/10/ For example, the SOHA size for the Klamath Mountain Province was expanded from 1000 acres to 1250 acres; the size for the Olympic Peninsula Province from 3000 acres to 3200 acres. See Section 318(b)(3); J.A. 79, 80.

/11/ In addition to Sections 318(a), (b), and (g), Section 318 contains eight other provisions. Sections 318(c), (d), (e), and (h) further elaborate on the required procedures, and Sections 318 (i), (j), and (k) clarify the effect of various parts of the legislation. Section 318(f) specifically addresses the Seattle Audubon litigation. It orders that timber sales aggregating 1.1 billion board feet from the sales subject to the injunction in the Seattle Audubon case be offered notwithstanding the provisions of law that formed the basis for the preliminary injunction entered in the case. Section 318(f)(3). It also specifies a procedure in which the Seattle Audubon respondents would be permitted to participate in selecting, from a list submitted by the Forest Service, certain sales and prohibiting other sales; such sales would not be subject to judicial review. Section 318(f)(1) and (2).

/12/ In January 1990, the district court certified respondents' constitutional challenge to Section 318(b)(6)(A) for interlocutory appeal under 28 U.S.C. 1292(b). Pet. App. 8a; J.A. 19.

/13/ The Portland Audubon respondents noted an appeal from the district court's final judgment dismissing their action. The court of appeals later consolidated the Seattle Audubon and Portland Audubon appeals. Pet. App. 5a, 8a.

/14/ Before denying petitions for rehearing in January 1991, Pet. App. 18a-19a, the panel issued an order amending its opinion in several respects, id. at 3a-4a. The opinion reprinted in the petition appendix (id. at 4a-17a) incorporates these amendments.

/15/ In their brief in opposition to certiorari, respondents stated that they are not pursuing their challenge to any 1990 Forest Service sales besides the 16 that have been enjoined. See Br. in Opp. 11 n.7. Because Section 318(k) provides that fiscal 1990 sales will be governed by the 1990 Appropriations Act even after fiscal 1990, Section 318 remains pertinent to the 16 sales.

/16/ See, e.g., Edward J. DeBartolo Corp. v. Florida Gulf Coast Building & Constr. Trades Council, 485 U.S. 568, 575 (1988) ("(W)here an otherwise acceptable construction of a statute would raise serious constitutional problems, the Court will construe the statute to avoid such problems unless such construction is plainly contrary to the intent of Congress."); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 30 (1937) ("The cardinal principle of statutory construction is to save and not to destroy. We have repeatedly held that as between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, our plain duty is to adopt that which will save the act."); Hooper v. California, 155 U.S. 648, 657 (1895) ("The elementary rule is that every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.").

/17/ The court of appeals' opinion never addresses the meaning or role of the second sentence of Section 318(b)(6)(A); it states only that the court "express(es) no opinion on the validity of the second and final sentence of subsection (b)(6)(A)." Pet. App. 17a n.4.

We emphasize that it is not our position that Section 318 precludes all judicial review of fiscal year 1990 timber sales. Section 318(g) provides that individual sales can be challenged on the ground that the sale is "arbitrary, capricious, or not in accordance with law." The category of "not in accordance with law" would include (1) claims related to compliance with Section 318 itself, and (2) statutory and constitutional claims unrelated to the adequacy of the (b)(3) and (b)(5) guidelines.

/18/ See, e.g., Pub. L. No. 89-554, Section 1, 80 Stat. 425 (1966) ("An employee detailed under subsection (b) of this section is deemed, for the purpose of preserving his allowances, privileges, rights, seniority, and other benefits, an employee of the agency from which detailed, and he is entitled to pay, allowances, and benefits from funds available to that agency. The authorization and payment of these allowances and other benefits from appropriations available therefor is deemed to comply with section 5536 of this title."); Pub. L. No. 92-318, Section 506(m), 86 Stat. 352 (1972) ("With respect to the Virgin Islands and Guam, the enactment of this section shall be deemed to satisfy any requirement of State consent in laws or provisions of law referred to in this section."); Pub. L. No. 98-473, 98 Stat. 1954 (1984) ("Provided * * * That, for the purposes of section 710 of the Regional Rail Reorganization Act of 1973, as added by section 1143 of the Northeast Rail Service Act of 1981, such sum shall be considered to have been appropriated under section 713 of the Regional Rail Reorganization Act of 1973 and counted against the limitation on the total liability of the United States."); Pub. L. No. 99-662, Section 204, 100 Stat. 4099 (1986) ("Any plan of improvement proposed to be implemented in accordance with this subsection shall be deemed to satisfy the requirements for obtaining the appropriate permits required under the Secretary's authority."); Pub. L. No. 100-440, Section 631, 102 Stat. 1759 (1988) ("For purposes of section 1886 of the Social Security Act, Missouri Baptist Hospital of Sullivan in Sullivan, Missouri is deemed to be located in Franklin County, Missouri, retroactively effective for discharges beginning on or after December 22, 1987."); Pub. L. No. 102-624, Section 1736, 104 Stat. 3793 (1990) ("The signature of the adult under this section shall be deemed sufficient to comply with any provision of Federal law requiring household members to sign the application or statements in connection with the application process.").

Indeed, at least twenty-nine statutes concerning federal land management alone specifically deem congressional specification to satisfy other environmental statutes. See Pub. L. No. 101-401, Section 5(b)(2), 104 Stat. 864 (1990); Pub. L. No. 101-195, Section 5(b)(2), 103 Stat. 1786 (1989); Pub. L. No. 100-547, Section 202, 102 Stat. 2738 (1988); Pub. L. No. 100-499, Section 6(b)(2), 102 Stat. 2493 (1988); Pub. L. No. 100-184, Section 6(b)(2), 101 Stat. 1276 (1987); Pub. L. No. 99-504, Section 104 (b), 100 Stat. 1803 (1986); Pub. L. No. 99-490, Section 5(b)(2), 100 Stat. 1236 (1986); Pub. L. No. 98-586, Section 5(b)(2), 98 Stat. 3107 (1984); Pub. L. No. 98-578, Section 5(b)(2), 98 Stat. 3089 (1984); Pub. L. No. 98-550, Section 401(b)(2), 98 Stat. 2811 (1984); Pub. L. No. 98-515, Section 5(b)(2), 98 Stat. 2421 (1984); Pub. L. No. 98-514, Section 5(b)(2), 98 Stat. 2417 (1984); Pub. L. No. 98-508, Section 4(b), 98 Stat. 2351 (1984); Pub. L. No. 98-430, Section 6(b)(2), 98 Stat. 1667-1668 (1984); Pub. L. No. 98-428, Section 201(b), 98 Stat. 1659-1660 (1984); Pub. L. No. 98-425, Section 111(b), 98 Stat. 1628 (1984); Pub. L. No. 98-406, Section 103(b)(2), 98 Stat. 1490 (1984); Pub. L. No. 98-339, Section 5(b)(2), 98 Stat. 303 (1984); Pub. L. No. 98-328, Section 5(b), 98 Stat. 278 (1984); Pub. L. No. 98-324, Section 5(b), 98 Stat. 265 (1984); Pub. L. No. 98-323, Section 104(b), 98 Stat. 260 (1984); Pub. L. No. 98-322, Section 105(b)(2), 98 Stat. 255 (1984); Pub. L. No. 98-321, Section 5(b), 98 Stat. 251 (1984); Pub. L. No. 98-140, Section 3(a)(2), 97 Stat. 902 (1983); Pub. L. No. 97-466, Section 5(b)(2), 96 Stat. 2541 (1983); Pub. L. No. 97-407, Section 5(b)(2), 96 Stat. 2034 (1983); Pub. L. No. 97-384, Section 4(b)(2), 96 Stat. 1942-1943 (1983); Pub. L. No. 96-560, Section 107(b)(2), 94 Stat. 3270-3271 (1980); Pub. L. No. 96-487, Section 708(b)(2), 94 Stat. 2421 (1980).

/19/ See Aluminum Co. of America v. Central Lincoln Peoples' Utility Dist., 467 U.S. 380, 395 (1984) (relying on legislative deeming provision even though it is an "express legal fiction").

/20/ It is instructive to consider the possible legislative formulations of Section 318. Under the court of appeals' analysis, it clearly would have been permissible if Congress had enacted precisely the same legislation (except the first sentence of Section 318(b)(6)(A)) and included, "Notwithstanding any other provision of law" before (b)(3) and (b)(5); in doing so, Congress would have permissibly ensured that the (b)(3) and (b)(5) guidelines would proceed unimpeded by other environmental statutes. At the same time, under the court of appeals' analysis, Congress's attempt to ensure that result by the wording it actually used was impermissible. The court does not make clear on which side of its dichotomy it would place the following two hypothetical examples: (1) Congress includes five separate provisions, to be codified in NEPA, FLPMA, MBTA, OCLA, and NFMA, specifying, "Provided, that the above requirements are satisfied by the guidelines in (b)(3) and (b)(5) of Section 318 of the Department of the Interior and Related Agencies Fiscal 1990 Appropriations Act," or (2) Congress simply names the five statutes in Section 318(b)(6)(A), rather than naming the cases in which they are raised. These examples highlight the artificiality of the court of appeals' rigid dichotomy.

/21/ The fact that the second sentence of 318(b)(6)(A) precludes judicial review of the (b)(3) and (b)(5) guidelines demonstrates that, far from directing the decision of a case and the entry of findings, Congress is actually disabling courts from reaching the question whether, for fiscal 1990, the (b)(3) and (b)(5) guidelines satisfy other statutes.

/22/ See also H.R. Conf. Rep. No. 264, supra, at 88 (Section 318 "should not be construed to moot future action after fiscal year 1990."); id. at 89 ("Nothing in this section is intended to prejudge * * * any future decision * * * that may be reached by a Federal court in the Seattle Audubon/Washington Contract Loggers Assoc. v. Robertson cases and the Portland Audubon v. Lujan case.").

The court of appeals believed that another sentence in the conference report provided "mixed signals" with the statement that Congress was not passing on the validity of the administrative documents. See Pet. App. 16a n.3 (quoting conference report statement that Section 318 "in no way alters application of the Endangered Species Act or other environmental laws to Forest Service and BLM management activities"). But there is no inconsistency. As noted, the first sentence of (b)(6)(A) operates as a deeming provision (cf. pp. 25-28 & notes 18, 19, supra); it provides that the (b)(3) and (b)(5) standards satisfy certain enumerated environmental statutes. There is no contradiction between such a deeming provision and the conclusion that Congress's temporary substitution of standards does not preclude further judicial challenge to the adequacy of pre-existing administrative documents.

/23/ Congress also required that environmental groups be included on advisory boards to evaluate proposed timber sales. Section 318(c).

/24/ The court of appeals incorrectly stated the total as 7.7 billion board feet. Pet. App. 6a. That is the amount for the Forest Service, and the BLM was required to sell an additional 1.9 billion board feet. See Section 318(a)(1); Section 318(a)(2).

/25/ See, e.g., 135 Cong. Rec. H6506 (daily ed. Oct. 3, 1989) (Rep. AuCoin) ("The compromise in this appropriation addresses that mistake, that colossal policy breakdown, that has us in this dispute between those advocates of the spotted owl and those who are trying to protect the industry, and I include myself in the ranks of both."); id. at H6507 (Rep. Dicks) ("I can guarantee you this compromise is not pleasing everybody, but under the circumstances I think we did the best job that we could."); id. at H6509 (Rep. Vento) ("(T)his compromise on old growth is necessary today so that the stalemate in the Pacific Northwest is placed on the path of solution."); 135 Cong. Rec. S12,964 (daily ed. Oct. 7, 1989) (Sen. Gorton) ("(T)his amendment represents a thoughtful and balanced process.").

/26/ See, e.g., 135 Cong. Rec. H6506 (daily ed. Oct. 3, 1989) (Rep. AuCoin) ("(W)e are here because nothing less than the Northwest economy and the Pacific Northwest environment are at stake."); id. at H6509 (Rep. Vento) ("We have ended up in a quagmire of court cases and a stalemate that has resulted in severe economic and environmental problems in the Pacific Northwest."); 135 Cong. Rec. S12,961 (daily ed. Oct. 7, 1989) (Sen. Adams) ("Small towns have disappeared. Others are in desperate straits. * * * (T)he severity of the crisis this year did not give us the luxury of time to slowly mull over this issue. Mills were shutting down. Jobs were threatened and gone. Our State was being torn apart, and tensions were rising with the very real potential of violence.").

/27/ The court of appeals stated that it could not interpret Section 318 as a temporary modification of the environmental laws because Congress cannot impliedly repeal statutes in appropriations Acts. Pet. App. 16a. In so ruling, it claimed to follow this Court's decision in TVA v. Hill, 437 U.S. 153 (1978). In Hill, however, the Court invoked the strong presumption against "repeal by implication" in circumstances where no statutory language whatsoever exempted the federal project from the requirements of the Endangered Species Act; only legislative history called for that result. The Court's opinion leaves no room for doubt that it would have sustained the exemption if it could be found in the text enacted into law. 437 U.S. at 189-191, 193. Thus, the court of appeals' invocation of Hill is erroneous. It is settled that Congress can enact substantive law, and modify statutory provisions, in appropriations legislation. See, e.g., United States v. Will, 449 U.S. 200, 222 (1980); United States v. Dickerson, 310 U.S. 554, 555 (1940). See also Metro Broadcasting, Inc. v. FCC, 110 S. Ct. 2997, 3016 n.29 (1990).

/28/ See Kaiser Aluminum & Chem. Corp. v. Bonjorno, 110 S. Ct. 1570, 1576-1578 (1990); id. at 1579-1585 (Scalia, J., concurring); id. at 1591-1594 (White, J., dissenting).

/29/ E.g., United States v. Sperry Corp., 110 S. Ct. at 396; Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. at 728-731; Usery v. Turner Elkhorn Mining Co., 428 U.S. at 14-20.

/30/ E.g., Lyng v. Castillo, 477 U.S. 635 (1986); Bolling v. Sharpe, 347 U.S. 497, 499 (1954).

/31/ E.g., Bowen v. Gilliard, 483 U.S. 587, 603-609 (1987).

/32/ E.g., Miller v. Florida, 482 U.S. 421 (1987); Weaver v. Graham, 450 U.S. 24 (1981).

/33/ Nixon v. Administrator of General Services, 433 U.S. 425 (1977).

/34/ Cf. Graham v. Connor, 490 U.S. 386, 395 (1989) ("Because the Fourth Amendment provides an explicit textual source of constitutional protection against this sort of physically intrusive governmental conduct, that Amendment, not the more generalized notion of 'substantive due process,' must be the guide for analyzing these claims."); Whitley v. Albers, 475 U.S. 312, 327 (1986) ("(T)he Eighth Amendment, which is specifically concerned with the unnecessary and wanton infliction of pain in penal institutions serves as the primary source of substantive protection to convicted prisoners * * * where the deliberate use of force is challenged as excessive and unjustified.").

/35/ An example may illustrate the difference between these two possible congressional actions. Suppose that Congress passes a statute requiring means testing for Social Security benefits and prohibiting benefits for "citizens who are self-sufficient"; Congress then amends the statute to provide that, "Any individual found to possess a yacht shall be deemed to be self-sufficient for purposes of the Social Security Act, and this provision shall apply to all pending cases." Because Congress is changing the legal characterization and significance of a fact -- yacht ownership -- no Article III problem is presented. If Congress, however, enacted legislation providing that, "In the case of George Jones v. Secretary of Health & Human Services, the court shall find that George Jones owns a yacht," a serious Article III problem would be presented because Congress, by specifying a factual finding from the evidentiary record in a particular case, would be invading the court's adjudicative function.

/36/ See, e.g., United States v. Ptasynski, 462 U.S. 74, 86 (1983) ("Had Congress described this class of oil in nongeographic terms, there would be no question as to the Act's constitutionality. We cannot say that identifying the class in terms of its geographic boundaries renders the exception invalid. Where, as here, Congress has exercised its considered judgment with respect to an enormously complex problem, we are reluctant to disturb its determination."); Pope v. United States, 323 U.S. 1, 9 (1944) (rejecting claim that statute violated Article III, even though it was "inartistically drawn," because the permissible "purpose and effect" of the provision were discernible); In re Penn Central Transportation Co., 384 F. Supp. 895, 916 (Regional Rail Reorg. Ct. 1974) (Friendly, J.) ("(I)f Congress had worded the statute in either of the forms discussed, the commerce power would have permitted it, despite the uniformity clause * * *. Since what Congress did was not in violation of the Constitution, we decline to hold its action to have constituted a breach of the uniformity clause simply because it used words readily intelligible to its members and the public rather than circumlocutions that would have had exactly the same effect.").

/37/ Three years previously, this Court had upheld such an exception to the Court's appellate jurisdiction in Ex parte McCardle, 74 U.S. (7 Wall.) 506 (1869). The congressional debates on the 1870 legislation included reference to McCardle -- and an apparent attempt to shape the legislation to conform to it -- as Congress fashioned its response to the Padelford decision. See generally 6 C. Fairman, History of the Supreme Court of the United States: Reconstruction and Reunion, 1864-68, at 842 (1971); Cong. Globe, 41st Cong., 2d Sess. 3814-3825 (1870). See also Young, supra, 1981 Wis. L. Rev. at 1201-1209.

/38/ As we have pointed out, the second sentence of Section 318(b)(6)(A) precludes judicial review of the (b)(3) and (b)(5) guidelines, but Section 318 permits judicial review of other statutory and constitutional claims, including compliance with Section 318 itself. See note 17, supra; Section 318(g).

/39/ P. Bator, P. Mishkin, D. Meltzer & D. Shapiro, Hart & Wechsler's The Federal Courts and The Federal System 369 (3d ed. 1988). See also Eisenberg, Congressional Authority To Restrict Lower Federal Court Jurisdiction, 83 Yale L.J. 498, 526 (1974) ("The rationale underlying Klein is not clear.").

/40/ This Court has consistently interpreted Klein as standing for that proposition, at least in part. See Carlisle v. United States, 83 U.S. (16 Wall.) 147, 152-153 (1873); Hart v. United States, 118 U.S. 62, 66-67 (1886); United States v. Sioux Nation of Indians, 448 U.S. 371, 404-405 (1980). See also Public Citizen v. United States Dep't of Justice, 491 U.S. 440, 485 (1989) (Kennedy, J., concurring in the judgment).

/41/ See Klein, 80 U.S. (13 Wall.) at 145-146.

/42/ See P. Bator et al., supra, at 369 n.4 (Klein "should surely not be read as casting doubt on the ancient principle, clear since the decision in United States v. Schooner Peggy * * * that the courts are obligated to apply law (otherwise valid) as they find it at the time of their decision, including when a case is on review, the time of the appellate judgment."); National Juvenile Law Center, Inc. v. Regnery, 738 F.2d 455, 465 (D.C. Cir. 1984).

/43/ See, e.g., United States v. Sperry Corp., supra; United States v. Heinszen & Co., 206 U.S. 370 (1907) (upholding legislation which provides retroactive ratification of previously unauthorized tariffs and which therefore requires dismissal of pending cases); Rafferty v. Smith, Bell & Co., 257 U.S. 226 (1921) (retroactive ratification of previously unauthorized tax applies to cases pending before this Court); Graham & Foster v. Goodcell, 282 U.S. 409, 415, 426-430 (1931).

/44/ Although this Court has noted Klein's language concerning a "rule of decision" in a pending case, it has not subsequently invalidated a statute on that ground. See Sioux Nation of Indians, 448 U.S. at 390-407 (holding that, in challenged statute, Congress permissibly waived res judicata defense); Pope v. United States, 323 U.S. at 13 (holding that challenged statute left courts with a "judicial function()"). See also Glidden Co. v. Zdanok, 370 U.S. 530, 568 (1962) (plurality opinion).

APPENDIX

STATE OF ALABAMA HIGHWAY DEPARTMENT, PETITIONER V. SHIRLEY ANN BOONE, ADMINISTRATRIX OF THE ESTATE OF VERNON DALE BOONE, JR., ET AL.

No. 90-1412

In the Supreme Court of the United States

October Term, 1991

On Petition For A Writ Of Certiorari To The Supreme Court Of Alabama

Brief For The United States As Amicus Curiae

This brief is submitted in response to the Court's invitation to the Solicitor General to express the views of the United States in this case.

TABLE OF CONTENTS Question presented Statement Discussion Conclusion QUESTION PRESENTED

Whether 23 U.S.C. 409, which provides that documents or data compiled in connection with federally funded highway safety programs "shall not be admitted into evidence in Federal or State court or considered for other purposes in any action for damages" arising out of a highway accident, bars discovery of such documents and data in an action for damages.

STATEMENT

1. In 1989, 45,555 persons died in traffic accidents in the United States. Despite continuing safety improvements, traffic accidents remain the leading cause of death in the United States for persons less than 38 years old. In addition, traffic accidents result in more permanent injuries than any other type of accident. In 1989, more than 3.6 million persons were injured in traffic accidents in the United States. United States Dep't of Transportation, The 1991 Annual Report on Highway Safety Improvement Programs, at II-1 (Apr. 1991) (hereinafter 1991 Annual Report).

The Highway Safety Act of 1973, Pub. L. No. 93-87, 87 Stat. 282 (codified as amended at 23 U.S.C. 101 et seq.), established federal programs to reduce the number and severity of traffic accidents by funding improvements to hazardous highway locations. Under the Rail-Highway Crossings Program (23 U.S.C. 130), the federal government provides funds to States and local governments to reduce or eliminate hazards at railroad-highway crossings. Since 1974, the Rail-Highway Crossings Program has funded more than 25,300 projects, "primarily for the installation of signs and markings, flashing light signals, automatic gates, and surface improvements." 1991 Annual Report, at IV-3. As a result of the program, "(f)atal, nonfatal injury, and combined fatal-plus-nonfatal injury accident rates have been reduced by 88, 62, and 66 percent, respectively." Id. at IV-5. The Department of Transportation (DOT) estimates that the program has saved over 6,400 lives and prevented 26,500 nonfatal injuries. Ibid.

A second federal program, the Hazard Elimination Program (23 U.S.C. 152), provides funds for safety improvements on public highways. Since 1974, the Hazard Elimination Program has provided funds for more than 30,000 safety improvement projects, such as "improving traffic signals, improving traffic channelization, installing guardrail and median barriers, widening the traveled-way and/or shoulders, improving pavement skid resistance, and placing or upgrading pavement markings." 1991 Annual Report, at IV-3. The program "has provided * * * reductions in * * * fatal, nonfatal injury, and combined fatal-plus-nonfatal injury accident rates * * * (of) 48, 24, and 25 percent, respectively." Id. at IV-5. DOT estimates that the program has prevented over 19,000 deaths and 520,000 nonfatal injuries. Ibid.

As an essential part of these federally financed safety programs, the States are required to compile data identifying and evaluating potential accident sites and hazardous highway conditions. Under the Rail-Highway Crossings Program, each State is required to "conduct and systematically maintain a survey of all highways to identify those railroad crossings which may require separation, relocation, or protective devices, and establish and implement a schedule of projects for this purpose." 23 U.S.C. 130(d). Under the Hazard Elimination Program, each State is required to "conduct and systematically maintain an engineering survey of all public roads to identify hazardous locations, sections, and elements, including roadside obstacles and unmarked or poorly marked roads, which may constitute a danger to motorists and pedestrians, assign priorities for the correction of such locations, sections, and elements, and establish and implement a schedule of projects for their improvement." 23 U.S.C. 152(a). /1/

In the Surface Transportation and Uniform Relocation Assistance Act of 1987, Pub. L. No. 100-17, Section 132, 101 Stat. 170, Congress enacted a comprehensive prohibition against the use in tort litigation of documents and data compiled in connection with federal highway safety programs. Section 132 of the Act provides, in part:

PROHIBITION AGAINST DISCLOSURE AND ADMISSION AS EVIDENCE OF STATE REPORTS AND SURVEYS.

Notwithstanding any other provision of law, reports, surveys, schedules, lists, or data compiled for the purpose of identifying, evaluating, or planning the safety enhancement of potential accident sites, hazardous roadway conditions, or railway-highway crossings, pursuant to sections 130, 144, and 152 of this title or for the purpose of developing any highway safety construction improvement project which may be implemented utilizing Federal-aid highway funds shall not be admitted into evidence in Federal or State court or considered for other purposes in any action for damages arising from any occurrence at a location mentioned or addressed in such reports, surveys, schedules, lists, or data.

23 U.S.C. 409.

2. On August 28, 1988, a train collided with a tractor trailer truck at a railway-highway grade crossing in Leeds, Alabama. The driver of the truck was killed. Respondents brought a wrongful death action in state court against the railroad and the City of Leeds.

In February 1990, respondents subpoenaed petitioner's entire file on the grade crossing where the accident occurred. Pet. App. A22-A23. Petitioner agreed to produce certain documents in its file that were not compiled for the purpose of identifying, evaluating, or planning safety improvements, but objected to producing other documents in the file on the ground that they were protected by 23 U.S.C. 409. Pet. App. A24-A25.

The state trial court granted respondents' motion to compel production of the withheld documents. Pet. App. A3. The court interpreted Section 409 as "a bar as to admissibility and/or consideration by any court, tribunal or body which is empowered to 'consider' evidence and law, in arriving at a finding," but not "as a bar to() the discoverability only of materials the subject of said United States Code Section." Pet. App. A3.

3. The Supreme Court of Alabama denied a petition for a writ of mandamus. Pet. App. A1-A2. The court ordered petitioner to produce the subpoenaed documents to the trial court in camera, "so that the trial court can determine which of the records, if any, are germane to any matters upon which the plaintiffs might pursue further discovery of evidence that may be admissible at trial." Id. at A1.

Three justices dissented. Pet. App. A2. The dissenting justices concluded that Section 409 "is a complete bar to the admissibility or discovery" of documents or data within its scope. Ibid. They reasoned that this result "is mandated by the language of the statute itself," as well as "the purpose behind 23 U.S.C. Section 409." Ibid.

Respondents' wrongful death action has been stayed pending resolution of the discovery dispute at issue in this case. See Pet. 3.

DISCUSSION

The decision of the Alabama courts in this case is inconsistent with the language, legislative history, and purpose of 23 U.S.C. 409. Section 409 broadly prohibits any consideration of documents and data compiled in connection with federal highway safety programs in actions for damages. That prohibition extends to a party's consideration of materials obtained through discovery as well as to a factfinder's consideration of materials admitted into evidence at trial. If reports and data concerning potential highway safety hazards are subject to discovery in tort actions, States and private parties will likely be deterred from compiling complete and accurate information about such hazards. As a result, federal highway safety programs -- which depend on information about safety problems supplied by the States and private entities such as railroads -- will be jeopardized. In light of the importance of the question presented in this case to federal programs intended to promote highway safety, we believe that it is appropriate for the Court to grant the petition for certiorari.

1. Statutory interpretation begins with the language of the statute itself. Norfolk & Western Ry. v. American Train Dispatchers Ass'n, 111 S. Ct. 1156, 1163 (1991). Where the language of the statute is clear, "the sole function of the courts is to enforce it according to its terms." United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485 (1917)). The plain language of 23 U.S.C. 409 provides not only that covered "reports, surveys, schedules, lists, or data * * * shall not be admitted into evidence in Federal or State court," but also that they shall not be "considered for other purposes in any action for damages arising from any occurrence at a location mentioned in such reports, surveys, schedules, lists, or data." 23 U.S.C. 409. By its plain terms, this language prohibits any consideration of covered materials for any purpose, including consideration by a party who obtains such materials through discovery.

Respondents contend (Br. in Opp. 4) that a party who obtains covered materials in discovery does not "consider" such materials. That simply is not so. To "consider" is "to reflect on" or to "think about with a degree of care or caution." Webster's Third New International Dictionary 483 (1986). Indeed, "'consider' often indicates little more than think about," although "(i)t may occasionally suggest somewhat more conscious direction of thought, somewhat greater depth and scope, and somewhat greater purposefulness." Ibid. Thus, Section 409 accurately describes what a party to a lawsuit does with materials obtained in discovery -- it considers the materials and their possible bearing on the issues in litigation.

Respondents nevertheless assert (Br. in Opp. 4) that the statutory phrase "or considered for other purposes," read in context, must "refer() to a trier of fact's consideration of the enumerated documents" rather than consideration of those documents by a party to the lawsuit. This reading of the statutory language is untenable. It is a basic principle of evidence that "(t)he fact issues at the trial should be decided upon the facts 'in the record,' i.e., facts officially introduced in accordance with the rules of practice, and facts which the court may judicially notice." E. Cleary, et al., McCormick on Evidence Section 51, at 122 n.1 (3d ed. 1984). Section 409's requirement that materials within its scope "not be admitted into evidence" is sufficient to prevent such materials from being officially introduced, and facts contained in Section 409 documents would rarely if ever be appropriate for judicial notice. Thus, the purpose respondents would assign to the statute is fully met by the language specifying that covered documents and data "shall not be admitted into evidence in Federal or State court." 23 U.S.C. 409. But the statute does not stop there. It goes on to provide that covered materials may not be "considered for other purposes." 23 U.S.C. 409. Respondents' reading would render the phrase "or considered for other purposes" surplusage, contrary to the rule that courts "are obliged to give effect, if possible, to every word Congress used." Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979).

Nor is there any basis for the suggestion that the "or considered for other purposes" language refers to limited or specialized uses of Section 409 materials at trial, such as to impeach a witness. See Martinolich v. Southern Pac. Transp. Co., 532 So. 2d 435, 439 (La. Ct. App. 1988), writ denied, 535 So. 2d 745 (La.), cert. denied, 490 U.S. 1109 (1989). To be sure, evidence may be admitted for some purposes (such as impeachment) but not for other purposes. See, e.g., Fed. R. Evid. 105. But Section 409 expressly prohibits the admission of documents and data within its scope for any purpose, limited or otherwise. /2/

In short, the plain language of Section 409 broadly prohibits any consideration of materials generated in connection with federally funded highway safety programs in actions for damages. That prohibition applies to a party's consideration of documents obtained in discovery as well as to a factfinder's consideration of documents admitted into evidence. /3/

2. Although there is no occasion to consult the legislative history when the language of the statute is plain, see Norfolk & Western Ry. v. American Train Dispatchers Ass'n, 111 S. Ct. at 1163, the legislative history of Section 409 reinforces the conclusion that Congress did not intend to allow discovery of documents and data compiled in connection with federal highway safety programs.

The forerunner of Section 409 was a 1986 DOT recommendation that Congress amend Title 23 to provide that documents or data compiled in connection with federal highway safety programs "shall not be required to be made available pursuant to section 552 of title 5, United States Code, nor shall they be admitted into evidence, or considered for other purposes, in any action for damages arising from any matter mentioned or addressed in such (documents) or data." DOT Draft Bill, Surface Transportation Reauthorization Act of 1986, Section 130, at 55-56 (Feb. 5, 1986). The DOT's 1986 proposal, in turn, was based on similar DOT proposals prompted by concern that "highway departments are reluctant to (identify and prioritize roadway hazards) for fear that acknowledging the existence of hazardous conditions would expose them to liability." Memorandum from Marshall Jacks, Jr., Associate Administrator for Safety, Traffic Engineering, and Motor Carriers, to D.L. Ivers, Chief Counsel, Federal Highway Administration (May 4, 1983) (reprinted at Pet. App. A57-A58). DOT's section-by-section analysis of its 1986 proposal explained that it would require that covered materials not be "admitted into evidence or used in any action for damages." DOT Draft Bill, Section-By-Section Analysis at 31-32 (emphasis added). DOT thus understood the phrase "considered for other purposes" to be a broad prohibition against any use of covered materials in tort actions. Moreover, the fact that DOT proposed to prohibit release of covered materials under FOIA clearly demonstrates that the prohibition on "use" in litigation encompassed discovery. /4/

The House version of Section 409 provided that "(n)otwithstanding any other provision of law, no report, list, schedule, or survey prepared by or for a State pursuant to section 152 of title 23, United States Code, or section 203 of the Highway Safety Act of 1973 shall be admitted as evidence or used in any suit or action for damages arising out of any matter referred to in such report, list, schedule, or survey." H.R. 2, 100th Cong., 1st Sess. Section 207 (1987). /5/ The Senate version of Section 409, which is substantially similar to the version enacted into law, included the phrase "considered for other purposes" from the DOT's 1986 proposal. S. 387, 100th Cong., 1st Sess. Section 124 (1987). The Senate Report's analysis of the provision, which is captioned "Prohibition Against Disclosure and Admission As Evidence of State Reports and Surveys," explains that no covered material "shall be required to be admitted into evidence or used in any action for damages arising from matters mentioned or addressed in such documents." S. Rep. No. 4, 100th Cong., 1st Sess. 27-28 (1987). Similarly, the Conference Report states that the House bill was "(s)imilar to (the) Senate Amendment," and repeats that the effect of Section 409 is to prevent covered materials from being "admitted into evidence or used in any action for damages arising from matters mentioned or addressed in such documents." H.R. Conf. Rep. No. 27, 100th Cong., 1st Sess. 172-173 (1987). Thus, Congress clearly intended to preclude any use of materials within the scope of Section 409 in actions for damages, including use by a party to the litigation who obtains Section 409 materials through discovery.

3. The Alabama courts' interpretation of Section 409 is also inconsistent with the purpose of the statute. In enacting Section 409, Congress recognized that state highway departments, as well as private entities such as railroads, are reluctant to compile detailed and accurate information about highway safety problems if there is a significant risk that the information will be used against them in actions for damages arising out of highway accidents. Cf. United States v. Weber Aircraft Corp, 465 U.S. 792, 802-803 (1984) (recognizing "a need for claims of privilege when confidentiality is necessary to ensure frank and open discussion and hence efficient governmental operations"). Simply barring the admission into evidence of materials gathered in the process of such evaluations, while allowing discovery of such materials, would not prevent enterprising plaintiffs from making effective use of the materials in an action for damages. As one court has observed, there is merit to the argument that "(t)he disclosure of 409 materials is merely the first step in a backdoor process that leads to the de facto admission in sum or substance in one form or another of the information in question." Light v. New York, 149 Misc. 2d 75, 79, 560 N.Y.S.2d 962, 964 (Ct. Cl. 1990).

Indeed, the general rule is that privileged matter is not subject to discovery. See, e.g., Fed. R. Civ. P. 26(b)(1) ("Parties may obtain discovery regarding any matter, not privileged, which is relevant."); Fed. R. Evid. 1101(c) ("The rule with respect to privileges applies at all stages of all actions, cases, and proceedings."). In many cases, plaintiffs may be able to replicate information obtained through discovery in an admissible form simply by using Section 409 materials as a blueprint for questioning in depositions. In other cases, plaintiffs may conduct their own studies, patterned after studies conducted by the States, to recreate Section 409 materials. The fact that respondents and other parties to lawsuits have devoted considerable effort to obtaining Section 409 material indicates that the material is quite useful in litigation, even if not itself admissible.

4. The question presented in this case is of considerable importance to the success of federal highway safety programs. Congress enacted Section 409 because it concluded that States and private entities such as railroads were reluctant to provide complete and accurate information about highway safety problems that is essential to federally funded highway safety programs.

The question presented is not only important, but is certain to recur frequently. In 1989, there were 682 fatal accidents, and 2,600 nonfatal accidents, involving motor vehicles at rail-highway crossings alone. See 1991 Annual Report, at II-13 to II-14. In the relatively short time since this Court declined to consider this issue in Martinolich v. Southern Pac. Transp. Co., 532 So. 2d 435 (La. Ct. App. 1988), writ denied, 535 So. 2d 745 (La.), cert. denied, 490 U.S. 1109 (1989), it has been addressed in at least three published decisions in addition to this case. See Hagerty v. Southern Ry., 133 F.R.D. 34 (E.D. Mo. 1990); Light v. New York, 149 Misc. 2d 75, 560 N.Y.S. 2d 962 (Ct. Cl. 1990); Indiana Dep't of Transp. v. Overton, 555 N.E.2d 510 (Ind. Ct. App. 1990).

Petitioner has attached to its petition copies of five unpublished decisions -- two by federal district courts and three by state trial courts -- holding that Section 409 bars discovery of documents and data within its scope. See Pet. App. A35-A56. These decisions conflict with other decisions holding that Section 409 imposes no limitations on discovery. See Hagerty v. Southern Ry., supra; Light v. New York, supra; Indiana Dep't of Transp. v. Overton, supra; Martinolich v. Southern Pac. Transp. Co., supra. We recognize that there is as yet no conflict among federal courts of appeals or state courts of last resort, but the sharp conflict in the lower courts nevertheless reveals significant confusion over the application of Section 409 to discovery. In addition, several of the courts that have allowed discovery have expressed some doubt about the correctness of that result. See Hagerty, 133 F.R.D. at 36 (discoverability question "is far from being settled"); Light, 149 Misc. 2d at 79, 560 N.Y.S.2d at 964 (recognizing "facial merit" to argument that "(t)he disclosure of 409 materials is merely the first step in a backdoor process that leads to de facto admission"); Martinolich, 532 So. 2d at 439 ("The meaning of 'or considered for other purposes' . . . is not clear."). The confusion in the lower courts is exemplified by the conflict between the decision of the Alabama state courts in this case and a decision of the United States District Court for the Northern District of Alabama holding that Section 409 bars discovery. See Bearden v. Southern Ry., No. CV88-PT-0005-S (July 11, 1988), reproduced at Pet. App. A35-A38.

This case presents a single, straightforward question of statutory interpretation. It is unlikely that additional lower court decisions will shed further light on the question presented. Moreover, we believe the decision of the Alabama courts in this case is incorrect. Because further delay will jeopardize the effectiveness of federal programs intended to promote highway safety without serving any useful purpose, we believe it is appropriate for the Court to resolve the question presented in this case.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

STUART M. GERSON

Assistant Attorney General

JOHN G. ROBERTS, JR.

Deputy Solicitor General

ROBERT A. LONG, JR.

Assistant to the Solicitor General

LEONARD SCHAITMAN

ROBERT D. KAMENSHINE

Attorneys

AUGUST 1991

/1/ In addition, 23 U.S.C. 144 establishes a program to provide federal funds to replace or rehabilitate highway bridges that are "significantly important" and "unsafe because of structural deficiencies, physical deterioration, or functional obsolescence." 23 U.S.C. 144(a). Under this program, the Secretary of Transportation, in consultation with the States, inventories bridges within the scope of the program, classifies them "according to serviceability, safety, and essentiality for public use," and assigns each bridge a priority for replacement or rehabilitation. 23 U.S.C. 144(b)(2).

/2/ Respondents contend (Br. in Opp. 7-8) that 23 U.S.C. 409 is analogous to 49 U.S.C. App. 1441(e), which provides:

No part of any report or reports of the National Transportation Safety Board (NTSB) relating to any accident or the investigation thereof, shall be admitted as evidence or used in any suit or action for damages growing out of any matter mentioned in such report or reports.

Respondents' contention is incorrect. The NTSB's aviation accident reports are public documents. 49 U.S.C. App. 1441(a)(4); 49 C.F.R. 801.35. Thus, no question of their discoverability arises.

/3/ Respondents note (Br. in Opp. 3-4) that "(b)efore Congress can intrude upon an area traditionally occupied by the states, its intent to preempt must be clear," and that therefore Section 409 "must be construed restrictively." Section 409, however, regulates the use of materials generated under federal programs -- not "an area traditionally occupied by the states" -- and in any event satisfies any clear statement requirement by expressly applying "in Federal or State court." Br. in Opp. 3; 23 U.S.C. 409.

/4/ As ultimately enacted into law, Section 409 does not refer expressly to the Freedom of Information Act, 5 U.S.C. 552. Congress may have concluded that express reference to FOIA was unnecessary because Section 409 applies "(n)otwithstanding any other provision of law," 23 U.S.C. 409, and FOIA does not apply to matters that are "specifically exempted from disclosure by statute." Exemption 3, 5 U.S.C. 552(b)(3). In addition, disclosure of materials covered by Section 409 appears to be precluded by FOIA's Exemption 4 (which exempts "commercial or financial information obtained from a person and privileged or confidential") and Exemption 5 (which exempts "inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency"). 5 U.S.C. 552(b)(4) and (5). In any event, most documents and data within the scope of Section 409 are in the custody of state agencies rather than the federal government.

/5/ There was no House Report accompanying H.R. 2. The House Report cited by petitioner (Pet. 12) describes H.R. 3129, 99th Cong., 1st Sess. (1985), passed by the House in 1986, which provided that covered materials shall not be "admitted into evidence or used in any suit or action for damages." The House Report that accompanied H.R. 3129 explained that the purpose of the provision "is to encourage greater accuracy and completeness * * * by preventing (the materials) from being used in any judicial proceeding, thereby improving their quality as a basis for programming." H.R. Rep. No. 665, 99th Cong., 2d Sess. 56 (1986).

MICHAEL EUGENE SMITH, PETITIONER V. UNITED STATES OF AMERICA

No. 90-8467

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Sixth Circuit

Brief For The United States In Opposition

OPINION BELOW

The opinion of the court of appeals (Pet. App. 1a-12a) is reported at 928 F.2d 740.

JURISDICTION

The judgment of the court of appeals was entered on March 22, 1991. A petition for rehearing was denied on May 20, 1991. The petition for a writ of certiorari was filed on June 21, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

1. Whether the offenses under 18 U.S.C. 871 of making a threat against the President and Vice-President and under 18 U.S.C. 115 of making a threat against a federal officer require an intention by the defendant to carry out the threat.

2. Whether the evidence was sufficient to support petitioner's convictions.

3. Whether the district court erred in admitting certain evidence and in permitting certain cross-examination of petitioner.

4. Whether the district court's admonishment of defense counsel during closing argument required a mistrial.

5. Whether the district court adequately stated its reasons for imposing petitioner's sentence.

STATEMENT

After a jury trial in the United States District Court for the Southern District of Ohio, petitioner was convicted on two counts of making threats against the President and Vice-President of the United States, in violation of 18 U.S.C. 871, and on two counts of making threats against other federal officers, in violation of 18 U.S.C. 115. Petitioner was sentenced to 57 months' imprisonment, to be followed by three years' supervised release. The court of appeals affirmed. Pet. App. 1a-12a.

1. On the morning of July 20, 1989, petitioner left a letter addressed to the United States Secret Service on the information desk of the John Weld Peck Federal Building in Cincinnati, Ohio. The letter stated (Pet. App. 9a-10a):

To Whom It May Concern

Im fed up with President Bush. In is so call kinded gentler world but he isnt dont Anything for the American People who are poor, hungry and he doesnt want the average Joe on the street to get a minimum wage hike but he thinks he & Congress needs one hes full of Shit And I think Some one ought to Take him OUT AS IN "Death" but then we would be stuck with Quayle and god knows he isnt Any Count. I would like to kill Both of Them. Ask Secret Service About ME especially the ASS hole Agent in Miami Ron Collins we had a Run In in 1986 in Ft Lauderdale hes the one he fuck up my Life by lying To The Courts. I may be drinking Now but Im telling the Truth he And that Female bitch Assit US Attory karen what Ever Sent ME to Prison for no Reason -- And They should And will pay if I have Anything To Do with it You can Take That to the bank. I Live here in The city now.

Mike

The Secret Service Agent and Assistant U.S. Attorney mentioned in the letter had prosecuted petitioner in Florida for threatening to kill President Reagan in 1986. Gov't C.A. Br. 6.

The investigation of the letter was assigned to Secret Service Special Agent William Murphy. At approximately noon on the same day the letter was delivered, petitioner placed a telephone call to the Federal Building, using an alias, and was connected to Murphy. Petitioner asked whether the Secret Service had received the letter concerning the President. After petitioner acknowledged that he was Michael Eugene Smith, he agreed to come to the Secret Service offices to discuss the letter. Petitioner arrived at the Federal Building at approximately 5:30 that afternoon and was taken to an interview room. After being advised of his Miranda rights, petitioner admitted that he wrote the letter and stated, "I'm not sorry I wrote the letter. I wrote the truth." When Agent Murphy asked petitioner what he meant, petitioner smiled and said, "No comment." Murphy asked petitioner whether he owned any weapons or guns; petitioner replied, "No, but I wish I had some." When Murphy again asked what petitioner meant, petitioner again smiled and said, "No comment." Petitioner was arrested. Gov't C.A. Br. 7-9.

2. a. At petitioner's trial in December 1989, /1/ he testified that when he wrote the letter he wanted the Secret Service to think that the letter was a serious threat so that he would be arrested, 12/12/89 Tr. 100-101 (cross-examination), but that he did not mean the letter to be a "real threat," id. at 88 (direct examination). See Gov't C.A. Br. 11; C.A. Joint Appendix 106, 118-119. On cross-examination, he also was questioned about his 1986 conviction for threatening President Reagan and about a letter he wrote to then-Vice President Bush while he was in prison for the threat against President Reagan, in which he told the Vice-President: "You better hope you don't get elected, because if there is any way possible I'm going to get you." 12/12/89 Tr. 90; C.A. Joint Appendix 108.

b. During closing argument, defense counsel stated: "(Petitioner's) never tried to hurt anybody, and every time he's contacted the government, it has been to the very people who are charged with arresting people who do try to hurt somebody." The judge interpreted defense counsel as asserting that it is the government "who * * * tr(ies) to hurt somebody." The judge interjected: "Excuse me just a moment, Mr. Attenborough. That's improper, and I caution you not to do it again. Ladies and gentlemen, the remark of counsel that it's the purpose of government to hurt people is improper." The court then said to defense counsel, "(w)ould you refrain from any such remarks?" Pet. App. 3a-4a. At that point, a sidebar conference occurred out of the hearing of the jury, at which defense counsel asserted that the trial judge had misheard him and moved for a mistrial on the grounds that the judge's criticism in front of the jury undermined counsel's credibility. The court denied a mistrial. Pet. App. 4a-5a.

c. The jury was instructed that a conviction under 18 U.S.C. 115 and 871 requires proof beyond a reasonable doubt that, objectively viewed, petitioner knowingly and willfully made a threat against each government official named in the indictment, but does not require proof that petitioner subjectively intended to carry out any of his threats. The court refused to give petitioner's requested instruction 15, which provided in pertinent part: "I now instruct you that, despite his admissions, the Defendant's plea of not guilty requires each member of the jury to weigh all of the evidence in deciding whether the Government has proven, beyond a reasonable doubt, first; that the Defendant actually understood and meant the words he used as true threat(s) and, second; whether a reasonable person, in the circumstances of each statement, would interpret that statement as a serious expression of an intent to harm or kill the person allegedly threatened, as charged in the particular count of the indictment you are then considering." C.A. Joint Appendix 30 (footnotes omitted).

d. At the sentencing hearing, the district court resolved all objections to the presentence report and adopted the sentencing range recommended by the report, 46 to 57 months. The court then imposed a 57 month sentence without any further statement of reasons for selecting that month sentence. /2/ Gov't C.A. Br. 25.

3. The court of appeals affirmed, with one judge dissenting. The court had "little difficulty" in rejecting petitioner's contentions (1) that he must be acquitted because there was no proof that he had an intention actually to harm the individuals named in his letter, (2) that the language of the letter was insufficient as a matter of law to constitute a threat, (3) that he was denied a fair trial because of the prosecution's introduction of evidence concerning petitioner's alcoholism and prior statements, and (4) that the trial court erred in failing to give petitioner's proposed instruction respecting the requisite state of mind for conviction. In finding the evidence to be sufficient, the court applied United States v. Vincent, 681 F.2d 462, 464 (6th Cir. 1982), which evaluates threats under an objective standard without requiring proof of a subjective intent to carry out the threat. Pet. App. 2a. The court also ruled that the jury instructions incorporated the governing standard; the trial court was not required to adopt the precise language sought by the defense. Id. at 2a-3a.

The court also found no merit to petitioner's contention that there was an inadequate statement of reasons for imposing a 57-month sentence. The court noted that 18 U.S.C. 3553(c) does not require a particularized reason for selecting a sentence within the applicable sentencing range where, as here, that range does not exceed 24 months. /3/ Pet. App. 3a.

Although the court had "more difficulty," Pet. App. 3a, with petitioner's contention that the admonishment of defense counsel before the jury required a mistrial, the court rejected that contention as well. The court found that the comment of the judge was an isolated incident; "the record seems to have been singularly free of similar incidents elsewhere in the course of trial." Id. at 6a. While noting that defense counsel may not have meant his statement the way it was interpreted by the trial judge, the court saw the statement as ambiguous and stated that the admonition was warranted if the statement had the meaning ascribed to it by the trial judge. Ibid. The court also found that the admonition, in context, did not rise to the level of reversible error. Ibid. And, in the absence of any record evidence to the contrary, the court refused to assume that the jury was exposed to the judge's comments made at the sidebar conference. Id. at 6a-7a.

Judge Jones dissented, arguing that the admonition of the trial judge gave a sufficient appearance of judicial bias to require a new trial. Pet. App. 8a-9a. In addition, while he accepted the standard of United States v. Vincent, supra, that a reasonable person must foresee that the recipient would interpret the statement as a serious expression of an intention to inflict bodily harm on the person threatened, Judge Jones found that the letter failed to meet that standard. Pet. App. 9a-11a.

ARGUMENT

1. Petitioner contends (Pet. 18-21) that this Court should clarify the legal standard for conviction under the threat statutes, 18 U.S.C. 115 and 871. The court of appeals correctly held that the legal standard for conviction under the threat statutes is an objective one, without regard to the speaker's subjective intent to carry out the threat. The government need only show that the defendant knowingly and willfully made a "true threat"; i.e., a statement that the hearer or reader reasonably understands as a threat under circumstances showing that the defendant intended the hearer to take his statement as an actual threat. See, e.g., United States v. Howell, 719 F.2d 1258, 1260 (5th Cir. 1983), cert. denied, 467 U.S. 1228 (1984); United States v. Callahan, 702 F.2d 964, 965 (5th Cir.), cert. denied, 464 U.S. 840 (1983); United States v. Vincent, 681 F.2d 462, 464 (6th Cir. 1982); United States v. Rogers, 488 F.2d 512, 514 (5th Cir. 1974), rev'd on other grounds, 422 U.S. 35 (1975); Roy v. United States, 416 F.2d 874, 877 (9th Cir. 1969); Ragansky v. United States, 253 F. 643 (7th Cir. 1918); see also United States v. Rogers, 422 U.S. 35, 43 n.1 (1975) (Marshall, J., concurring). Mere bluster or hyperbole is excluded from the coverage of the statutes because it is not reasonably understood as a true threat. See United States v. Frederickson, 601 F.2d 1358, 1364 (8th Cir.), cert. denied, 444 U.S. 934 (1979). Similarly, political diatribe is excluded, even if it incorporates what might otherwise be understood as threatening language. See Watts v. United States, 394 U.S. 705, 706-708 (1969) (per curiam).

Petitioner contends (Pet. 21) that the Fifth Circuit's opinion in United States v. Rogers, supra, "appears to be somewhat inconsistent with the Vincent decision and the case at bar." There is no such inconsistency. Both cases reject any requirement to prove that defendant had a subjective intention to carry out the threat, and both require that the statement constitute a serious expression of an intent to harm the person mentioned. There is no conflict in the circuits warranting this Court's review. /4/

2. Petitioner next contends (Pet. 22-24) that the evidence was insufficient to establish that he violated the threat statutes. After being instructed on the correct legal standard, /5/ the jury concluded that the statements made in petitioner's letter were reasonably understood as threats. That fact-specific issue does not warrant this Court's review. In any event, the verdict is supported by sufficient evidence.

The text of petitioner's letter includes the statement "I would like to kill" both the President and Vice-President /6/ and the statement that the Secret Service Agent and prosecutor involved in petitioner's prior conviction "will pay if I have Anything To Do with it." Pet. App. 9a-10a. A reasonable jury could construe these statements as threats. That interpretation of the statements is supported by petitioner's admissions to the arresting Secret Service Agent that he wished he had weapons and that he was not sorry he wrote the letter, coupled with his refusal to explain what he meant. Although some of petitioner's statements had a political coloration and were in a conditional form, those features of the letter did not detract from its threatening character. The irate and vituperative tone of the letter, and its specificity in identifying targets of the writer's outrage, warranted the jury in concluding that a reasonable reader would understand petitioner's remarks to constitute threats.

3. Petitioner argues (Pet. 25-26) that the trial court erred when it permitted the prosecution to offer evidence and to question petitioner concerning prior instances in which he had made threats against federal officials. Those evidentiary issues were correctly resolved by the court of appeals and warrant no further review by this Court. To convict, the jury was required to find that petitioner knowingly and willfully made the threats. His prior activity and his awareness of the consequences of his action were relevant to proving his intent when he gave the letter to the Secret Service. See Fed. R. Evid. 404(b).

4. Petitioner contends (Pet. 12-17) that the district court's admonishment of defense counsel during closing argument required a mistrial. The court of appeals carefully reviewed that claim and found that a mistrial was not required. The trial judge apparently understood petitioner's counsel to have argued that it was the government that tries to hurt people. /7/ Working only with a cold record, the court of appeals properly deferred to the trial judge's good faith understanding of what he understood defense counsel to say. If the trial judge's understanding was correct, the admonition to defense counsel was warranted. If, on the other hand, the jury heard defense counsel's statement as petitioner contends it was intended, then the jury itself would be in a position to see that the trial judge had misinterpreted defense counsel's statement and that the admonition was unjustified. In any event, the court of appeals correctly determined that that isolated event during closing argument did not so undermine the fairness of the trial as to compel the grant of a mistrial. That issue warrants no further review here.

5. Finally, petitioner argues (Pet. 29-30) that the sentencing judge failed to state any reasons for the sentence he selected and that the omission precluded appellate review. Section 3553(c) provides in pertinent part (emphasis added):

The court, at the time of sentencing, shall state in open court the reasons for its imposition of the particular sentence, and, if the sentence -- (1) is of the kind, and within the range, described in subsection (a)(4), and that range exceeds 24 months, the reason for imposing a sentence at a particular point within the range.

Section 3553(c) requires an adequate statement of how the applicable sentencing range was selected, see United States v. Garcia, 919 F.2d 1478, 1482 (10th Cir. 1990); United States v. McDowell, 918 F.2d 1004, 1012 (1st Cir. 1990), and that requirement was satisfied here. The presentence report calculated the offense level and criminal history score required to arrive at the applicable sentencing range. At the sentencing hearing, the district court resolved all objections to the presentence report and adopted its calculation of the applicable sentencing range. As the court of appeals correctly held, 18 U.S.C. 3553(c) did not require a further statement of reasons for the selection of the 57 month sentence within the 46-57 month sentencing range because that range did not exceed 24 months.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, III

Assistant Attorney General

RICHARD A. FRIEDMAN

Attorney

AUGUST 1991

/1/ Petitioner's first trial on these charges, in November 1989, ended in a mistrial after the jury deadlocked 11-1 in favor of conviction. See Gov't C.A. Br. 4.

/2/ The base offense level for each of the four offenses is 12 under Sentencing Guideline Section 2A6.1. The offenses under 18 U.S.C. 115 called for an increase of three levels under Sentencing Guideline Section 3A1.2 because the targets of the threats were law enforcement officers, yielding an offense level of 15 for each of those offenses. Under the rules for determining the combined offense level of multiple offenses under Sentencing Guideline Section 3D1.1 and 3D1.4, there was a four-offense-level increase, yielding a combined offense level of 19. Petitioner was given a two-level decrease for acceptance of responsibility under U.S.S.G. 3E1.1, resulting in a total offense level of 17. His criminal history score was 10, placing him in Criminal History Category V.

/3/ The court of appeals erroneously stated that the applicable sentencing range was 63-78 months, rather than 46-57 months, Pet. App. 3a, but the court was nevertheless correct that the range did not cover a period of more than 24 months.

/4/ Every circuit but one to have considered the question has held that no intent to carry out the threat is required. In United States v. Patillo, 438 F.2d 13 (1971) (en banc), the Fourth Circuit held that Section 871 requires proof that the defendant intended either to injure the President, or to restrict his movements as a result of the threat. 438 F.2d at 16. This case does not implicate the issue on which Patillo and the other circuits disagree. First, petitioner has never argued that the legal standard for liability under Section 871 requires proof of a intent to do harm to the President; instead, he has claimed that his words were not intended to be a "true threat," rather than "political argument, idle talk or jest," Pet. C.A. Br. 7-9; see Pet. 19 ("(F)ar from intending the words as a true threat * * * (petitioner) was actually intending to say any words that would cause the Government agents to arrest him."). Petitioner's proposed jury instruction also embodied the "true threat" theory. See p. 5, supra. Second, unlike in Patillo, petitioner communicated his threat directly to the Secret Service and could reasonably have anticipated that some disruption to the President's movements might ensue. In that situation, the Fourth Circuit has stated that "the trier of fact may find * * * intention from the nature of the threat, i.e., whether the person making the threat might reasonably anticipate that it would be transmitted to law enforcement officers and others charged with the security of the President." 438 F.2d at 16. Finally, in the many years since that decision, the Fourth Circuit has not had occasion to apply or reconsider Patillo, and this Court has frequently declined opportunities to review the issue. See, e.g., United States v. Callahan, supra; United States v. Herman, 902 F.2d 1580 (9th Cir.) (Table), cert. denied, 111 S. Ct. 355 (1990). There is no reason for a different result here.

/5/ Petitioner argues (Pet. 27-28) that his requested instruction 15 also correctly stated the law and should have been given. The court of appeals properly held that as long as the instructions fairly and accurately explained the legal standard for conviction, the court was not required to adopt petitioner's particular linguistic formulation.

/6/ Petitioner's quotation of the letter, Pet. 7, inaccurately alters this phrase to "I would like to tell both (the President and Vice-President)." The letter is accurately quoted in the dissenting opinion, Pet. App. 9a, as stating "I would like to kill Both of Them."

/7/ The transcript recorded counsel's statement as follows: "He's never tried to hurt anybody, and every time he's contacted the government, it has been to the very people who are charged with arresting people who do try to hurt somebody." The manner of delivery of that rather ambiguous statement may have given the impression that "the very people who are charged with arresting people" were the people "who do try to hurt somebody."

ROBERT NOBLE CASALE, PETITIONER V. UNITED STATES OF AMERICA

No. 90-8451

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Eleventh Circuit

Brief For The United States In Opposition

OPINION BELOW

The opinion of the court of appeals (Pet. App. 1523-1530) is reported at 921 F.2d 1523.

JURISDICTION

The judgment of the court of appeals was entered on January 30, 1991. A petition for rehearing was denied on March 21, 1991. The petition for a writ of certiorari was filed on June 19, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether the Double Jeopardy Clause barred the RICO conspiracy count against petitioner because petitioner had previously pled guilty to a non-RICO conspiracy charge.

STATEMENT

After a jury trial in the United States District Court for the Southern District of Florida, petitioner was convicted on one count of conspiring to participate in an enterprise through a pattern of racketeering activity (RICO conspiracy), in violation of 18 U.S.C. 1962(d); one count of importing diazepam, in violation of 21 U.S.C. 952(b); three counts of possessing diazepam with intent to distribute it, in violation of 21 U.S.C. 841(a)(1); two counts of possessing cocaine with intent to distribute it, in violation of 21 U.S.C. 841(a)(1); and two counts of interstate travel to promote unlawful narcotics activity, in violation of 18 U.S.C. 1952(a). He was sentenced to a total of 13 years' imprisonment. The court of appeals affirmed. Pet. App. 1523-1530.

1. In 1981, co-conspirators Michael Thifault, Peter Berry, William Lynch, and John Mantesta formed a partnership to import and distribute large quantities of methaqualone, cocaine, diazepam, and marijuana. This partnership was known as the "Berry organization." Pet. App. 1525.

In early 1982, Thifault transported 300,000 counterfeit quaalude pills from Canada to Berry's house in Florida. /1/ Berry distributed 100,000 pills to petitioner to be sold to others in two deliveries of 50,000 pills each. In turn, petitioner had 50,000 pills delivered to co-defendant Louis Ippolio in California. In March 1982, Berry delivered the remaining 200,000 counterfeit quaaludes to petitioner. Petitioner had all of those pills delivered to Ippolito in California. In April 1982, the Berry organization imported approximately 1,000,000 counterfeit quaaludes and delivered 280,000 to petitioner in Florida for later delivery to Ippolito in California. Pet. App. 1525.

Shortly thereafter, Ippolito met with Berry and petitioner in California to discuss a plan to import marijuana from Colombia. In May 1982, Berry gave Ippolito $15,000 to pay the owner of the boat that was to transport the marijuana. In June 1982, co-conspirator Edward Barns picked up 16,000 counterfeit quaaludes from petitioner. Pet. App. 1525.

In September 1982, following Berry's arrest, petitioner assumed control of the Berry organization. Thereafter, he received a shipment of 750,000 to 1,000,000 counterfeit quaaludes, which he distributed to various people. In early 1983, Thifault delivered 25,000 to 50,000 pills to co-defendant Edwin Link at petitioner's direction. Later, Thifault made one delivery of 250,000 quaaludes and another of 125,000 quaaludes to co-defendant Carcaise. /2/ In November 1983, Thifault delivered another 100,000 counterfeit quaaludes to Carcaise. Pet. App. 1526.

Petitioner remained in control of the Berry organization until Berry's return in June 1983. After Berry's return, petitioner continued to deal in narcotics until his arrest in March 1984. Pet. App. 1526.

2. The RICO count charged petitioner and 36 co-defendants with a conspiracy lasting from January 1979 to December 18, 1986, and alleged the commission of 94 predicate acts of racketeering involving the importation and distribution of drugs. By special verdict, the jury found that petitioner had committed six racketeering acts that incorporated ten separate offenses, including (1) the importation of 1,000,000 diazepam pills from October 15, 1982, to November 15, 1982, with intent to distribute them; (2) the possession of 1/8 kilogram of cocaine on May 20, 1983, with intent to distribute it; (3) the possession of 16,000 diazepam pills on June 2, 1982, with intent to distribute them; (4) the possession of 100,000 diazepam pills on June 8, 1983, with intent to distribute them; (5) the possession of 200,000 diazepam pills from March 19, 1982, to April 13, 1982, with intent to distribute them; the possession of two kilograms of cocaine from March 19, 1982, to March 31, 1982, with intent to distribute it; and interstate travel to promote unlawful narcotics activity from March 19, 1982, to March 31, 1982; (6) the possession of 280,000 diazepam pills from April 11, 1982, to May 15, 1982, with intent to distribute them; the possession of three kilograms of cocaine from May 4, 1982, to May 15, 1982, with intent to distribute it; and interstate travel to promote unlawful narcotics activity from May 4, 1982, to May 15, 1982.

3. Previously, in 1984, petitioner had pleaded guilty to conspiring, from an unknown date to June 8, 1983, to possess with intent to distribute unspecified quantities of cocaine and diazepam. To provide a factual basis for the guilty plea, the government introduced evidence at the plea proceeding that, on May 20, 1983, an undercover DEA agent purchased 1/8 kilogram of cocaine from petitioner and Edward Terra; that, on the same date, petitioner and Terra agreed to deliver 100,000 diazepam pills to the agent; and that petitioner and Terra delivered the pills on June 8, 1983. That conduct was also the basis for two of the six predicate acts of racketeering that the jury in the instant case relied on in convicting petitioner of RICO conspiracy -- those charging petitioner with the possession of 1/8 kilogram of cocaine on May 20, 1983, with intent to distribute it and the possession of 100,000 diazepam pills on June 8, 1983, with intent to distribute them. As a result of petitioner's guilty plea, the government agreed to the dismissal of substantive counts alleging the possession and distribution of the 1/8 kilogram of cocaine; the possession and distribution of the 100,000 diazepam pills; and the possession of another quantity of diazepam pills on May 20, 1983. Supp. Gov't C.A. Br. 3-4 & Ex. A.

4. On appeal, petitioner contended that, under Grady v. Corbin, 110 S. Ct. 2084 (1990), the Double Jeopardy Clause barred the use of the previously adjudicated charges against him as predicate acts of racketeering in the RICO conspiracy count. Relying on its decision in United States v. Gonzalez, 921 F.2d 1530 (11th Cir. 1991), cert. pending, No. 90-7857, the court of appeals rejected petitioner's claim. The court explained that Grady did not "in any way weaken" this Court's earlier decision in Garrett v. United States, 471 U.S. 773 (1985), which "'clearly allows for subsequent prosecutions for complex crimes such as (a) RICO violation . . . notwithstanding an earlier conviction on a predicate charge.'" Pet. App. 1530, quoting Gonzalez, 921 F.2d at 1538.

ARGUMENT

1. As an initial matter, it should be noted that the predicate acts charged in the RICO conspiracy count in this case were substantive offenses. Petitioner does not contend that the inclusion of those substantive predicate acts in the RICO conspiracy count was barred by the Double Jeopardy Clause.

First, in the earlier prosecution petitioner was not convicted of committing those substantive offenses, but rather of conspiring to commit them. Thus, this case does not present the question whether crimes for which a defendant has previously been convicted may be named as predicate acts in a RICO or RICO conspiracy indictment. /3/

Second, under settled law, prior convictions for substantive offenses do not bar prosecution on later conspiracy charges, because a conspiracy is not "the same offense" as its object offenses. See, e.g., Garrett v. United States, 471 U.S. 773, 778 (1985); Iannelli v. United States, 420 U.S. 770, 781-782 (1975); United States v. Feola, 420 U.S. 671, 693 (1975); Callanan v. United States, 364 U.S. 587 (1961); Pinkerton v. United States, 328 U.S. 640, 643-644 (1946). Accordingly, the government may prosecute a defendant separately for a substantive offense and a conspiracy to commit that offense. See, e.g., United States v. Bayer, 331 U.S. 532, 542-543 (1947); United States v. Guthrie, 789 F.2d 356, 358 (5th Cir. 1986); United States v. Hines, 713 F.2d 584, 586 (10th Cir. 1983); United States v. Snell, 627 F.2d 186, 188 (9th Cir. 1980), cert. denied, 450 U.S. 957 (1981); United States v. Brown, 604 F.2d 557, 559 (8th Cir. 1979); United States v. Bosch, 584 F.2d 1113, 1118-1119 (1st Cir. 1978); United States v. Shelton, 573 F.2d 917, 919 (6th Cir.), cert. denied, 439 U.S. 827 (1978); United States v. Ricco, 549 F.2d 264, 273 (2d Cir.), cert. denied, 431 U.S. 905 (1977).

2. Petitioner's sole contention appears to be that his prosecution for RICO conspiracy should have been barred because he was previously prosecuted for drug conspiracy and some of the evidence used to prove that conspiracy was also used to prove the RICO conspiracy here. See Pet. 9-10.

a. The court of appeals was correct in ruling that RICO conspiracy is not the "same offense" as the conspiracy for which petitioner was previously prosecuted. RICO conspiracy requires proof of agreement to commit multiple criminal acts over an extended period of time in connection with an enterprise that often consists of a large group of individuals. Those requirements are expressed through the requirements of the RICO conspiracy statute that a defendant agree to conduct an "enterprise" through "a pattern of racketeering activity" consisting of at least two related predicate acts that amount to, or pose a threat of, continuing criminal conduct. 18 U.S.C. 1962(c), (d); see H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229 (1989). The threat posed by a RICO conspiracy is therefore not the same as that posed by the limited conspiracy to possess drugs with intent to distribute them for which petitioner was previously convicted.

The courts of appeals that have addressed the issue have all held that the Double Jeopardy Clause permits successive prosecutions for non-RICO conspiracy and RICO conspiracy, even when the government uses some of the same evidence concerning the defendant's actions to prove both conspiracies. E.g., United States v. Gonzalez, 921 F.2d 1530 (11th Cir. 1991), cert. pending, No. 90-7857; United States v. Gambino, 920 F.2d 1108 (2d Cir. 1990), cert. pending, No. 90-1689 & No. 91-31; United States v. Scarpa, 913 F.2d 993, 1013-1014 (2d Cir. 1990); United States v. Grayson, 795 F.2d 278, 282-283 (3d Cir. 1986), cert. denied, 479 U.S. 1054 (1987); United States v. Schell, 775 F.2d 559, 568 (4th Cir. 1985); United States v. Watchmaker, 761 F.2d 1459, 1466-1468 (11th Cir. 1985); United States v. Brooklier, 637 F.2d 620 (9th Cir. 1981), cert. denied, 459 U.S. 1206 (1983). /4/ The decision of the Eleventh Circuit that petitioner's conviction for conspiracy to possess cocaine and diazepam with intent to distribute them in violation of 21 U.S.C. 846 does not preclude later prosecution for RICO conspiracy thus comports fully with all prior federal appellate precedent.

b. Even if a non-RICO conspiracy prosecution could in some instances preclude a subsequent RICO conspiracy charge, the RICO conspiracy charge against petitioner would not be barred, because each conspiracy constituted a separate offense under the totality of the circumstances test traditionally employed by the courts to determine whether two conspiracies are the same for double jeopardy purposes. See, e.g., United States v. Ruggiero, 754 F.2d 927, 932 (11th Cir.), cert. denied, 471 U.S. 1127 (1985); United States v. Langella, 804 F.2d 185, 189 (2d Cir. 1986); United States v. MacDougall, 790 F.2d 1135, 1144 (4th Cir. 1986); United States v. Marable, 578 F.2d 151, 154 (5th Cir. 1978). Pursuant to that test, the factors to be considered are the time periods of the conspiracies; the places where the pertinent events occurred; the persons acting as co-conspirators; the statutory offenses that were the objects of the conspiracies; and the overt acts committed in furtherance of the conspiracies. See Marable, 578 F.2d at 154.

Here, only six co-defendants were named in petitioner's earlier conspiracy prosecution, while the subsequent RICO conspiracy count named 66 different individuals as indicted and unindicted co-conspirators of petitioner. The earlier conspiracy was alleged to have ended on June 8, 1983, and it centered on two sales of drugs and the possession of an additional quantity of drugs that took place during a three week period in 1983. The RICO conspiracy, by contrast, is alleged to have continued for six years from January 1979 to March 27, 1985, almost two years after the termination of the earlier charged conspiracy. The earlier conspiracy charge lists no overt acts. By contrast, the RICO conspiracy count alleges 94 predicate acts involving drug trafficking. Of the six predicate acts of racketeering that the jury determined petitioner had committed, only two were the subjects of proof at petitioner's earlier plea proceeding.

c. Finally, this Court has often recognized the well-settled rule that a successive prosecution does not violate the Double Jeopardy Clause where "the State is unable to proceed on the more serious charge at the outset because the additional facts necessary to sustain that charge have not * * * been discovered despite the exercise of due diligence." Grady v. Corbin, 110 S. Ct. at 2090 n.7. In light of the unique elements of a RICO offense, a prosecutor considering charges based on specific, limited transactions may well be unaware that the defendant has also committed a RICO offense that could be joined in the same proceeding. In addition, even where the prosecutor is aware of sufficient facts to add a RICO count to an indictment on other charges, the government should not be required to choose between bringing RICO charges precipitously or forgoing prosecution for the predicate act.

Those principles apply with full force in this case. This was not a case in which the government chose to hold the RICO charge in reserve until after completing the prosecution on the drug violations. To the contrary, the government could not have brought the RICO conspiracy charge against petitioner at the time of the earlier indictment because the principal witnesses needed to prove that charge did not begin to cooperate with the government until later. See Gov't C.A. Br. 17-18; Supp. Gov't C.A. Br. 18 & n.17.

3. In support of his claim, petitioner relies on Grady v. Corbin, 110 S. Ct. 2084 (1990), in which the Court held that "the Double Jeopardy Clause bars a subsequent prosecution if, to establish an essential element of an offense charged in that prosecution, the government will prove conduct which constitutes an offense for which the defendant already has been prosecuted." Id. at 2087. Grady, however, does not help petitioner's cause.

First, the Grady test has no application in the RICO context. In Grady the successive prosecutions involved simple offenses -- misdemeanor traffic violations and homicide -- that occurred simultaneously during a single course of conduct spanning a brief period of time. A RICO charge, by contrast, entails proof of multiple criminal acts committed in furtherance of an ongoing enterprise and occurring over an extended time span. As the Court stated in Garrett v. United States, 471 U.S. 773, 788 (1985), a complex offense such as RICO does not "lend itself to the simple analogy of a single course of conduct." Accordingly, the courts of appeals that have reached the issue have found Grady inapplicable in RICO cases. See United States v. Gonzalez, 921 F.2d at 1535-1539; Gambino, 920 F.2d at 1112-1113; Scarpa, 913 F.2d at 1013-1014 n.8; United States v. Esposito, 912 F.2d 60 (3d Cir. 1990); United States v. Pungitore, 910 F.2d 1084, 1109-1111 (3d Cir. 1990), cert. denied, 111 S. Ct. 2010 (1991). But see United States v. Russo, 906 F.2d 77 (2d Cir. 1990) (accepting government's concession on facts of that case that Grady barred prosecution for acts that had been charged as predicate acts in a prior RICO prosecution).

Second, even if the Grady test does apply in this context, the non-RICO and RICO conspiracies in this case did not involve the same conduct. As we have shown, the two prosecutions entailed separate agreements among different conspirators to achieve diverse objectives over substantially different time periods. The "conduct" at issue in a conspiracy case is the agreement. See Braverman v. United States, 317 U.S. 49, 53 (1942) ("The gist of the crime of conspiracy * * * is the agreement or confederation of the conspirators to commit one or more unlawful acts," and "the precise nature and extent of the conspiracy must be determined by reference to the agreement which embraces and defines its objects."); United States v. Broce, 488 U.S. 563, 570 (1989) (agreement is "all but synonymous" with conspiracy); Iannelli v. United States, 420 U.S. at 777. Accordingly, because the agreements alleged in each of the two prosecutions were distinct, the "conduct" at issue in each was similarly distinct.

Third, Grady bars a prosecution only when evidence of previously prosecuted conduct would "establish an essential element" of the offense charged in the later prosecution. 110 S. Ct. at 2087. In this case, although evidence concerning the earlier conspiracy was relevant in this prosecution, proof of petitioner's membership in the earlier conspiracy could not be said to "establish" any element of the RICO conspiracy charged.

Finally, as noted above, this Court in Grady expressly recognized that a subsequent prosecution will not be barred where "the State is unable to proceed on the more serious charge at the outset because the additional facts necessary to sustain that charge have not * * * been discovered despite the exercise of due diligence." Grady v. Corbin, 110 S. Ct. at 2090 n.7. That principle alone is sufficient to sustain this prosecution. /5/

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, III

Assistant Attorney General

JOEL M. GERSHOWITZ

Attorney

AUGUST 1991

/1/ While quaalude pills contain as their active ingredient the drug methaqualone, Thifault's pills contained a different drug, diazepam.

/2/ Co-defendant Carcaise was tried jointly with petitioner and convicted of RICO conspiracy and possession of diazepam with intent to distribute it. The court of appeals upheld his RICO conspiracy conviction in the same opinion in which it affirmed petitioner's conviction. Carcaise has filed a separate petition, No. 90-8044, challenging his conviction on double jeopardy grounds, and the government has filed a separate brief in opposition in that case.

/3/ As we have explained in our brief in opposition to the petition for a writ of certiorari in Carcaise v. United States, No. 90-8044, even if petitioner had been convicted of the substantive crimes charged in his prior prosecution, there is no bar to naming crimes for which a defendant has been convicted as predicate acts in a RICO or RICO conspiracy indictment. See 90-8044 Br. in Opp. 4-9. We are providing petitioner with a copy of our brief in opposition in Carcaise.

/4/ In Scarpa and Grayson, successive prosecutions were held permissible even though the previously adjudicated non-RICO conspiracy was specifically alleged as a predicate act in the RICO conspiracy indictment. The result in this case, in which the non-RICO conspiracy was not itself charged as a predicate act, follows a fortiori from Scarpa and Grayson.

/5/ Petitioner's reliance on United States v. Calderone, 917 F.2d 717 (2d Cir. 1990), cert. pending, No. 90-1527, is unavailing. In Calderone, a non-RICO case, the court held that the defendants' acquittal on charges of participating in a wide-ranging, multi-drug conspiracy barred a subsequent prosecution alleging a narrower, single-drug conspiracy. The same court has held that Grady does not bar successive prosecution for non-RICO and RICO conspiracies. Gambino, 920 F.2d at 1112-1113. Nor do we believe that this case should be held pending the Court's disposition of the petition for a writ of certiorari in United States v. Felix, 926 F.2d 1522 (10th Cir. 1991), cert. pending, No. 90-1599. Like Calderone, Felix does not involve a RICO charge. Instead, Felix concerns the question whether the government may prosecute a defendant for substantive criminal conduct and then, in a separate prosecution for conspiracy, ask the jury to infer the conspiratorial agreement in part from that same substantive criminal conduct. The Court's disposition of Felix is therefore unlikely to alter the analysis of the question presented in this case.

JOSE ANGEL TENORIO ALVAREZ, PETITIONER V. UNITED STATES OF AMERICA

No. 90-8387

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Fifth Circuit

Brief For The United States In Opposition

OPINION BELOW

The opinion of the court of appeals (Pet. App. 1-11) is unreported, but the judgment is noted at 929 F.2d 697 (Table).

JURISDICTION

The judgment of the court of appeals was entered on March 19, 1991. The petition for a writ of certiorari was filed on June 17, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether the district court properly increased petitioner's offense level under Section 3B1.1 of the Sentencing Guidelines because he was an organizer of criminal activity.

STATEMENT

Petitioner pleaded guilty in the United States District Court for the Western District of Texas to one count of possession of heroin with intent to distribute it, in violation of 21 U.S.C. 841(a)(1). He was sentenced to 175 months' imprisonment, to be followed by a five-year term of supervised release.

1. On August 16, 1989, petitioner was indicted on one count of conspiring to possess heroin with intent to distribute it, in violation of 21 U.S.C. 846, three counts of possessing heroin with intent to distribute it, and two counts of possessing cocaine with intent to distribute it, in violation of 21 U.S.C. 841(a)(1). Petitioner pleaded guilty to one count of possessing heroin with intent to distribute it in exchange for the government's agreement to dismiss the other charges against him.

The facts underlying the offense to which petitioner pleaded guilty are set forth in the government's proffer in support of the guilty plea. On May 9, 1989, two undercover officers went to petitioner's house to negotiate the purchase of heroin and cocaine from petitioner and a co-defendant, Anita Heath. The officers engaged in preliminary negotiations with petitioner and Heath and then left to await a telephone call from petitioner. Shortly thereafter, one of the officers received a call on his pager. The officer telephoned petitioner, who told the officer he could obtain half an ounce of heroin and half an ounce of cocaine for $600 each. Petitioner told the officers to return to his house in an hour for delivery. When the two officers arrived, they gave petitioner $1200, and petitioner in turn gave at least $500 to Heath. Petitioner then handed the officers two plastic bags; one contained 12.6 grams of heroin and the other allegedly contained cocaine. Dec. 18, 1989, Tr. 15-16.

The presentence report described eight undercover transactions between March 8, 1989, and June 12, 1989, involving a total of 119.406 grams of heroin and 36.56 grams of cocaine. /1/ Seven of the transactions occurred at petitioner's house; the eighth was arranged by petitioner and involved delivery of 53.9 grams of heroin in petitioner's car. Petitioner was involved in every transaction at his house except one that was conducted by his mother and a co-defendant, Alicia Pena. Anita Heath was involved in three of the transactions. Presentence Report 3-5.

2. Because petitioner was at least 18 years old at the time of the offense and had three prior felony convictions for crimes of violence (two for burglary of a habitation and one for aggravated robbery with a deadly weapon), the district court sentenced him as a career offender under Sentencing Guidelines Section 4B1.1. Section 4B1.1 of the Guidelines assigns an offense level of 32 to a career offender such as petitioner whose offense carries a maximum term of 20 years' imprisonment. The district court reduced petitioner's offense level by two levels for acceptance of responsibility, see Guidelines Section 3E1.1, resulting in an adjusted offense level of 30 and a Guidelines range of 168 to 210 months' imprisonment. The court then sentenced petitioner to imprisonment for 175 months. May 29, 1990, Tr. 25-26, 29.

The presentence report also included an alternative calculation of petitioner's sentencing range in the event he was not sentenced as a career offender. Under the alternative calculation, petitioner's drug offense (involving at least 100 grams but less than 400 grams of heroin) was assigned a base level of 26. Petitioner then received a two-level increase for his role as an organizer or leader of the criminal activity under Guidelines Section 3B1.1(c), and a two-level reduction for acceptance of responsibility, to arrive at a sentencing range of 120 to 150 months in prison. Presentence Report at 6-7. The district court did not employ this alternative calculation because it sentenced petitioner as a career offender.

3. The court of appeals affirmed. Pet. App. 1-11. The court first rejected petitioner's contention that the evidence was insufficient to establish that he was a career offender. Id. at 4-7. The court also rejected petitioner's contention that there was no evidence that more than one person participated in the May 29, 1989, transaction, and that the offense level under the alternative calculation of petitioner's sentencing range should not have been increased two levels pursuant to Guidelines Section 3B1.1(c). Id. at 7-8. The court noted that, under governing Fifth Circuit law, a sentencing court is free to consider conduct that falls within the "contours of the underlying scheme" in applying Section 3B1.1. Pet. App. 8 (quoting United States v. Rodriguez, 925 F.2d 107, 111 (5th Cir. 1991). Finally, the court of appeals declined to consider petitioner's contention that the Sentencing Commission lacked authority to promulgate Guidelines Section 1B1.3, which provides that the base offense level shall be determined on the basis of "all such acts or omissions that were part of the same course of conduct or common scheme or plan as the offense of conviction." The court noted that petitioner raised this issue for the first time on appeal. In addition, the court concluded that petitioner's sentence under the career offender Guideline would have been the same even if the district court had considered only the smaller amount of heroin involved in the offense of conviction. Pet. App. 9-11.

ARGUMENT

Petitioner contends (Pet. 4-10) that the district court erred in increasing his offense level by two levels under Sentencing Guidelines Section 3B1.1. He asserts (id. at 8-10) that the decision in this case conflicts with decisions of other courts of appeals precluding consideration of conduct other than the offense of conviction. Finally, petitioner contends (id. at 10-11) that consideration of a clarifying amendment to the commentary to the Sentencing Guidelines that was adopted after he committed his offense violates the Ex Post Facto Clause and is inconsistent with United States v. Murillo, 933 F.2d 195 (3d Cir. 1991).

1. Petitioner's contentions can have no effect on the proper resolution of this case. Petitioner was sentenced as a career offender under Sentencing Guidelines Section 4B1.1. Under that provision, the offense level for a career offender is the greater of (1) the level specified in a table set forth in Section 4B1.1 or (2) the offense level that would apply if the defendant were not a career offender. Petitioner's offense level under Section 4B1.1 was 32. His otherwise applicable offense level was 28 (if the challenged two-level increase under Guidelines Section 3B1.1 is included) or 26 (if that increase is excluded). /2/ In either case, petitioner's offense level under Section 4B1.1 was greater than his otherwise applicable offense level. Thus, resolution of the Section 3B1.1 issue in petitioner's favor would not affect his sentence.

2. Even if petitioner had not been sentenced as a career offender, his Section 3B1.1 argument would not lead to a reduction in his sentence. An adjustment under Section 3B1.1 may apply where there are at least two participants in the offense, including the defendant. United States v. Caballero, 936 F.2d 1292 (D.C. Cir. 1991); United States v. Paulino, 935 F.2d 739 (6th Cir. 1991); United States v. Calderon, 935 F.2d 9 (1st Cir. 1991). Petitioner's argument thus turns on his assertion that he was the only participant in the offense to which he pleaded guilty. That assertion is incorrect. Petitioner's co-defendant, Anita Heath, was present throughout the preliminary negotiations on May 9, 1989, and participated in the final transaction. The undercover officers paid the money to petitioner, who in turn gave some of the money to Heath. Thus, even if petitioner were correct in arguing that only the offense of conviction should be considered, the evidence was sufficient to show that petitioner was an "organizer, leader, manager, or supervisor" in the May 9, 1989, transaction. See Guidelines Section 3B1.1(c).

3. In any event, the questions posed by petitioner are of no continuing importance. Section 3B1.1 provides for increasing the defendant's offense level for an aggravating "role in the offense." For offenses committed before November 1, 1990, the courts of appeals initially were divided over whether the sentencing court could consider only the offense of conviction, see United States v. Pettit, 903 F.2d 1336, 1340-1341 (10th Cir.), cert. denied, 111 S. Ct. 197 (1990); United States v. Williams, 891 F.2d 921, 925 (D.C. Cir. 1989), or whether the sentencing court could also consider conduct that is part of the same course of conduct or common scheme or plan, see United States v. Fells, 920 F.2d 1179 (4th Cir. 1990), cert. denied, 111 S. Ct. 2831 (1991). /3/

After these cases were decided, the Sentencing Commission issued a clarifying amendment to the introductory commentary applicable to Guidelines Section 3B1.1, which states:

This Part provides adjustments to the offense level based upon the role the defendant played in committing the offense. The determination of a defendant's role in the offense is to be made on the basis of all conduct within the scope of Section 1B1.3 (Relevant Conduct), i.e., all conduct included under Section 1B1.3(a)(1)-(4), and not solely on the basis of elements and acts cited in the count of conviction.

Sentencing Guidelines, App. C., Amdmt. 345 at C.189 (1990). Since that amendment was adopted, the courts of appeals have agreed that, as to offenses to which the amendment applies, the relevant conduct Guideline should be employed in assessing a defendant's role in the offense under Part B of Chapter 3 of the Guidelines. See United States v. Caballero, 936 F.2d 1292 (D.C. Cir. 1991); United States v. Lillard, 929 F.2d 500 (9th Cir. 1991) (rejecting as dictum contrary view in United States v. Zweber, 913 F.2d 705 (9th Cir. 1990), on which petitioner relies (Pet. 9 n.5)); United States v. Perdomo, 927 F.2d 111 (2d Cir. 1991); United States v. Rodriguez, 925 F.2d 107 (5th Cir. 1991); United States v. Murillo, 933 F.2d 195, 200 (3d Cir. 1991).

Petitioner argues (Pet. 10-11) that the clarifying amendment to Section 3B1.1 should not be applied to his case, because he committed his offense before the effective date of the amendment. In support of that statement, he relies on United States v. Murillo, supra. To the extent that Murillo conflicts with the decisions of other courts, which have considered the clarifying amendment as reflecting the state of the law prior to is adoption, we submit that it is incorrect. The Sentencing Commission's clarifying amendment only confirmed the correctness of the view that the sentencing court could consider conduct that was part of the same course of criminal activity. See United States v. Caballero, supra; United States v. Perdomo, supra; United States v. Rodriguez, supra. Even under Murillo, moreover, it would have been proper for the sentencing court to "look to any persons in (petitioner's) organization who were involved in the purchase and intended distribution of the (heroin), as well as the persons who were in joint possession of these drugs." Murillo, 933 F.2d at 200. Anita Heath was involved in the May 9, 1989, transaction to which petitioner pleaded guilty. For that reason -- and for the additional reason that petitioner was sentenced as a career offender -- Murillo is of no help to petitioner.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, III

Assistant Attorney General

KAREN SKRIVSETH

Attorney

AUGUST 1991

/1/ The court of appeals calculated (Pet. App. 2-3) that the quantity of the drugs involved in the offense was equivalent to 126.718 grams of heroin. That calculation was based on the drug equivalency tables appended to Sentencing Guidelines Section 2D1.1, which provide that 1 gram of cocaine is equivalent to .2 grams of heroin.

/2/ Each offense level was adjusted downward by two levels for acceptance of responsibility.

/3/ As we explained in our Brief in Opposition to Certiorari in Fells, a copy of which has been provided to counsel for petitioner, Fells was correctly decided. Guidelines Section 1B1.2(a) directs courts to "determine the applicable guideline range in accordance with Section 1B1.3." Section 1B1.3, in turn, defines "Relevant Conduct (Factors that Determine the Guideline Range.") It provides, with respect to drug distribution and other offenses the seriousness of which is largely dependent on the aggregate harm, that both specific offense characteristics under Chapter 2 (e.g., drug quantity under Section 2D1.1) and adjustments under Chapter 3 (including adjustments for the defendant's role in the offense) shall be based on "all such acts and omissions that were part of the same course of conduct or common scheme or plan as the offense of conviction." Guidelines Section 1B1.3(a)(2).

KENNETH H. HEDRICK, PETITIONER V. UNITED STATES OF AMERICA

No. 90-8382

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Seventh Circuit

Brief For The United States In Opposition

OPINION BELOW

The opinion of the court of appeals (Pet. App. 1a-13a) is reported at 922 F.2d 396.

JURISDICTION

The judgment of the court of appeals was entered on January 8, 1991. Pet. App. 1. The petition for a writ of certiorari was filed on June 18, 1991, and is therefore substantially out of time under Rule 13.1 of the Rules of this Court. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether the Fourth Amendment requires suppression of evidence seized without a warrant from petitioner's trash cans, which were located within the curtilage of his property in the place from which the trash regularly was collected for disposal.

STATEMENT

Following a bench trial in the United States District Court for the Central District of Illinois, petitioner was convicted on one count of conspiracy to possess and to distribute cocaine, in violation of 21 U.S.C. 846, seven counts of possession of cocaine with intent to distribute it, in violation of 21 U.S.C. 841(a)(1), and five counts of money laundering, in violation of 18 U.S.C. 1956(a)(1)(A). The district court sentenced petitioner to 168 months of imprisonment, to be followed by five years of supervised release, and also ordered him to forfeit $13,000 in stock certificates, a 1982 Lincoln Town Car, and $1,850. The court of appeals affirmed. Pet. App. 1a-13a.

1. At petitioner's trial the government introduced evidence it had discovered through warrantless searches of garbage at petitioner's residence. Petitioner had left the garbage in opaque bags inside garbage cans covered with lids. The garbage cans were located on a driveway 50 feet south of the house and 20 feet from a detached garage. The cans were 25 to 30 feet away from the street and 18 feet from the public sidewalk. There was no fence or other obstruction between the public sidewalk and the cans. A private trash collection service regularly collected the garbage from the cans at that location. Pet. App. 2a, 8a-9a. Petitioner filed a motion seeking suppression of the evidence obtained from the garbage cans, but the district court denied the motion without opinion.

2. The court of appeals affirmed, holding that "the garbage cans were so readily accessible to the public that they exposed the contents to the public for Fourth Amendment purposes." Pet. App. 8a. Although the court agreed with petitioner's contention that the cans were within the curtilage of his house, the court relied on this Court's decision in California v. Greenwood, 486 U.S. 35 (1988), which held that the Fourth Amendment did not prohibit a warrantless search of garbage cans left beyond the curtilage, for the conclusion that petitioner possessed no reasonable expectation of privacy in objects left for disposal in the garbage cans. The court noted that "the distance between the garbage cans and the public sidewalk was relatively short, the garbage was collected by the garbage service from that location, and the garbage cans were clearly visible from the sidewalk." Id. at 8a. Furthermore, "the absence of a fence or any other barrier indicates that the garbage was knowingly exposed to the public." Id. at 8a-9a. /1/

ARGUMENT

Petitioner renews his claim (Pet. 6-11) that the warrantless search of his trash violated the Fourth Amendment. This contention is without merit. In California v. Greenwood, 486 U.S. 35 (1988), this Court held that the warrantless search of garbage left for collection at curbside outside the curtilage of the house did not violate the Fourth Amendment. Assuming that the defendant had a subjective expectation of privacy in garbage placed in sealed, opaque bags, the Court reasoned that the defendant could not have had a reasonable expectation of privacy in the garbage because of the extent to which it was exposed and readily accessible to "animals, children, scavengers, snoops and other members of the public." Id. at 40 (footnotes omitted). Petitioner argues that the reasoning of Greenwood applies only when the trash is left outside the curtilage. Where, as here, the trash is not placed outside the curtilage, petitioner contends that the homeowner retains a reasonable expectation of privacy in the garbage.

The court of appeals correctly rejected this argument. As that court noted, "(t)he mere intonation of curtilage * * * does not end the inquiry." Pet. App. 5a. This Court has long recognized that the Fourth Amendment protects privacy, not particular types of areas or enclosures. See Oliver v. United States, 466 U.S. 170, 183-184 (1984); Rakas v. Illinois, 439 U.S. 128, 143 n.12 (1978); Katz v. United States, 389 U.S. 347, 353 (1967); Warden v. Hayden, 387 U.S. 294, 304 (1967). Thus, the Court has held that the Fourth Amendment permits officers without a warrant to view an enclosed backyard within the curtilage, because the yard was knowingly exposed to "(a)ny member of the public flying in this airspace who glanced down." California v. Ciraolo, 476 U.S. 207, 213 (1986); see also Dow Chemical Co. v. United States, 476 U.S. 227 (1986). Similarly, the Court has found that the Fourth Amendment is not violated in cases where officers trespass onto private property to observe what readily could be seen in an open field. United States v. Dunn, 480 U.S. 294, 304 (1987); Oliver v. United States, 466 U.S. at 176-181; Hester v. United States, 265 U.S. 57 (1924).

The court of appeals in this case recognized that a closed container such as a backpack that was located within the curtilage of the house ordinarily would receive the full protection of the Fourth Amendment, because a person does not expose objects to the public by leaving them in a backpack near his driveway. Pet. App. 6a. Drawing on the reasoning of Greenwood, however, the court held that a closed garbage can in some cases should be subject to a different rule. The distinction rests on the common-sense conclusion, reflected in Greenwood itself (486 U.S. at 40), that garbage left where it is accessible to the public generally is recognized as being subject to being sorted through or taken away. Pet. App. 6a-7a.

The court did not hold that trash left anywhere outside a house would be exempt from Fourth Amendment protection. It noted that a homeowner would retain a reasonable expectation of privacy in garbage cans placed immediately adjacent to the house so as to be beyond any normal public access. Pet. App. 7a-8a. Here, however, the garbage cans were permanently located some distance away from the house, closer to the public sidewalk than to the house itself, the garbage was collected from that location by the trash service, and no fence or other barrier discouraged access to the cans by members of the public. Id. at 8a-9a. Given these circumstances, the court's conclusion that petitioner could not have harbored any reasonable expectation of privacy in the garbage cans is entirely appropriate.

The decision below does not conflict with any other court of appeals decision. Petitioner relies on a district court decision in United States v. Certain Real Property Located at 987 Fisher Road, 719 F. Supp. 1396 (E.D. Mich. 1989), but the court below correctly found that case distinguishable, noting (Pet. App. 8a) that its own rule would have resulted in suppression in that case, where garbage bags were located against the back wall of a house, 719 F. Supp. at 1398. Other cases have found no expectation of privacy in garbage that was within the curtilage of the house, in circumstances similar to those of this case. United States v. Wilkinson, 926 F.2d 22, 27 (1st Cir. 1991) (garbage on defendant's "own lawn"), cert. denied, 111 S. Ct. 2813 (1991); United States v. Dunkel, 900 F.2d 105, 106-107 (7th Cir. 1990), vacated on other grounds, 111 S. Ct. 747 (1991); United States v. Kramer, 711 F.2d 789, 791-794 (7th Cir.) (cited approvingly in Greenwood, 486 U.S. at 42), cert. denied, 464 U.S. 962 (1983); United States v. Alden, 576 F.2d 772, 776-777 (8th Cir.), cert. denied, 439 U.S. 855 (1978); United States v. Shelby, 573 F.2d 971, 973-974 (7th Cir.), cert. denied, 439 U.S. 841 (1978).

In sum, the court of appeals fashioned no new and absolute rule, but simply found that under the facts of this case petitioner had no reasonable expectation of privacy. That conclusion correctly applies the analysis in this Court's cases to the particular facts of this case, and thus the decision does not warrant further review.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, III

Assistant Attorney General

KATHLEEN A. FELTON

Attorney

AUGUST 1991

/1/ Judge Cudahy dissented, arguing that garbage in enclosed cans within the curtilage can never be searched without a warrant. Pet. App. 9a-13a.

RAYFUL EDMOND, III, PETITIONER V. UNITED STATES OF AMERICA

No. 90-8236

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The District Of Columbia Circuit

Memorandum For The United States In Opposition

Petitioner contends that the court of appeals erred in holding that he can be prosecuted under District of Columbia law for first-degree murder as an aider and abettor of a gunman who was previously acquitted of that charge.

1. In a 43-count indictment filed in the United States District Court for the District of Columbia, petitioner was charged with running a large-scale drug enterprise. The indictment also charged him with first-degree murder, in violation of 22 D.C. Code Sections 2401, 3202 and 105. The district court granted defense motions by severing the count charging petitioner and co-defendant Columbus Daniels with first-degree murder. Petitioner and others were tried first on the other counts, which related to the drug operation. On December 6, 1989, a jury convicted petitioner of conspiracy (21 U.S.C. 846), of having conducted a continuing criminal enterprise (21 U.S.C. 848), and of other drug and racketeering crimes. Pet. App. 37A-38A.

Following petitioner's convictions on those drug offenses, the district court prepared to try petitioner and Daniels on the first-degree murder charge. The government anticipated proving that petitioner had ordered codefendant Daniels to murder Brandon Terrell, a potential rival in the drug business. The district court again granted defense motions by severing petitioner's trial from that of Daniels. Daniels, the alleged gunman in the murder, was tried first and was convicted only of the lesser-included charge of second-degree murder. Pet. App. 38A-39A.

Petitioner then moved to reduce the charge against him to second-degree murder, claiming that Daniels' implied acquittal of first-degree murder barred the government from prosecuting petitioner as an aider and abettor of Daniels. Petitioner also moved to bar the government from establishing his responsibility for the murder under Pinkerton v. United States, 328 U.S. 640 (1946)), which holds conspirators liable for the reasonably foreseeable acts of their co-conspirators in furtherance of the conspiracy. According to petitioner, the government could not rely on Pinkerton to prove the murder charge because petitioner had already been prosecuted for his role in the drug conspiracy. The district court granted both motions by reducing the murder charge against petitioner from first to second degree, and by precluding the government from relying on a Pinkerton theory of liability. Pet. App. 20A-27A.

2. The court of appeals reversed. Pet. App. 36A-60A. The court unanimously held that the government could prove the murder charge based on a Pinkerton theory of liability. Double jeopardy does not bar such proof, the court held, because petitioner was separately responsible for both the drug conspiracy and murder. Pet. App. 48A-53A; id. at 54A (Silberman, J., concurring on this point).

The court further held, with one judge dissenting, that petitioner could be tried for first-degree murder notwithstanding Daniels' implied acquittal on that charge. Pet. App. 39A-48A. The court relied on Standefer v. United States, 447 U.S. 10 (1980), where this Court held, under 18 U.S.C. 2, that an aider and abettor may be prosecuted for a crime regardless of whether the principal previously was acquitted in a separate prosecution. Pet. App. 40A-42A. The court concluded that, while the present case involves 22 D.C. Code Section 105 rather than 18 U.S.C. 2, the result must be the same. Pet. App. 39A-48A.

3. This Court need not consider the merits of petitioner's contentions at this time because the case is in an interlocutory posture. The court of appeals' order simply remanded the case to the district court for trial. Petitioner's position is no different than if the district court had left intact the first-degree murder charge against him. If petitioner is acquitted following a trial on the merits, or if he is convicted of second-degree murder, his contentions will be moot. If, on the other hand, petitioner is convicted of first-degree murder and his conviction is affirmed on appeal, he will then be able to present his contentions to this Court, together with any other claims he may have, in a petition for a writ of certiorari seeking review of a final judgment against him. Accordingly, review by this Court of the court of appeals' decision would be premature at this time. /1/

It is therefore respectfully submitted that the petition for a writ of certiorari should be denied.

JOHN G. ROBERTS, JR. /2/

Acting Solicitor General

AUGUST 1991

/1/ Because this case is interlocutory, we are not responding on the merits to the question presented by the petition. We will file a response on the merits if the Court requests.

/2/ The Solicitor General is disqualified in this case.

HURLEY F. RICHARD, PETITIONER V. LOUIS W. SULLIVAN, SECRETARY OF HEALTH AND HUMAN SERVICES;

PAUL LEGER, PETITIONER V. LOUIS W. SULLIVAN, SECRETARY OF HEALTH AND HUMAN SERVICES

No. 90-8219

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Fifth Circuit

Brief For The Respondent

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. A1-A9) is reported at 926 F.2d 399 (5th Cir. 1991). The court of appeals' order of dismissal of petitioner Leger's prior appeal (App. A, infra) is unreported. The prior remand order and opinion of the district court in petitioner Richard's case (App. B, infra) is unreported.

JURISDICTION

The judgment of the court of appeals was entered on February 28, 1991. A petition for rehearing was denied on March 28, 1991. Pet. App. B10. The petition for a writ of certiorari was filed on June 3, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether the court of appeals correctly held that a post-remand administrative decision by the Secretary of Health and Human Services, which is favorable to a claimant in a Social Security disability case, is a "final judgment" within the meaning of the Equal Access to Justice Act (EAJA), 28 U.S.C. 2412(d).

STATEMENT

1. Petitioner Leger unsuccessfully sought disability benefits under Title II and Title XVI of the Social Security Act, 42 U.S.C. 401 et seq. and 42 U.S.C. 1381 et seq., and subsequently brought suit, pursuant to 42 U.S.C. 405(g), to review the decision of the Secretary of Health and Human Services rejecting his disability claims. The district court upheld the Secretary's decision. While petitioner's appeal was pending, petitioner and the Secretary, pursuant to Fed. R. App. P 42, stipulated to dismissal of the appeal and a return of the matter to the Secretary for further administrative proceedings. The court of appeals dismissed the appeal in accordance with the stipulation. App. A, infra. In subsequent administrative proceedings, petitioner's claims were granted in full. Pet. App. A2-A3.

Thereafter, petitioner moved to reopen the proceedings in district court, seeking a summary judgment confirming the administrative award. The apparent purpose for seeking such a decree was to set the predicate for a timely request for attorney's fees under the Equal Access to Justice Act (EAJA), 42 U.S.C. 2412. Pet. App. A3. Relying on the Ninth Circuit's decision in Melkonyan v. Heckler, 895 F.2d 556 (1990), vacated and remanded, 111 S. Ct. 2157 (1991), a magistrate recommended that the motion be denied on the ground that the court had no authority to render a judgment confirming a favorable post-remand administrative decision. Pet. App. A3. The district court adopted the magistrate's recommendation and dismissed petitioner's action. Ibid.

2. Petitioner Richard also unsuccessfully sought disability benefits and petitioned for judicial review of his unfavorable administrative decision. Pet. App. A3. Pending action by the district court, the Secretary requested a remand for further administrative proceedings. The district court granted that request. App. B, infra. In those proceedings, petitioner prevailed and was awarded benefits. Ibid.

Petitioner sought to reopen his case in district court and obtain a judgment confirming the administrative decision. Again, the apparent purpose of the requested judgment was to provide a predicate for a timely request for EAJA fees. Pet. App. A3-A4. A magistrate recommended denial of the motion on the ground that petitioner had no basis for seeking judicial review of an administrative award of benefits. The district court adopted the magistrate's recommendation. Id. at A4.

3. After consolidating petitioners' appeals, the court of appeals affirmed in both cases. The court first concluded that, "absent specific direction by the court, in its order or orders of remand, the Secretary is not required to report to the court his or her findings or decision if benefits are awarded to the claimant in the post-remand administrative proceedings." Pet. App. A6-A7. The court then agreed with three other circuits, including the Ninth Circuit in Melkonyan, that, for purposes of EAJA, "the favorable action by the Secretary was the 'final judgment' contemplated by 28 U.S.C. Section 2412(d)(1)(A) & (B)." Pet. App. A7 (footnote omitted).

ARGUMENT

The court of appeals relied on the holding of the Ninth Circuit in Melkonyan that a favorable decision by the Secretary on remand is a "final judgment" for purposes of EAJA. Pet. App. A7. This Court, however, explicitly rejected this analysis in its Melkonyan decision and held that "EAJA requires a 'final judgment' entered by a court." 111 S. Ct. at 2162. The court of appeals in this case also concluded that the Secretary need not return to court after awarding benefits, absent specific direction by the court. Pet. App. A6-A7. Although that is generally true in actions under 42 U.S.C. 405(g) (see Sullivan v. Finkelstein, 110 S. Ct. 2658, 2664-2665 (1990)), this Court made clear in Melkonyan that following a remand pursuant to the sixth sentence of Section 405(g), "the Secretary must return to the District Court." 111 S. Ct. at 2163. The Court therefore remanded in Melkonyan to allow the district court to clarify the nature of its original remand order. Id. at 2165-2166. Accordingly, it would be appropriate to grant the petition in this case, vacate the judgment below, and remand to the court of appeals for further consideration in light of Melkonyan. /1/

CONCLUSION

The petition for a writ of certiorari should be granted, the judgment of the court of appeals should be vacated, and the case should be remanded for further consideration in light of this Court's holding in Melkonyan v. Sullivan, 111 S. Ct. 2157 (1991).

Respectfully submitted.

KENNETH W. STARR

Solicitor General

STUART M. GERSON

Assistant Attorney General

WILLIAM KANTER

MICHAEL E. ROBINSON

Attorneys

AUGUST 1991

/1/ The remand in petitioner Richard's case appears to have been entered pursuant to sentence six of Section 405(g); petitioner Leger's appeal was dismissed under Fed. R. App. P. 42, pursuant to a stipulation that the matter be returned to the Secretary. The characterization of these dispositions for present purposes -- and the consequences of such characterization -- can best be addressed, in the first instance, by the lower courts. Cf. Melkonyan, 111 S. Ct. at 2165-2166.

APPENDIX

JOY P. ADAMS, PETITIONER V. LYNN MARTIN, SECRETARY OF LABOR

No. 90-8210

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Fourth Circuit

Brief For The Respondent In Opposition

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. A1-A8) is reported at 927 F.2d 771. The decision of the Secretary of Labor (Pet. App. A9-A20) and the decision of the administrative law judge (Pet. App. A21-A28) are unreported.

JURISDICTION

The judgment of the court of appeals was entered on March 5, 1991. The petition for a writ of certiorari was filed on June 3, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether the employment protection provisions of Section 210 of the Energy Reorganization Act of 1974, 42 U.S.C. 5851, apply to Department of Energy contractors and subcontractors.

STATEMENT

1. The Department of Energy (DOE) owns the Savannah River Plant, a nuclear facility located in Barnwell, South Carolina that produces material for the United States' nuclear weapons program. At the time relevant to this suit, E.I. DuPont De Nemours and Company operated the plant under a contract with DOE, and B.F. Shaw Company provided services as a subcontractor. Pet. App. A2, A14. On October 25, 1985, B.F. Shaw Company dismissed Roger D. Wensil, a pipefitter at the Savannah River Plant, as part of a reduction in work force. Wensil filed a complaint with DOE alleging that his employment was terminated because he had reported that other employees were using illegal drugs at the plant. DOE conducted an investigation pursuant to DOE Order 5483.1A, which prohibits discrimination against contract employees who complain of health and safety hazards at DOE facilities, and concluded that his discharge was not the result of his "whistleblowing" activities. Id. at A2. /1/

Wensil also filed a complaint with the Department of Labor pursuant to Section 210 of the Energy Reorganization Act (ERA), 42 U.S.C. 5851, which also prohibits employment discrimination on account of "whistleblowing" activities. /2/ The Department's Wage and Hour Division concluded, however, that it lacked jurisdiction over the matter because Section 210 does not protect employees at DOE-owned facilities, who are already protected under DOE Order 5483.1A. Instead, Section 210 applies only to persons employed at commercial nuclear facilities, which are licensed by the Nuclear Regulatory Commission (NRC). The Wage and Hour Division notified Wensil of its conclusion and, after a hearing, an administrative law judge (ALJ) recommended dismissal of Wensil's complaint. Pet. App. A2-A3.

Petitioner, who also was employed by B.F. Shaw Company at the Savannah River Plant, subsequently filed a complaint with the Department of Labor under Section 210. She contended that B.F. Shaw Company terminated her employment because she provided testimony to DOE and the Department of Labor on Wensil's behalf. The Department of Labor's Wage and Hour Division notified petitioner that it lacked jurisdiction under the same reasoning as in Wensil's case, and, after a hearing, an ALJ recommended dismissal of petitioner's complaint. Pet. App. A21-A28. See Id. at A3.

2. The Secretary of Labor reviewed Wensil's and petitioner's complaints and, in a consolidated decision, adopted the ALJs' recommendations. The Secretary examined the pertinent language of Section 210, which provides that "(n)o employer, including a Commission licensee, an applicant for a Commission license, or a contractor or subcontractor of a Commission licensee or applicant" may discriminate against employees who commence administrative enforcement proceedings, 42 U.S.C. 5851(a), and concluded that the scope of its coverage was ambiguous. She observed that the "including" phrase of Section 210 could either illustrate a broad category of employers to be covered, or restrict coverage to the listed categories of "NRC-type" employers. Pet. App. A10, A15. After examining the object, structure, and history of Section 210, the Secretary concluded that Congress intended to legislate "with reference only to the NRC." Id. at A17.

The Secretary cited numerous indicia suggesting that Congress intended Section 210 to apply only to NRC-licensed facilities. Pet. App. A15-A17. /3/ She also observed that the complainants' position was difficult to reconcile with Section 210(b)(1), which requires the Secretary to notify NRC, as well as any named employer, when a complaint is filed. 42 U.S.C. 5851(b)(1). As the Secretary recognized, the complainants' interpretation would result in "notifications to NRC of complaints against DOE -- an entirely separate agency." Pet. App. A18-A19. Finally, the Secretary observed that her conclusion that Section 210 covered only NRC-type employers did not leave complainants without a remedy for the alleged discrimination because DOE's employment protection provisions were available. Pet. App. A20. See Id. at A3. /4/

3. The court of appeals affirmed the Secretary's decision. The court first rejected petitioner's argument that Section 210 unambiguously covers every employer and employee regardless of whether the facility is owned by DOE or licensed by the NRC. Instead the court agreed with the Secretary that Section 210(a) is "ambiguous when referring to those who must abide by its whistleblowing provisions." Pet. App. A5. The court therefore examined "whether the Secretary's construction is a permissible one and not contrary to clear congressional intent." Ibid. The court concluded that Congress's enactment of Section 210 by amendment to Title II of the ERA, which governs only the NRC, demonstrated a deliberate congressional intent to apply the whistleblower provisions solely to NRC-related employees. Id. at A5-A6. /5/ In addition, the court observed that Section 210 refers only to the NRC, and it requires that notice of an employee complaint be given to NRC rather than DOE. Id. at A6. Finally, the court concluded that while Section 210's legislative history is largely ambiguous, the House Conference Report was entitled to some weight. That Report's specific and exclusive reference to "Commission licensees, applicants, contractors, or subcontractors" supported the Secretary's interpretation of the statutory language. Pet. App. A7-A8. /6/

ARGUMENT

1. The court of appeals correctly affirmed the Secretary's decision in this case. The court applied the settled rule that where, as here, the statutory language is ambiguous, the court's inquiry is limited to determining whether the agency's interpretation is permissible and not contrary to clear congressional intent. Pet. App. A4-A5. See Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-845 (1984). In the instant case, both the Secretary of Labor, who is charged with administering Section 210 of the ERA, and DOE, which has its own whistleblower protection procedures for contractors' employees (see note 1, supra), agree that Section 210 does not apply to employees of DOE contractors and subcontractors.

As the court of appeals recognized, the Secretary's interpretation is the most logical construction of the statute. Congress placed Section 210 within Title II of the ERA, which governs only the NRC. Section 210 makes reference only to the NRC and not to DOE or its predecessor, the Energy Research and Development Administration (ERDA). /7/ Similarly, Section 210 instructs the Secretary of Labor, upon receipt of a whistleblower complaint, to notify the NRC and not DOE or ERDA. If Congress had intended Section 210 to apply to DOE facilities, it presumably would have directed the Secretary to notify DOE of the filing of a complaint against its contractors and subcontractors. Pet. App. A6.

2. Petitioner's challenges to the court of appeals' reasoning are unpersuasive. Petitioner first argues (Pet. 11-13) that a Senate report discussing Section 210 supports her interpretation. See S. Rep. No. 848, 95th Cong., 1st Sess. 29-30 (1978). As the court of appeals explained, however, that report is ambiguous, and to the extent that legislative history might be enlightening, the House Conference report supports the Secretary's interpretation. Pet. App. A7-A8. Petitioner also contends (Pet. 13-17) that Section 210's mention of the NRC should be deemed descriptive rather than restrictive because the ERA elsewhere uses the term "including" (see note 2, supra) in a descriptive sense. As the court recognized, however, a common term like "including" must be construed in light of its immediate context. Pet. A6.

Petitioner next argues (Pet. 17-20) that Section 210 should be applied to DOE-related employees in order to effectuate Congress' purpose of protecting public health and safety. DOE, however, has long had in place procedures for protecting the continued employment of individuals who provide health and safety information. /8/ Thus, the existing employment protection provisions, which provide similar protections for DOE-related and NRC-related employees, certainly comport with Congress's general intent to encourage and protect employees who report safety violations. Petitioner's mere desire that DOE-related employees receive the same protections as NRC-related employees does not provide a ground for extending Section 210 to DOE facilities, where other effective and adequate protections have long been in place. /9/

Finally, petitioner argues (Pet. 23) that Section 210 must be interpreted to conform to Section 322 of the Clean Air Act, 42 U.S.C. 7622, which covers DOE employees, because related statutes should be construed in pari materia. The Clean Air provision, however, is substantially different from Section 210 of the ERA. It does not contain any of the language found in Section 210 indicating that Section 210 applies only to NRC-related facilities. Compare 42 U.S.C. 5852(a) and (b)(1) with 42 U.S.C. 7622(a) and (b)(1). Hence, if anything, a comparison of Section 322 of the Clean Air Act and Section 210 of the ERA bolsters the Secretary's interpretation.

3. Even if there were merit to petitioner's arguments, the court of appeals' decision would not warrant this Court's review. The court simply applied well-established principles of statutory construction to a particular statutory provision. No other court has addressed the issue presented here, and hence the court's decision does not conflict with any decision of another court of appeals. Moreover, given that DOE already provides similar protection to "whistleblowers," the issue is unlikely to generate a conflict among the circuits, and the decision has limited practical significance.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

DAVID S. FORTNEY

Deputy Solicitor

ALLEN H. FELDMAN

Associate Solicitor

KERRY L. ADAMS

Counsel for Appellate Litigation

JUDITH D. HEIMLICH

Attorney Department of Labor

AUGUST 1991

/1/ Since January 1977, DOE has provided whistleblower protection for employees of contractors at government-owned contractor-operated (GOCO) nuclear facilities. Those protections were contained originally in the Energy Research and Development Administration (ERDA) Manual Chapter 0506, Occupational Safety and Health Program for ERDA GOCO Contractor Employees (approved Jan. 5, 1977), and later in DOE Order 5483.1A, Occupational Safety and Health Program for DOE Contractor Employees at GOCO Facilities (June 22, 1983), which replaced DOE 5483.1 (Apr. 13, 1979)). DOE maintains that employees at DOE facilities can pursue discrimination claims only under DOE Order 5483.1A. Pet. App. A3. See also id. at A25 nn. 4-5.

/2/ Section 210(a) provides:

No employer, including a Commission licensee, an applicant for a Commission license, or a contractor or subcontractor of a Commission licensee or applicant, may discharge any employee or otherwise discriminate against any employee with respect to his compensation, terms, conditions, or privileges of employment because the employee * * * --

(1) commenced, caused to be commenced, or is about to commence or cause to be commenced a proceeding under this chapter or the Atomic Energy Act of 1954, as amended * * *, or a proceeding for the administration or enforcement of any requirement imposed under this chapter or the Atomic Energy Act of 1954, as amended;

(2) testified or is about to testify in any such proceeding or;

(3) assisted or participated or is about to assist or participate in any manner in such a proceeding or in any other manner in such a proceeding or in any other action to carry out the purposes of this chapter or the Atomic Energy Act of 1954, as amended * * *.

42 U.S.C. 5851(a).

/3/ The Secretary noted that Section 210 was part of an NRC appropriations bill, and that Section 210 was added to Title II of the ERA, which applies solely to the NRC. Pet. App. A16. She also noted that the NRC and DOE had existed as separate statutory entities for four years by the time of Section 210's enactment in 1978, that each agency had adopted its own whistleblower regulations, and that Congress apparently designed Section 210 to afford protection for NRC-type employees more in balance with those already existing for DOE-type employees. Ibid. She additionally observed that the House Conference Report stated unambiguously that the provision gave "protection to employees of Commission licensees, applicants, contractors, or subcontractors from discharge or discrimination for taking part or assisting in administrative or legal proceedings of the Commission." H.R. Conf. Rep. No. 1796, 95th Cong., 2d Sess. 16 (1978) (emphasis added). Pet. App. A16-A17. Furthermore, the legislative materials made no reference to DOE or its contractors' employees while making frequent reference to NRC and NRC-type employees. Id. at A17. Finally, the protected activities described in Section 210 refer to "proceedings," which are conducted only by NRC with respect to licensing and other regulatory functions, and not by DOE. Ibid.

/4/ While this dispute was pending before the Department of Labor, DOE reopened its investigation and ultimately ordered B.F. Shaw Company to reinstate Wensil and petitioner. See Pet. App. A3.

/5/ As the court explained, if Congress wished Section 210 to cover DOE-related employees, it presumably would have amended Title I of the ERA, which is devoted to DOE, or Title IV, which prohibits sex discrimination by both DOE and the NRC. Pet. App. A5-A6.

/6/ Petitioner's co-complainant, Roger Wensil, has not sought further review in this Court.

/7/ The Atomic Energy Act of 1954 (AEA), as amended, 42 U.S.C. 2011 et seq., was enacted to regulate the "development, use and control" of nuclear energy. Pet. App. A5. The AEA contemplated that the Atomic Energy Commission (AEC) would own certain nuclear facilities involved in the production of materials for nuclear weapons, and would license other facilities to engage in commercial activities. Ibid. In 1974, Congress enacted the ERA, which abolished the AEC and established two separate federal agencies in its stead. The AEC's regulatory and licensing authority over commercial power reactors was transferred to the NRC, 42 U.S.C. 5841(f), and its responsibility for the research, development, and defense aspects of nuclear energy were assumed by ERDA. See 42 U.S.C. 5811-5821. In 1977, ERDA's functions were transferred to the DOE. 42 U.S.C. 7101, 7151a.

/8/ In addition to DOE Order 5483.1A, DOE recently proposed regulations that would provide protection to whistleblowers employed by DOE contractors. 55 Fed. Reg. 9326 (Mar. 13, 1990).

/9/ Similarly, petitioner's reliance (Pet. 20-21) on the notion that remedial legislation should be "broadly construed" is misplaced -- there is no reason to construe Section 210 "broadly" where doing so would supplant other available remedies.

MICHAEL G. GODFREE, PETITIONER V. FEDERAL TRADE COMMISSION

No. 90-8174

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Ninth Circuit

Brief For The Federal Trade Commission In Opposition

OPINIONS BELOW

The opinion of the court of appeals, Pet. App. A, is unreported, but the judgment is noted at 927 F.2d 609 (Table). The order of the district court, Pet. App. B, is unreported.

JURISDICTION

The judgment of the court of appeals was entered on February 26, 1991. The petition for a writ of certiorari was filed on May 28, 1991 (the Tuesday after a Monday holiday). The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether the district court abused its discretion when it awarded certain assets to the Federal Trade Commission upon completion of a receivership.

STATEMENT

1. In November 1985, the Federal Trade Commission filed an action against petitioner and his co-defendants for engaging in deceptive trade practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a). Operating through American National Cellular, Inc. (ANC), petitioner and his co-defendants helped investors apply for licenses to operate cellular telephone systems. Those licenses were awarded in a lottery held by the Federal Communications Commission. The complaint charged that petitioner and his co-defendants intentionally misled investors by exaggerating the likelihood of their obtaining a license, downplaying the high risk of the investment, and failing to disclose that an investor would most likely lose his investment. The complaint sought injunctive relief under Section 13(b) of the FTC Act, 15 U.S.C. 53(b), including a temporary restraining order, a freeze on ANC's assets, appointment of a temporary receiver, and an order to show cause why a preliminary injunction and the appointment of a permanent receiver should not be granted. FTC v. American National Cellular, Inc., 810 F.2d 1511, 1512 (9th Cir. 1987).

The United States District Court for the Central District of California issued a temporary restraining order. It subsequently issued a preliminary injunction, froze ANC's assets, and appointed a receiver. The court of appeals affirmed those orders. FTC v. American National Cellular, Inc., 810 F.2d at 1512. Later, the district court held petitioner in criminal contempt for violating the temporary restraining order. The court of appeals affirmed that order as well. FTC v. American National Cellular, 868 F.2d 315, 316-317 (9th Cir. 1989).

In November 1986, petitioner and ANC entered into a consent decree with the FTC settling the underlying civil action. Pet. C.A. E.R. 30-42. The decree enjoined petitioner and his co-defendants from making certain misrepresentations. It also required them to pay $22.9 million to defrauded investors. As partial payment, the decree required petitioner and his co-defendants to turn over certain assets to the Commission or the receiver. The decree lifted the freeze on other assets and provided that they be returned to petitioner.

2. In August 1989, the receiver asked the district court to terminate the receivership because all assets that could be liquidated had been refunded to investors. At that time (as today) more than $19 million of the $22.9 million judgment remained unpaid. The district court terminated the receivership and discharged the receiver. Pet. C.A. E.R. 53-55.

Petitioner then moved that ANC's books and records, including its customer list, be returned to him. On October 3, 1989, the district court denied that motion. Pet. App. B. Instead, it awarded the corporate books and records to the FTC to satisfy in part petitioner's unpaid debt to the FTC and to prevent petitioner from resuming the fraud that necessitated the FTC's action in the first place. Pet. C.A. E.R. 64.

3. The court of appeals affirmed in an unpublished opinion. Pet. App. A. It held that the district court did not abuse its discretion. Pet. App. A3.

ARGUMENT

1. Contrary to petitioner's contention, Pet. 5-6, the district court had ample authority under Section 13(b) of the FTC Act, 15 U.S.C. 53(b), to award ANC's books and records to the FTC upon termination of the receivership. Section 13(b) expressly authorizes a court to issue "a permanent injunction." It is well established that where Congress allows resort to equity for enforcement of a statute, "all the inherent equitable powers of the District Court are available for the proper and complete exercise of that jurisdiction." Porter v. Warner Holding Co., 328 U.S. 395, 398 (1946). "Unless a statute in so many words, or by a necessary and inescapable inference, restricts the court's jurisdiction in equity, the full scope of that jurisdiction is to be recognized and applied." Ibid. Accord, Renegotiation Board v. Bannercraft Co., 415 U.S. 1, 19-20 (1974); Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288, 290-291 (1960); Scripps-Howard Radio, Inc. v. FCC, 316 U.S. 4, 11 (1942).

The courts of appeals have uniformly held that Section 13(b) authorizes district courts to grant any ancillary relief necessary to accomplish complete justice. FTC v. Security Rare Coin & Bullion Corp., 931 F.2d 1312, 1314-1315 (8th Cir. 1991); FTC v. World Travel Vacation Brokers, Inc., 861 F.2d 1020, 1026 (7th Cir. 1988); FTC v. U.S. Oil & Gas Corp., 748 F.2d 1431, 1434 (11th Cir. 1984); FTC v. H.N. Singer, Inc., 668 F.2d 1107, 1113 (9th Cir. 1982). In this case, that relief includes the authority to award assets in partial satisfaction of an unpaid judgment and as security against future violations of the injunctive provisions of the consent decree. Since the district court awarded ANC's assets to the FTC pursuant to Section 13(b), rather than as a consequence of termination of the receivership, it is irrelevant (Pet. 5) that creation of the receivership did not itself transfer title to the assets petitioner seeks. The district court's award is grounded in its equitable authority under the FTC Act, not common law receivership doctrine.

2. An order fashioning equitable relief, such as the award of corporate assets challenged by petitioner, may be reversed only if the district court abused its discretion. Heckler v. Lopez, 463 U.S. 1328, 1330-1331 (1983) (Rehnquist, Circuit Justice). As the court of appeals correctly held, the district court did not abuse its discretion here.

First, the district court's award helped satisfy petitioner's obligation to the FTC. See Pet. C.A. E.R. 64. That ANC's assets have some value is demonstrated by petitioner's efforts to regain them. Since petitioner still owes $19 million to the FTC, it was well within the district court's discretion to award ANC's assets to the FTC. /1/

The award of ANC's assets also furthers the purpose of the outstanding judgment -- to take fraudulently-obtained investments from petitioner. The district court's equitable authority allows it to require a law violator to disgorge ill-gotten gains in favor of the FTC. FTC v. World Wide Factors, Ltd., 873 F.2d 1235, 1239, amended, 882 F.2d 344 (9th Cir. 1989); see cases cited pp. 4-5, supra. That remedy applies to any property that is "causally related to the wrongdoing." SEC v. First City Financial Corp., 890 F.2d 1215, 1231 (D.C. Cir. 1989). Here, ANC's books, records, and other assets were integral to petitioner's scheme to defraud consumers. Depriving petitioner of those assets will prevent him from using them to defraud others, and it will deter others from perpetrating similar frauds by demonstrating that a wrongdoer may not retain the fruits of his deceit.

Second, the award of assets to the FTC ensures that petitioner will not gain "possession of property which may enable him to disobey the injunction against him." Pet. C.A. E.R. 64. Petitioner's contention that there is no "legal support" for this justification (Pet. 7) is belied by the record. Petitioner has already been held in criminal contempt by the district court for violating a temporary restraining order. See FTC v. American National Cellular, 868 F.2d at 320-322. And he has continued to defend his contumacious conduct as recently as in his last-filed submission in the court of appeals. Pet. C.A. Reply Br. 2. The assets in question -- customer lists, books, and records -- would help petitioner find consumers susceptible to fraudulently-promoted investments and thereby facilitate his resumption of fraudulent conduct. Because petitioner has already demonstrated a propensity to violate court orders, the district court did not abuse its discretion by denying him access to the tools of his fraudulent trade. /2/

3. Petitioner's contention that he has been denied due process (Pet. 10) is not properly before this Court because it was not pressed or passed on by either the district court or the court of appeals. Browning-Ferris Industries Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 277 (1989). In any event, the argument is without merit because petitioner does not allege that he was denied any procedural safeguard. Instead, petitioner contends that the district court lacked statutory authority to award the corporate books and records to the Commission. As explained above, however, the district court has that authority under Section 13(b) of the FTC Act, 15 U.S.C. 53(b).

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

JAMES M. SPEARS

General Counsel

JAY C. SHAFFER

Deputy General Counsel

ERNEST J. ISENSTADT

Assistant General Counsel

LAWRENCE DEMILLE-WAGMAN

Attorney

AUGUST 1991

/1/ Although petitioner contends that the corporate assets should be awarded to him so that he can use them to raise money to pay his outstanding judgment, Pet. 9, 11, he never explains how he could do so without engaging in the same sort of deception that required the FTC to file this case.

/2/ SEC v. Spence & Green Chemical Co., 612 F.2d 896, 904 (5th Cir. 1980), cert. denied, 449 U.S. 1082 (1981), on which petitioner relies (Pet. 8), does not hold that corporate assets must be returned to the owner upon termination of a receivership. The question in Spence & Green was when a receivership should be terminated, not to whom the assets should be given. Ibid. As to the question of timing, the court of appeals held that it is "an equitable determination resting in the sound discretion of the district court and reviewable only for an abuse of that discretion." Ibid. The court then held that the district court had not abused its discretion by holding in abeyance the corporate owners' motion to terminate the receivership, although it suggested that (on the facts of that case) the corporation could be restored to the original owners. Ibid. Unlike petitioner, the owners in Spence & Green had no substantial unpaid judgment against them and no history of prior violations of court orders.

JEFFREY LYNN FOWLER, PETITIONER V. UNITED STATES OF AMERICA

No. 90-8138

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Fifth Circuit

Brief For The United States In Opposition

OPINION BELOW

The opinion of the court of appeals (Pet. App. 1-7) is not reported, but the judgment is noted at 930 F.2d 917 (Table).

JURISDICTION

The judgment of the court of appeals was entered on April 4, 1991. The petition for a writ of certiorari was filed on May 28, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

1. Whether the district court properly adjusted petitioner's offense level under the Sentencing Guidelines to account for the fact that petitioner committed an aggravated assault during the time that he unlawfully possessed a firearm.

2. Whether the district court violated the Due Process Clause by adjusting petitioner's offense level to take into account the aggravated assault.

3. Whether the provision of the Sentencing Guidelines authorizing an enhancement for aggravated assault requires proof that the offender subjectively intended to cause bodily harm.

STATEMENT

Following a jury trial in the United States District Court for the Western District of Texas, petitioner was convicted of possession of a firearm by a convicted felon, in violation of 18 U.S.C. 922(g)(1). He was sentenced to 77 months' imprisonment, to be followed by a three-year term of supervised release, and was fined $3,000. The court of appeals affirmed. Pet. App. 1-7.

1. On December 26, 1989, petitioner got into an argument with an unidentified female companion in the parking lot of a grocery store in Bellmead, Texas. After a heated exchange, petitioner began walking toward an access road of a nearby interstate highway. The woman got into a car, started it, and drove toward petitioner. At the last moment, the woman swerved out of petitioner's way and continued onto the access road. Petitioner, who had jumped into a culvert to avoid the oncoming car, drew a revolver and fired four or five shots at the car. Pet. App. 1; Gov't C.A. Br. 3.

A store employee notified the police and provided a description of petitioner. The employee said that she last saw petitioner walking north on the access road. A police officer found petitioner walking north on the road a short distance from the store. When the officer requested that petitioner release a jacket he was carrying under his arm, a loaded .38 caliber revolver dropped from the rolled-up jacket. The officer then arrested petitioner.

Petitioner acknowledged that he had fired the weapon from the culvert and had then stopped to reload. Petitioner guided the arresting officer to the culvert, where five empty cartridges were found. At trial, the government established that petitioner had been convicted of three previous felony offenses. Pet. App. 2-3; Gov't C.A. Br. 3-4.

2. At sentencing, the district court began with Sentencing Guidelines Section 2K2.1, which assigns a base offense level of 12 to violations of Section 922(g). The court then applied Sentencing Guidelines Section 2K2.1(c)(2), which provides:

If the defendant used or possessed the firearm in connection with the commission or attempted commission of another offense, apply Section 2X1.1 (Attempt, Solicitation, or Conspiracy) in respect to that other offense, if the resulting offense level is greater than that determined above.

Section 2X1.1, in turn, provides that the base offense level for crimes governed by that Section is to be determined by reference to the guideline for the object offense. Finding that petitioner possessed the firearm in connection with the commission of an aggravated assault, the district court found that object offense in this case to be aggravated assault. Because the base offense level for aggravated assault is 15 (see Sentencing Guidelines Section 2A2.2), the court applied that base offense level rather than the lower level of 12 that applies to the Section 922(g) offense in the absence of a higher base offense level for the offense committed in connection with the unlawful firearm possession. See United States v. Perez, 897 F.2d 751, 752 (5th Cir.), cert. denied, 111 S. Ct. 177 (1990). The district court then increased petitioner's offense level by five levels because he had fired the weapon, see Guidelines Section 2A2.2(b)(2), and by two more levels because he had obstructed justice by perjuring himself at trial, see Guidelines Section 3C1.1. Thus, petitioner's adjusted offense level was 22, resulting in a Guideline range of 77 to 96 months. The court imposed a sentence at the lower end of that range. Pet. App. 3a; Gov't C.A. Br. 5; 4 R. 10-11.

3. The court of appeals affirmed petitioner's conviction and sentence. Pet. App. 1-7. The court first rejected petitioner's contention that the district court should not have applied the Guideline for aggravated assault, because there was insufficient evidence that he intended to cause bodily harm firing the pistol. In light of the extremely close range from which petitioner fired the weapon and his other conduct during the incident, the court found "ample evidence" of an intent to cause bodily harm. Pet. App. 4. The court also rejected petitioner's contention that his 77-month sentence was illegal because it exceeded the statutory five-year maximum sentence for aggravated assault, in violation of 18 U.S.C. 113(c). The court explained that petitioner was convicted of unlawful possession of a firearm, not aggravated assault, and his 77-month sentence was "well within bounds of the firearm possession statute." Pet. App. 5. The court held that it did not violate the Due Process Clause to base his sentence on conduct he engaged in while he was in possession of the weapon, rather than sentencing him only for the illegal possession, without regard to what he did with the weapon. Pet. App. 6.

ARGUMENT

1. Petitioner does not dispute that the district court's application of Sentencing Guidelines Section 2K2.1(c)(2) to his case was both a correct interpretation of the Guidelines and consistent with other judicial decisions that have approved use of the aggravated assault Guidelines in conjunction with sentencing under the felon-in-possession statutes. See United States v. Madewell, 917 F.2d 301, 305-307 (7th Cir. 1990); United States v. Smith, 910 F.2d 326, 329-330 (6th Cir. 1990); United States v. Shinners, 892 F.2d 742 (8th Cir. 1989). As the commentary to Section 2K2.1 explains:

The firearm statutes often are used as a device to enable the federal court to exercise jurisdiction over offenses that otherwise could be prosecuted only under state law. For example, a convicted felon may be prosecuted for possessing a firearm if he used the firearm to rob a gasoline station. In pre-guidelines practice, such prosecutions resulted in high sentences because of the true nature of the underlying conduct. The cross reference at Section 2K2.1(c)(2) deals with such cases.

Guidelines Section 2K2.1, commentary.

Petitioner nevertheless contends (Pet. 1-3) that Sentencing Guidelines Section 2K2.1(c)(2) exceeds the Sentencing Commission's statutory authority. Petitioner did not raise this argument in the court of appeals, but in any event the argument is without merit. Contrary to petitioner's contention, the Sentencing Reform Act of 1984, Pub. L. No. 98-473, 98 Stat. 1987, does not require the Sentencing Commission to limit district courts to considering only the specific conduct that was the basis of the offense of conviction. On the contrary, the Sentencing Reform Act expressly contemplates that a broader range of conduct will be taken into account in sentencing.

Petitioner contends (Pet. 3) that 18 U.S.C. 3553 restricts the Sentencing Commission to considering conduct that formed the basis for the offense of conviction. In fact, Section 3553 provides that sentencing courts should consider a variety of factors, including "the kinds of sentence and the sentencing range established for the applicable category of offense committed by the applicable category of defendant as set forth in the Guidelines that are issued by the Sentencing Commission pursuant to 28 U.S.C. 994(a)(1)." 18 U.S.C. 3553(a)(4). Section 994, in turn, expressly authorizes the Sentencing Commission to promulgate guidelines that take into account, among other factors, "the circumstances under which the offense was committed which mitigate or aggravate the seriousness of the offense." 28 U.S.C. 994(c)(2). Accordingly, the Commission's determination that the "applicable category of offense" should be determined with reference to "any intended offense conduct that can be established with reasonable certainty," Sentencing Guidelines Section 2X1.1(a), is plainly within its authority. /1/

2. Petitioner contends that the district court violated his due process rights by sentencing him for aggravated assault, "an offense for which he had neither been indicted or convicted." Pet. 4. Petitioner's contention rests on a false premise. Petitioner was not sentenced for aggravated assault, but for unlawfully possessing a firearm. His sentence of 77 months' imprisonment fell well below the 10-year statutory maximum for that offense. See 18 U.S.C. 924(a)(2). The court consulted the assault Guideline only to determine where to fix petitioner's sentence within the 10-year range for the firearm violation. Consequently, petitioner's due process argument lacks merit. /2/

3. Finally, petitioner contends (Pet. 4) that the court of appeals failed to apply a subjective test to determine whether he intended to cause bodily harm under Sentencing Guidelines Section 2A2.2, and that its decision conflicts with United States v. Smith, 910 F.2d 326 (6th Cir. 1990), which held that a defendant may not be sentenced under Guidelines Section 2A2.2 for aggravated assault absent proof that he actually intended to cause bodily injury. Here, the court of appeals noted that United States v. Perez, 897 F.2d 751 (5th Cir.), cert. denied, 111 S. Ct. 177 (1990), applied an objective test to the "intent to do bodily harm" element of Guidelines Section 2A2.2. Pet. App. 4. But the court of appeals did not rest its decision in this case on that ground. The court went on to conclude that "ample evidence exists to buoy the finding that (petitioner) actually intended to harm his unknown female companion." The court observed that petitioner did not shoot into the air, but "rather, fired (from extremely close range) five shots at (the woman in the car)." Ibid. Petitioner then "reloaded his .38 Special -- hardly the act of a man whose purpose was to scare but not injure." Ibid. Thus, petitioner's offense level was subject to an increase under Section 2A2.2 under either an objective or a subjective test.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, III

Assistant Attorney General

STEVAN D. MITCHELL

Attorney

AUGUST 1991

/1/ Hughey v. United States, 110 S. Ct. 1979 (1990), on which petitioner relies, provides no support whatever for his position. In Hughey, the Court held that under a statute providing that a defendant convicted of an offense may be ordered to "make restitution to any victim of such offense," 18 U.S.C. 3579(a)(1), restitution could be awarded only for the loss caused by the particular offense of conviction. That decision has no effect on the question whether a defendant's sentence may be based on factors other than the particular conduct constituting the elements of the offense of conviction.

/2/ Petitioner is incorrect in suggesting that the United States did not charge petitioner with aggravated assault because that charge would have been more difficult to prove. In fact, petitioner's conduct did not violate the federal assault statutes, so a federal assault charge could not have been brought in any event. See 18 U.S.C. 111-115.

MARY JANE FIGGANS, PETITIONER V. UNITED STATES OF AMERICA

No. 91-5198

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Fourth Circuit

Brief For The United States In Opposition

OPINION BELOW

The court of appeals opinion, Pet. App. 1a-3a, is unpublished, but is noted at 929 F.2d 695 (Table).

JURISDICTION

The judgment of the court of appeals was entered on March 28, 1991. The petition for a writ of certiorari was filed on June 26, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether petitioner waived an objection to the grounds for increasing her base offense level under the Guidelines by failing to raise the issue in the district court.

STATEMENT

After a guilty plea in the United States District Court for the Northern District of West Virginia, petitioner was convicted on one count of possession of cocaine base, in violation of 21 U.S.C. 841. The district court sentenced her to 63 months' imprisonment. The court of appeals affirmed.

1. Petitioner lived with a drug dealer at the time of her offense and occasionally distributed drugs for him. On October 8, 1989, a search of the trailer where they lived uncovered drugs, a large amount of cash, and a firearm. On October 29, 1989, a search of a motel room occupied by petitioner produced traces of drugs, a large amount of cash, and a firearm. Pet. App. 2a; Gov't C.A. Br. 3.

2. After accepting petitioner's guilty plea to the October 8 offense, the district court ordered the probation officer to prepare a presentence report. The probation officer calculated a base offense level of 26 based on the amount of cocaine petitioner possessed. Guidelines Section 2D1.1(a)(3). She recommended a two-level enhancement because petitioner possessed a firearm during the commission of the offense. Guidelines Section 2D1.1(b)(1). And she recommended a two-level reduction because petitioner accepted responsibility for her offense. Guidelines Section 3E1.1(a). II C.A. J.A. 24. The adjusted offense level of 26, combined with petitioner's criminal history category of I, yielded a sentencing range of 63-78 months.

At the sentencing hearing, petitioner objected to the enhancement for firearms possession solely on the ground that she did not possess a firearm at the time she committed the offense. I C.A. J.A. 10-11. /1/ Petitioner did not object to the enhancement on the ground that her possession, if any, was not intentional. Ibid. The district court, finding that "the firearm was present on at least two occasions," id. at 11, overruled petitioner's objection and sentenced her to 63 months' imprisonment.

3. The court of appeals affirmed in an unpublished opinion. Pet. App. 1a-3a. It refused to consider petitioner's claim that the district court could not adjust her base offense level for firearms possession unless it made a finding that she intentionally possessed the firearm. The court of appeals held that petitioner waived that claim by not presenting it to the district court. Id. at 3a.

ARGUMENT

The court of appeals correctly held that petitioner waived her objection to the firearms possession enhancement, Guidelines Section 2D1.1(b)(1), by not presenting that objection to the district court. Moreover, since the decision is not precedent even in its circuit of origin, it cannot conflict with the decision of any other court of appeals or of this Court, and since the Guideline on which petitioner's objection to the firearms possession enhancement relies, Guidelines Section 1B1.3(a)(3) (1987), has been amended, Guidelines Section 1B1.3(a)(3) (1988) (effective Nov. 1, 1989), her claim on the merits cannot arise in the future. This decision thus does not warrant further review.

The courts of appeals have repeatedly barred criminal defendants from challenging the factual basis for Guidelines sentencing enhancements for the first time on appeal. See, e.g., United States v. Ramusack, 928 F.2d 780, 783 (7th Cir. 1991); United States v. Tibesar, 894 F.2d 317, 319 (8th Cir.), cert. denied, 111 S. Ct. 79 (1990); United States v. Holguin, 868 F.2d 201, 205 (7th Cir.), cert. denied, 110 S. Ct. 97 (1989). Requiring timely assertion of an objection serves two important purposes. First, it promotes judicial economy by alerting the sentencing court to a problem at a time when it may be able to resolve the matter to the party's satisfaction. In this case, a timely objection would have enabled the district court to enter a finding as to whether petitioner intentionally possessed the firearm. Second, requiring a timely objection prevents a party from pursuing a certain course at the sentencing hearing for tactical reasons and later -- if the outcome is unfavorable -- claiming that the course followed constituted reversible error. Cf. Wainwright v. Sykes, 433 U.S. 72, 89-90 (1977).

The presentence report put petitioner on notice that the district court might enhance petitioner's base offense level for firearms possession. Guidelines Section 1B1.3(a)(3) (1987) specified that an enhancement based on such a specific offense characteristic is permissible only if "the harm or risk of harm was caused intentionally, recklessly or by criminal negligence." /2/ Petitioner could have argued in the district court that she did not intentionally possess a firearm. Her failure to do so properly invokes the waiver barrier to asserting the claim on appeal.

Petitioner does not contend that objections to Sentencing Guidelines can never be waived. She instead argues that her objection that she did not possess a firearm during the commission of the offense also preserved for appeal the objection that her possession was not intentional. Pet. 9. That is not correct. The purposes of the waiver rule -- alerting the district court to possible errors and preventing sandbagging -- would not be served by allowing an objection to the applicability of a Guideline on one ground to preserve objections to its applicability on every other possible ground.

Petitioner also argues that her objection cannot be waived because a sentencing enhancement for firearms possession requires a finding that she knowingly possessed a gun, and that the absence of such a finding renders her objection subject to notice on appeal as plain error. Pet. 10-11. Although it is true that plain errors "may be noticed although they were not brought to the attention of the court," Fed. R. Crim. P. 52(b), the absence of a finding in this case was not error, let alone plain error. Federal Rule of Criminal Procedure 32(b)(3)(D) provides that the sentencing court "shall" make a finding only if the defendant alleges "any factual inaccuracy in the presentence investigation report." /3/ Petitioner did not object that the presentence report's recommendation of a firearms possession enhancement rested on a false assumption of fact -- namely, that petitioner knowingly possessed a firearm. The district court therefore did not have to make an express finding. /4/

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, III

Assistant Attorney General

RICHARD A. FRIEDMAN

Attorney

AUGUST 1991

/1/ Counsel explained the objection as follows:

The purpose, or the reason for my objecting to the (firearms possession) enhancement is set forth in my objection. The guidelines indicate that the enhancement is appropriate when it is determined a firearm was possessed during the commission of a conviction offense. * * * There was a weapon in the house, or the trailer where these people lived. * * * I think enhancement applies only to the conviction offense, and that was on October 8 of '89.

I C.A. J.A. 10-11. The objection to which petitioner's counsel referred does not appear in the joint appendix filed in the court of appeals. In any event, petitioner does not contend that such objection challenged the applicability of the firearms possession enhancement on the ground that petitioner's possession was not intentional.

/2/ The quoted language was omitted from the amended Guidelines Section 1B1.3(a)(3) (1988) (effective Nov. 1, 1989).

/3/ As petitioner concedes, Pet. 10, the court of appeals cases on which she relies for the proposition that a firearms possession enhancement requires a finding of scienter, United States v. Suarez, 911 F.2d 1016 (5th Cir. 1990); United States v. Burke, 888 F.2d 862 (D.C. Cir. 1989), both involved timely objections in the district court, Suarez, 911 F.2d at 1018; Burke, 888 F.2d at 865. The requirement of findings when a factual issue is in dispute is perfectly consistent with the absence of such a requirement when no objection is raised.

/4/ The U.S. Attorney's qualified concession of "possible error in the application of the sentencing guidelines," Gov't C.A. Br. 7, did not address the waiver issue and assumed, without citation to authorities, that a finding of intentional possession was required in the absence of a defendant's objection. That assumption was incorrect.

MOHAMMAD ABBAS HASHIM, PETITIONER V. IMMIGRATION AND NATURALIZATION SERVICE

No. 91-207

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Second Circuit

Brief For The Respondent

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-11a) is reported at 936 F.2d 711. The opinion of the Board of Immigration Appeals (Pet. App. 13a-23a) is unreported.

JURISDICTION

The judgment of the court of appeals was entered on June 25, 1991. The petition for a writ of certiorari was filed on July 22, 1991. This Court's jurisdiction is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether the Equal Access to Justice Act, 5 U.S.C. 504 and 28 U.S.C. 2412(d), authorizes the award of attorney's fees for work performed in connection with administrative deportation proceedings conducted by the Immigration and Naturalization Service.

STATEMENT

Petitioner prevailed in an administrative deportation proceeding and thereafter sought an award of attorney's fees under the Equal Access to Justice Act (EAJA), 5 U.S.C. 504 and 28 U.S.C. 2412(d), for his attorney's work in those proceedings. An immigration judge denied fees (Pet. App. 24a), and the Board of Immigration Appeals affirmed (Pet. App. 13a-23a).

On petitioner's appeal, the court of appeals affirmed, holding that EAJA does not apply to administrative deportation proceedings. Pet. App. 1a-11a. The court noted that "(e)very court, save one, that has addressed the issue" has rejected petitioner's position, and stated its agreement with the majority view (id. at 7a-8a). /1/

ARGUMENT

Petitioner correctly observes (Pet. 7) that the issue presented in this petition is the same as the one before the Court in Ardestani v. INS, cert. granted, No. 90-1141 (Mar. 4, 1991). Ardestani has been fully briefed in this Court, and is scheduled for oral argument on October 8, 1991. /2/ Accordingly, the instant petition should be held pending the Court's decision in Ardestani, and should then be disposed of in light of that decision.

CONCLUSION

The petition for a writ of certiorari should be held pending this Court's decision in Ardestani v. INS, No. 90-1141, and thereafter disposed of as appropriate in light of that decision.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

STUART M. GERSON

Assistant Attorney General

WILLIAM KANTER

JOHN S. KOPPEL

Attorneys

AUGUST 1991

/1/ The court of appeals noted that while the Ninth Circuit has held (in Escobar Ruiz v. INS, 838 F.2d 1020 (1988)) that EAJA applies to INS administrative proceedings since they are similar to those governed by the Administrative Procedure Act, the other circuits that have considered the issue have concluded that EAJA extends only to administrative proceedings which -- unlike those conducted by the INS -- are subject to the APA. Pet. App. 7a, citing Hodge V. U.S. Dep't of Justice, 929 F.2d 153 (5th Cir. 1991), petition for cert. pending, No. 91-83; Full Gospel Portland Church V. Thornburgh, 927 F.2d 628 (D.C. Cir. 1991); Ardestani V. INS, 904 F.2d 1505 (11th Cir. 1990), cert. granted, No. 90-1141 (Mar. 4, 1991); Clarke V. INS, 904 F.2d 172 (3d Cir. 1990); and Owens V. Brock, 860 F.2d 1363 (6th Cir. 1988). The Fourth Circuit has also joined the majority view, concluding that EAJA fees are not available for work performed in INS deportation proceedings. Escobar V. INS, 935 F.2d 650 (1991).

/2/ We are supplying a copy of our brief in Ardestani to counsel for petitioner.

DAVID COOK, PETITIONER V. COMMISSIONER OF INTERNAL REVENUE

No. 91-43

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Ninth Circuit

Brief For The Respondent In Opposition

TABLE OF CONTENTS Question presented Opinions below Jurisdiction Statement Argument Conclusion OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1A-10A) is unreported. /1/ The opinion of the Tax Court (Pet. App. 11A-32A) is reported at 90 T.C. 975.

JURISDICTION

The judgment of the court of appeals was entered on April 22, 1991. The petition for a writ of certiorari was filed on July 5, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether, under Section 108(b) of the Deficit Reduction Act of 1984, as amended by Section 1808(d) of the Tax Reform Act of 1986, a commodities dealer may deduct putative "losses" incurred from participation in sham commodity "straddle" transactions lacking economic substance.

STATEMENT

1. During 1976 and 1977, when petitioner was a commodities dealer in California, he participated in sham commodities tax straddle transactions on a London exchange. Along with at least 1400 other taxpayers, petitioner entered into a series of transactions designed to yield putative "losses" in the first year and offsetting "gains" in the next. By straddling the tax "losses" and "gains" over the two years, the objective was to derive tax benefits from transactions wholly lacking in economic substance. Because these transactions lacked economic substance, the Commissioner disallowed the deductions resulting from the claimed "losses." The Tax Court upheld the Commissioner's determination in Glass v. Commissioner, 87 T.C. 1087 (1986), which has now been affirmed by seven courts of appeals. See Dewees v. Commissioner, 870 F.2d 21 (1st Cir. 1989); Friedman v. Commissioner, 869 F.2d 785 (4th Cir. 1989); Killingsworth v. Commissioner, 864 F.2d 1214 (5th Cir. 1989); Ratliff v. Commissioner, 865 F.2d 97 (6th Cir. 1989); Yosha v. Commissioner, 861 F.2d 494 (7th Cir. 1988); Keane v. Commissioner, 865 F.2d 1088 (9th Cir. 1989); Kirchman v. Commissioner, 862 F.2d 1486 (11th Cir. 1989). Petitioner therefore concedes (Pet. App. 1A), as he must, that the transactions for which he claims a deduction were arranged solely for the purpose of generating putative tax losses and thus lack economic substance. See Glass v. Commissioner, 87 T.C. at 1153-1178.

2. After the Tax Court issued its decision in Glass v. Commissioner, petitioner was allowed to amend his petition to allege that, as a commodities dealer, he was entitled to deduct the putative "losses" even though the transactions lacked economic substance. Petitioner's amended claim is based upon Section 108 of the Deficit Reduction Act of 1984, Pub. L. No. 98-369, 98 Stat. 630, as amended by Section 1808(d) of the Tax Reform Act of 1986, Pub. L. No. 99-514, 100 Stat. 2817-2818. As amended, Section 108(a) provides that losses attributable to the disposition of one leg of a commodity straddle are deductible if incurred in a "trade or business" or in a "transaction entered into for profit." Section 108(b), as amended, provides that a "loss incurred by a commodities dealer * * * shall be treated as a loss incurred in a trade or business." Pet. App. 33A, 35A.

The Tax Court, in a reviewed opinion, held unanimously that, even though petitioner was engaged in a "trade or business" as a commodities dealer, he was not entitled to deduct the putative "losses" from his sham transactions under Section 108. In an opinion in which fourteen other judges joined, Judge Nims held that Section 108 does not allow losses incurred in prearranged transactions that lack economic substance to be deducted (Pet. App. 21A). Since offsetting gains had been prearranged, "(i)n effect, then, no losses were incurred." Ibid. Section 108(b) is therefore inapplicable because it "applies only to 'any loss' incurred by a commodities dealer" (Pet. App. 21A). This conclusion was supported by the legislative history of Section 108, which reflects that a deduction for losses incurred by dealers "would not be available in any cases where the trades were fictitious (or) prearranged" (Pet. App. 20A) (quoting H.R. Rep. No. 426, 99th Cong., 2d Sess. 911 (1986)).

Judge Whitaker concurred in a separate opinion. He concluded that petitioner was not acting as a "commodities dealer" within the meaning of Section 108(b) when he engaged in the sham tax straddle transactions. The legislative history reflects that a dealer making a trade "in violation of the rules of the exchange" (Pet. App. 29A (quoting H.R. Rep. No. 426, supra, at 911)) would be outside the coverage of Section 108(b). Since the sham London trades did "not comport with the rules of trading in the United States," petitioner did not qualify as a "commodities dealer" in making these trades (Pet. App. 19A-30A).

In an additional concurring opinion in which nine other judges joined, Judge Wells stated that he agreed both with the majority that Section 108(b) did not apply to transactions that lacked economic substance and also agreed with Judge Whitaker that Section 108(b) did not apply because the London transactions "would have been in violation of the rules of domestic exchanges in the United States" (Pet. App. 30A).

3. The court of appeals affirmed. The court agreed "with the Tax Court majority that where the transaction was an economic sham, there was no 'loss,' even in year one" (Pet. App. 6A). Since there was no "loss," petitioner's status as a "commodities dealer" was not relevant (id. at 7A). The court noted that, under petitioner's reasoning, "a person who owned a seat on a commodities exchange during the relevant years would, by an economically meaningless shuffling of paper, have been relieved of any obligation to pay taxes at ordinary income rates" (id. at 8A). Such a result is precluded by Gregory v. Helvering, 293 U.S. 465 (1935), and its progeny, which have long refused to give recognition to "paper transactions which have no purpose or economic consequence other than tax avoidance" (Pet. App. 9A). The court noted (ibid.) that the Second Circuit had reached the same conclusion in DeMartino v. Commissioner, 862 F.2d 400 (1988).

ARGUMENT

The court of appeals correctly held that petitioner is not entitled to deduct his purported commodity tax straddle losses because these transactions lack economic substance. This decision does not conflict with any decision of this Court or of the other courts of appeals. Further review is therefore not warranted.

1. This Court has long held that transactions that lack economic substance will not be recognized for tax purposes. See Gregory v. Helvering, 293 U.S. at 469. When a transaction represents "nothing more than a contrivance" in a scheme of tax avoidance, it will not be given effect. Ibid. Congress did not depart from this fundamental tenet of tax law in enacting Section 108(b).

As originally enacted, Section 108(a) provided that a loss on a straddle position was deductible if it was "part of a transaction entered into for profit" (Pet. App. 33A). Section 108(b), in turn, provided dealers with a rebuttable presumption that their positions were profit motivated (Pet. App. 33A). The Commissioner was thus free to introduce evidence to show that dealers did not have the requisite profit motive. In the Tax Reform Act of 1986, however, Section 108(a) was amended to provide that a loss on a straddle position is deductible if the loss is incurred either in a "trade or business" or in a transaction "entered into for profit." Section 108(b) was similarly amended to provide that "any loss incurred by a commodities dealer in the trading of commodities shall be treated as a loss incurred in a trade or business." The purpose of the amendment was to eliminate the need for the "inherent(ly) difficult()" inquiry into the profit motive of dealers for trades executed in the course of their customary business (H.R. Rep. No. 426, supra, at 910-911). The report of the House Ways and Means Committee makes clear, however, that Congress never intended that dealers who engage in straddle transactions that lack economic substance would be entitled to avail themselves of the provisions of Section 108(b). The report states (H.R. Rep. No. 426, supra, at 911):

(T)he presumption would not be available in any cases where the trades were fictitious, prearranged, or otherwise in violation of the rules of the exchange in which the dealer is a member.

Petitioner mistakenly contends (Pet. 2, 11) that the court of appeals held that his trades lacked economic substance because he had no profit motive. The question whether a transaction has economic substance does not depend upon a subjective analysis of the taxpayer's motive but, instead, upon an objective analysis of whether the transaction has any economic effect other than avoiding taxes. See Gregory v. Helvering, 293 U.S. at 469-470. Neither the Tax Court nor the court of appeals based its decision in this case on the absence of any profit motive on the part of the investors. Instead, the courts held that the transactions, viewed as a whole, were designed and executed to produce nothing other than tax benefits (Pet. App. 9A, 16A, 20A).

2. Petitioner concedes (Pet. 7) that the decision in this case does not conflict with any decision of this Court or of any other court of appeals. Indeed, the only other courts to have considered this question have reached the same conclusion -- that Section 108(b) does not allow a "loss" deduction for transactions that lack economic substance. See DeMartino v. Commissioner, 862 F.2d at 407; Lerman v. Commissioner, No. 90-1813 (3d Cir. July 17, 1991).

In DeMartino, the taxpayers "invested" in crude oil future straddles under a prearranged plan designed to create tax losses without any possibility that any genuine gain or loss would be realized. As the court observed, such transactions lack economic substance. 862 F.2d at 406. The court concluded that, in enacting Section 108(b), "Congress eliminated the profit motive inquiry in cases involving dealers because of the inherent difficulty involved in making such an inquiry, but it did not prevent inquiry into the economic substance of a dealer's commodity trading." 862 F.2d at 407. The Third Circuit recently reached the same conclusion in Lerman v. Commissioner, supra.

The decision in this case is also consistent with numerous decisions holding that Section 108 has no application to commodity transactions that lack economic substance. /2/ See, e.g., Keane v. Commissioner, 865 F.2d at 1093; Friedman v. Commissioner, 869 F.2d at 791; Kirchman v. Commissioner, 862 F.2d at 1494; Killingsworth v. Commissioner, 864 F.2d at 1218; Ratliff v. Commissioner, 865 F.2d at 98; Yosha v. Commissioner, 861 F.2d at 499. See also Dewees v. Commissioner, 870 F.2d at 36. Further review is therefore not warranted.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

SHIRLEY D. PETERSON

Assistant Attorney General

RICHARD FARBER

KENNETH L. GREENE

Attorneys

AUGUST 1991

/1/ The court of appeals entered a revised opinion in this case on August 12, 1991. That opinion, which is attached as an Appendix to this brief, does not alter the judgment previously reached. It does, however, incorporate a more detailed exposition of the court's reasoning. Because the mandate was issued by the court of appeals on May 21, 1991, and has never been recalled by that court, the court may have lacked jurisdiction to enter its extensively revised opinion. See 5B C.J.S. Appeal & Error Sections 1995, 1996 (1958 & Supp. 1991).

/2/ These decisions did not involve dealers. They hold, however, that Section 108(a) is inapplicable to transactions that lack economic substance because no genuine "loss" has occurred. Petitioner asserts (Pet. 7) that, while the courts of appeals in Ratliff, Yosha, and Killingsworth held that the taxpayers were not entitled to deduct their London option transaction losses under Section 108, they did not hold that Section 108 was inapplicable in the first instance. Petitioner suggests that the courts denied the deductions because the taxpayers in those cases failed to meet the profit motive test of Section 108(a). Petitioner concludes that "there clearly exists the potential of a future conflict" (Pet. 7).

Petitioner is mistaken. It is readily apparent from these decisions that the losses were disallowed because the transactions lacked economic substance. Only after this conclusion was reached did the courts -- in response to the taxpayers' argument that they had the requisite profit motive -- observe that the taxpayers also failed to satisfy the profit motive test of Section 108. Petitioner's speculation concerning a future conflict does not warrant this Court's review.

Petitioner also asserts (Pet. 7-8) that the court concluded in Dewees that the fact that the London option transactions lacked economic substance did not take them outside of Section 108(a). As petitioner eventually admits (Pet. 8), however, the Dewees court did not adopt this reasoning but, instead, merely described it as an alternative to the more traditional analysis that a transaction that lacks economic substance falls outside the scope of an otherwise applicable tax statute. See 870 F.2d at 36.

APPENDIX

BANK OF COUSHATTA, ET AL., PETITIONERS V. FEDERAL DEPOSIT INSURANCE CORPORATION

No. 91-24

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Fifth Circuit

Brief For The Respondent In Opposition

TABLE OF CONTENTS Questions presented Opinions below Jurisdiction Statement Argument Conclusion OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-19a) is reported at 930 F.2d 1122. The district court's order (Pet. App. 21a-22a) and its memorandum ruling denying petitioners' motion for a stay pending appeal (Pet. App. 23a-29a) are unreported. The capital directive issued by the Federal Deposit Insurance Corporation (Pet. App. 30a-33a) is unreported.

JURISDICTION

The judgment of the court of appeals was entered on May 13, 1991. The petition for a writ of certiorari was filed on July 1, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

1. Whether a capital directive issued by the Federal Deposit Insurance Corporation pursuant to 12 U.S.C. 3907 is subject to judicial review under the Administrative Procedure Act in district court enforcement proceedings.

2. Whether the procedures for issuance and enforcement of a capital directive are constitutional.

STATEMENT

1. Petitioners are the Bank of Coushatta, a bank chartered by the State of Louisiana and federally insured pursuant to the Federal Deposit Insurance Act, 12 U.S.C. 1811 et seq., and its directors (collectively the Bank). On July 28, 1989, the Federal Deposit Insurance Corporation (FDIC) sent a letter to petitioners transmitting the FDIC's most recent report of examination of the Bank's financial condition. The letter noted that the Bank was operating with capital below the minimum required regulatory level. The letter further noted that the Bank's deteriorating financial status suggested that the Bank was incapable of meeting the commitment it had previously made to regulators to increase its capital. Pet. App. 2a.

Accompanying the letter was the FDIC's proposal to issue a capital directive -- specifically, a Notice of Intent to Issue Directive to the Bank to increase its capital pursuant to Section 3907(b)(2) of the International Lending Supervision Act of 1983 (ILSA), 12 U.S.C. 3907(b)(2), and 12 C.F.R. 325.6. /1/ The Notice contained preliminary findings of fact and conclusions of law stating that the ratio of the Bank's primary and total capital to assets, as defined by applicable regulations, was below minimum regulatory requirements. The Notice proposed a capital directive requiring that, by December 1989, the Bank increase its ratio of primary capital to total assets and its ratio of total capital to assets to that required for a healthy bank, and also requiring an increase in capital of not less than $725,000. Pet. App. 2a.

Under 12 C.F.R. 325.6(c), the Bank had the right to respond to the proposed capital directive, "explaining why the directive should not be issued, seeking modification of its terms, or other appropriate relief." In August 1989, the Bank responded to the Notice with a brief letter. The Bank did not dispute any aspect of the FDIC's calculation of the Bank's capital position, instead admitting that it was not in compliance with regulatory capital requirements. Pet. App. 3a, 24a, 28a. The letter explained that the Bank's tenuous financial position was the result of loan losses, other real estate losses, and the weakness of the Louisiana economy. The letter offered no concrete proposal for meeting the minimum capital requirements. Id. at 3a.

In September 1989, after considering petitioners' response, the FDIC issued the capital directive. Pet. App. 30a-33a. The directive was binding on both the Bank of Coushatta and its directors. Pet. App. 33a; see 12 U.S.C. 3909(d); 12 C.F.R. 325.6(d)(1). It required the Bank to meet the minimum ratio of primary capital to total assets and to increase its capital by $725,000. Petitioners were given thirty days in which to submit a plan for meeting the required capital level. Pet. App. 33a.

2. Petitioners failed to comply with the capital directive. In May 1990, the FDIC applied to the United States District Court for the Western District of Louisiana for an order enforcing the capital directive pursuant to 12 U.S.C. 1818(i). /2/ On July 13, 1990, the district court issued the requested order ex parte, enjoining petitioners to comply with the capital directive and requiring them to file a report within thirty days after entry of the order detailing their compliance with the order. Pet. App. 3a-4a, 22a.

Petitioners appealed and requested a stay pending appeal. The district court denied the stay request, explaining that petitioners had failed to establish a likelihood of success on appeal. Pet. App. 23a-29a. The court rejected petitioners' contention that the issuance of the court's order ex parte violated the judicial review provisions of the Administrative Procedure Act (APA). The court found that "the determination of whether or not to issue a capital directive is committed to the sole discretion of the FDIC and is, therefore, unreviewable under the (APA)." Pet. App. 26a, citing 5 U.S.C. 701(a)(2). The court also rejected petitioners' claim that the issuance of the capital directive without a hearing violated the Due Process Clause of the Fifth Amendment. Pet. App. 27a-28a. Finally, the court dismissed the contentions that the ex parte order was the result of misrepresentations by the FDIC about the nature of the district court's role in enforcing a capital directive, and that the FDIC's procedures violated the APA. /3/ Id. at 26a.

3. The court of appeals affirmed. The court agreed with the district court that judicial review of the capital directive was not available because the issuance of a capital directive is "committed to agency discretion by law" under 5 U.S.C. 701(a)(2). Pet. App. 11a, 14a. The court noted that Section 701(a)(2) precludes APA review of agency actions under statutes "drawn so that a court would have no meaningful standard against which to judge the agency's exercise of discretion." Pet. App. 10a, quoting Heckler v. Chaney, 470 U.S. 821, 830 (1985). The court also noted that in Webster v. Doe, 486 U.S. 592 (1988), this Court had found the absence of meaningful standards for review where the statute permitted the Director of the Central Intelligence Agency (CIA) to terminate an employee whenever the Director "shall deem such termination necessary or advisable in the interests of the United States." 50 U.S.C. 403(c) (emphasis added). The court found in ILSA a parallel to the language in Webster; ILSA's repeated use of the terms "deem" and "discretion," in defining the FDIC's power to regulate minimum capital requirements, leaves the courts without meaningful reviewing criteria. The court also found support for that result in the legislative history of ILSA. Pet. App. 12a-14a.

Next, the court rejected petitioners' claim that the FDIC's procedures for issuing a capital directive violate the Due Process Clause of the Fifth Amendment. /4/ The court first described the FDIC's procedures. Under the FDIC's regulations, the agency is required to notify the bank of the agency's intent to issue a capital directive and to provide the underlying data from which the bank's capital was calculated. The regulations further provide the bank with an opportunity to file a written response, with supporting data, to explain why the directive should not issue or should be modified. Finally, the FDIC is required to consider the bank's response and to make findings of fact and conclusions of law. Pet. App. 16a.

The Bank did not argue that the FDIC had failed to observe these procedures, but complained that the procedures do not afford an adequate chance to challenge the facts supporting the determination of a capital deficiency. The court dismissed that contention, noting that the regulations give a bank the right to submit any relevant evidence bearing on the underlying facts. Pet. App. 17a; 12 C.F.R. 325.6(c). Petitioners "did not take full advantage of (the Bank's) opportunity to respond," nor did petitioners "challenge any of the data provided (the Bank), including the report of examination." Pet. App. 17a. "Needless to say, (the Bank's) failure to take such opportunity is not due to an inherent deficiency in the procedures." Ibid.

Turning to the issue whether due process required an evidentiary hearing, the court applied the three-factor analysis of Mathews v. Eldridge, 424 U.S. 319, 335 (1976). The court found that although the private interest affected is "substantial," the risk of an erroneous deprivation of that interest under the FDIC's procedures is "minimal" because "(t)he decision to issue (a directive) comes only after several deliberative steps and thorough documentation, including a bank examination, presentation of the examination report to a bank and consideration of any written response." Pet. App. 18a. The court also found that the government interest in prompt implementation of the capital directive is significant because of the harm that delay could cause to the Bank's financial condition. Ibid. Weighing those interests, the court concluded that petitioners' due process rights are adequately protected by the existing procedures. Id. at 19a.

ARGUMENT

The court of appeals correctly decided the two issues before it -- whether a capital directive issued by the FDIC is subject to judicial review and whether the FDIC's procedures for issuance of such a directive violate due process. No other court of appeals has addressed either issue, and the court's decision does not conflict with any decision of this Court. Moreover, petitioners' procedural challenges are entirely academic because petitioners have never questioned the substantive underpinnings of the FDIC's decision to issue the capital directive, i.e., the agency's determination that petitioners failed to meet the minimum regulatory capital requirements. Accordingly, this Court's review is not warranted.

1. Petitioners contend (Pet. 8-12) that the court of appeals erred in holding that the issuance of the capital directive is "agency action committed to agency discretion by law," and therefore unreviewable under 5 U.S.C. 701(a)(2). The court of appeals, however, correctly concluded that the statute provides no meaningful standards against which to review the complex and technical financial determinations that the FDIC makes under ILSA; accordingly, the APA does not afford a right to judicial review.

a. ILSA repeatedly uses terms of judgment reflecting Congress's intent to give the banking agencies broad discretion. Minimum capital levels are to be established as the agency, "in its discretion, deems to be necessary or appropriate in light of the particular circumstances of the banking institution"; the banking agency "may * * * deem()" noncompliance to be an unsafe or unsound practice, "in its discretion"; and the agency "may issue" a capital directive "(i)n addition to, or in lieu of, any other action authorized by law." 12 U.S.C. 3907(a)(2), (b)(1), and (b)(2)(A). Neither the statute nor the implementing regulations provide any standards that courts could apply in considering whether the agency acted within the boundaries of its discretion in issuing a capital directive. As in Webster v. Doe, the statute "fairly exudes deference * * * and appears * * * to foreclose application of any meaningful standard of judicial review." 486 U.S. at 600. /5/

The legislative history confirms that conclusion. As the court of appeals noted, Pet. App. 6a-7a, a specific purpose behind Congress's enactment of ILSA was to overrule First Nat'l Bank of Bellaire v. Comptroller of the Currency, 697 F.2d 674, 685-687 (5th Cir. 1983), which had set aside, as unsupported by substantial evidence, a banking agency's requirement of a capital ratio in a cease and desist order. The Senate Report criticized Bellaire because it had "clouded the authority of the bank regulatory agencies to exercise their independent discretion in establishing and requiring the maintenance of appropriate levels of capital." S. Rep. No. 122, 98th Cong., 1st Sess. 16 (1983) (emphasis added). In seeking to forestall such judicial intervention, the Senate Banking Committee explained that

establishing adequate levels of capital is properly left to the expertise and discretion of the agencies. Therefore, in order to clarify the authority of the banking agencies to establish adequate levels of capital requirements, to require the maintenance of those levels, and to prevent the courts from disturbing such capital, the Committee has provided a specific grant of authority to the banking agencies to establish levels of capital.

Ibid. (emphasis added). Against that background, it is clear that the issuance of a capital directive, which results from technical banking determinations implicating industry expertise as well as economic judgment, is not subject to judicial review. /6/

b. Petitioners contend (Pet. 8-12) that Section 701(a)(2) cannot preclude review because a capital directive is enforced by the courts at the behest of an executive agency. No decision of this Court, however, holds that the nonreviewability of an agency determination turns on whether a private party or the government has invoked the jurisdiction of the courts. If that were true, the reviewability of agency action would depend on fortuities of litigation, rather than the nature of the pertinent statutory provisions. For example, in Webster v. Doe, supra, the Court found that a CIA employee could not obtain judicial review of his termination. Under petitioners' approach, however, if the CIA had sued Doe to require him to surrender his agency credentials on the ground that he had been terminated, Section 701(a)(2) would not have applied and Doe would have been entitled to full-scale judicial review on the merits of his termination. By the same reasoning, if a bank filed a complaint seeking APA review of the FDIC's issuance of a capital directive, petitioners would not object to the FDIC's reliance on Section 701(a)(2). Nothing in the APA remotely suggests that the reviewability of a particular agency determination hinges on which party is the plaintiff. Section 701(a)(2) speaks in terms of "statutes" that preclude review, not "actions" in which review is precluded. /7/

Petitioners also briefly contend (Pet. 7-8, 15) that the court of appeals misconstrued both 5 U.S.C. 701(a)(1), which provides that review under the APA is unavailable where "statutes preclude judicial review," and the jurisdictional limitations of 12 U.S.C. 1818(i). No question respecting either provision is presented in this case; the court of appeals did not rely on either in holding that review is precluded. The court of appeals considered the applicability of Section 701(a)(1), but held that "even if review is not prohibited pursuant to Section 701(a)(1), it is precluded pursuant to Section 701(a)(2), because issuance of a directive is committed to the FDIC's discretion." Pet. App. 14a. As to Section 1818(i), the court did no more than note that "no review is allowed in the district court enforcement proceeding" because the court's "jurisdiction is limited to the 'power to order and require compliance.'" Pet. App. 10a, quoting Section 1818(i). While that statement is supportive of the position we urge -- that review is not available of a capital directive -- the court's opinion makes clear that it rested its decision, not on Section 1818(i), but on Section 701(a)(2) of the APA. /8/

2. Citing Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568 (1985), petitioners claim (Pet. 12-13) that the procedures employed in this case violate Article III and the Due Process Clause because the courts below enforced a capital directive without having reviewed it. Contrary to petitioners' contention (Pet. 12-13), the nonreviewability of a capital directive is not unconstitutional. As this Court recognized in Thomas, "(m)any matters that involve the application of legal standards to facts and affect private interests are routinely decided by agency action with limited or no review by Article III courts." 473 U.S. at 583. See, e.g., United States v. Fausto, 484 U.S. 439 (1988) (no review of the amount of backpay due an employee of the federal government); NLRB v. United Food & Commercial Workers, 484 U.S. 112 (1987) (no review of General Counsel's settlement of an unfair labor practice complaint); Wayte v. United States, 470 U.S. 598, 607 (1985) (decision whether or not to prosecute rests within the discretion of the prosecutor and "is particularly ill-suited to judicial review"); United States v. Erika, Inc., 456 U.S. 201 (1982) (no review of the amount of payment due under Part B of the Medicare program); Switchmen's Union v. National Mediation Bd., 320 U.S. 297 (1943) (no review of National Mediation Board decisions). Under those cases, there is no irreducible constitutional requirement that Article III courts review all determinations in a federal regulatory program.

The Article III and due process claims in this case are particularly weak because judicial review was available for petitioners' constitutional claims. Cf. Webster v. Doe, 486 U.S. at 603. As the opinion of the court of appeals illustrates, a bank that receives a capital directive may raise due process or other constitutional claims in the context of an enforcement proceeding. Pet. App. 14a. It may also be that a bank could argue that a particular capital directive was wholly beyond the statutory authority of the agency to issue, cf. Heckler v. Chaney, 470 U.S. at 832; Thomas, 473 U.S. at 591-592, although petitioners never raised such a claim in this case. See Pet. 17 n.9. It is plain, in any event, that the Constitution does not require review of the factual or enforcement determinations that prompted the FDIC to issue the capital directive in this case. /9/

Petitioners also contend (Pet. 13-14) that the district court's enforcement of the capital directive violated either the Federal Rules of Civil Procedure or the Due Process Clause because of the failure of the court to give notice of the proceedings prior to entering its order. "The Federal Rules of Civil Procedure were designed for ordinary, plenary civil actions. They do not apply to a summary proceeding that is not a 'suit of a civil nature' within the meaning of Rule 1." 4 C. Wright & A. Miller, Federal Practice and Procedure Section 1026, at 102 (2d ed. 1987). Ex parte applications may be permitted in summary proceedings. Id. at 103. Because this case arose under 12 U.S.C. 1818(i)(1), which authorizes the FDIC to "apply * * * for the enforcement of any effective and outstanding order" and bars review of the merits, the district court properly treated it as a summary proceeding. /10/ But whether or not this is so, petitioners suffered no prejudice as a result of proceedings in the district court, and thus are in no position to complain about them. See Fed. R. Civ. P. 61 (court must "disregard any error or defect in the proceedings which does not affect the substantial rights of the parties").

Petitioners had the opportunity to ask the district court to reconsider its order before compliance was required, and in fact they made all of their arguments to the district court about why an order should not issue in requesting a stay. /11/ Pet. App. 23a-29a. They also had the benefit of raising and litigating all of their claims on appeal, subject to a de novo standard of review. And petitioners have never contested the FDIC's determination that there was a factual and legal predicate for issuing a capital directive against the Bank. Id. at 28a. In light of those factors, it is difficult to imagine what benefit petitioners would have derived from the procedures they claim to desire. The mode by which the district court proceeded had no adverse impact on petitioners' substantial rights. /12/

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ALFRED J.T. BYRNE

General Counsel

ANN S. DUROSS

Assistant General Counsel

THOMAS A. SCHULZ

Assistant General Counsel

COLLEEN B. BOMBARDIER

Senior Counsel

THOMAS L. HOLZMAN

Counsel Federal Deposit Insurance Corporation

AUGUST 1991

/1/ Capital directives are authorized by ILSA, which requires federal banking agencies to "cause banking institutions to achieve and maintain adequate capital by establishing minimum levels of capital for such banking institutions and by using such other methods as the appropriate Federal banking agency deems appropriate." 12 U.S.C. 3907(a)(1). The ILSA further permits a federal banking agency, "in its discretion," to consider the failure of a bank to maintain capital at or above the minimum level "to constitute an unsafe and unsound practice within the meaning of (12 U.S.C. 1818)." 12 U.S.C. 3907(b)(1). In addition to that remedy, a banking agency "may issue" a capital directive -- "a directive to a banking institution that fails to maintain capital at or above its required level as established pursuant to subsection (a) of this section." 12 U.S.C. 3907(b)(2)(A). The "directive may require the banking institution to submit and adhere to a plan acceptable to the * * * agency describing the means and timing by which the banking institution shall achieve its required capital level." 12 U.S.C. 3907(b)(2)(B). 12 C.F.R. 325.6 sets forth the FDIC's procedures for the issuance of a capital directive. In keeping with the nature of a capital directive as one of the less intrusive enforcement mechanisms, Pet. App. 18a-19a, ILSA does not specify formal administrative proceedings for the issuance of a capital directive, nor does it provide for judicial review of such a directive. 12 U.S.C. 3907. See Pet. App. 4a-7a, 16a-17a.

/2/ Pursuant to 12 U.S.C. 3907(b)(2)(ii), a capital directive "issued pursuant to this paragraph, including plans submitted pursuant thereto, shall be enforceable under the provisions of (12 U.S.C. 1818(i)) to the same extent as an effective and outstanding (cease and desist) order issued pursuant to (12 U.S.C. 1818(b)) which has become final." Section 1818(i)(1) authorizes the FDIC to apply to the district court for enforcement of "any effective and outstanding notice or order" and states that the district court has jurisdiction to require compliance with those orders, but that, "except as otherwise provided in this section no court shall have jurisdiction * * * to review, modify, suspend, terminate, or set aside any such notice or order." 12 U.S.C. 1818(i)(1).

/3/ The court of appeals also denied petitioners' request for a stay. Pet. App. 4a.

/4/ Although it had found that judicial review of the agency's determination to issue a capital directive was precluded, the court determined that Congress had not manifested an intention to preclude review of constitutional claims. Pet. App. 14a.

/5/ The discretionary nature of a capital directive is also evident from the overall statutory scheme. A capital directive generally would follow a painstaking examination of the bank's books and discussions with bank officials. The purpose of the directive is to have the bank shore up its capital position in order to keep it from experiencing more serious financial troubles. If more serious troubles develop, however, there are far more serious remedies -- such as the appointment of a conservator or receiver for the bank. In those settings, judicial review of the agency's action is available. See Franklin Sav. Bank V. Director, Office of Thrift Supervision, 934 F.2d 1127, 1141-1142 (10th Cir. 1991).

/6/ Petitioners err in relying (Pet. 11) on a statement by Banking Committee Chairman St. Germain that "(t)he committee believes that the authority of an agency to require a bank to maintain adequate capital is properly within the expertise and discretion of the agency, subject to the appropriate standard of judicial review." 129 Cong. Rec. 22,652 (1983). Even if read as implying that courts may review capital directives -- something the statement does not say -- the statement cannot take precedence over the clear statutory language and structure of ILSA. See Wisconsin Public Intervenor V. Mortier, 111 S. Ct. 2476, 2484 n.4 (1991). Moreover, the floor statement is entitled to considerably less weight than the authoritative explanation in the committee report. See, e.g., Garcia V. United States, 469 U.S. 70, 76 (1984).

/7/ Petitioners' reliance (Pet. 9-10) on Heckler V. Chaney, supra, is misplaced. In that case, the Court established a presumption that an agency decision not to bring an enforcement action is nonreviewable. 470 U.S. at 832. The Court did not consider what standards govern decisions to initiate a proceeding, nor did it address the reviewability of an administrative determination that is enforced through the courts.

/8/ Although construction of Section 1818(i) was not necessary to a rejection of petitioners' claims, we note that petitioners are wrong in suggesting (Pet. 8) that our brief in Board of Governors of the Federal Reserve System V. MCorp Financial, Inc., No. 90-913, concedes that Section 1818(i) is not a jurisdictional bar. As we explained in our reply brief in MCorp (at 2 n.1), Section 1818(i) is a jurisdictional limitation, which, as applied to cease and desist orders, effectively calls for the exhaustion of administrative remedies. As applied to capital directives by ILSA, however, Section 1818(i) functions as a complete jurisdictional bar to judicial review. Petitioners also assert (Pet. 15-16) that the court of appeals' decision essentially renders the MCorp case "moot" because banking agencies can accomplish the same purpose, i.e., requiring an increase in the bank's capital, without providing the same procedures that apply when the Federal Reserve Board requires a bank holding company to supply capital to a subsidiary bank. The short and complete answer is that capital directives may issue only against "banking institutions," 12 U.S.C. 3907(a), not bank holding companies. Therefore, a capital directive cannot impose requirements on a bank holding company such as were imposed in MCorp. More importantly, petitioner overlooks that a capital directive is a comparatively mild requirement compared to the more stringent remedies in the banking regulators' arsenal, see 12 U.S.C. 1818. Indeed, capital directives are relatively rarely used. The paucity of litigation regarding capital directives, as well as the absence of any other circuit court decisions on the issue, undercuts petitioners' submission (Pet. 16-17) that the issues in this case are of widespread importance.

/9/ Petitioners are not aided by United States V. Mendoza-Lopez, 481 U.S. 828 (1987). As the passage quoted by petitioners indicates (Pet. 12), that case found a requirement of judicial review only where a criminal sanction was imposed as a result of an administrative determination, which is not the case here. Nor can petitioner derive support (Pet. 13) from Atlas Roofing Co. V. OSHRC, 430 U.S. 442, 455 n.13 (1977), or Touby V. United States, 111 S. Ct. 1752 (1991). Atlas Roofing decided a Seventh Amendment issue and did not determine the requirements of Article III or of due process. Touby considered whether pre-enforcement judicial review of a particular agency action was required to survive a nondelegation challenge. No nondelegation challenge is presented here.

/10/ Under ILSA and 12 U.S.C. 1818(i), the district court, when enforcing a capital directive, is required to treat the capital directive as a final and unreviewable order; therefore, the only issue before the court is whether there has been compliance with the order. The district court's procedure here suited those requirements: the court issued an order enforcing the capital directive, subject to a showing by petitioners, in thirty days, that they had complied. Pet. App. 22a.

/11/ In contrast to the situation in Armstrong V. Manzo, 380 U.S. 545 (1965), see Pet. 13, the district court's ex parte order enforcing the capital directive did not enhance the burden on petitioners to establish a defense; it merely functioned as a "show cause" order that afforded petitioners the only right to which they were entitled: the opportunity to demonstrate compliance.

/12/ The petition presents two other questions that do not warrant review. The first question presented in the petition, Pet. (i), is whether, under the Constitution, ILSA, or the APA, a capital directive can be imposed without the opportunity for a hearing. The petition does not discuss that issue; accordingly, petitioners have shown no reason for this Court to review it. In any event, the court of appeals explained why the procedures afforded in this case satisfy the Due Process Clause, Pet. App. 14a-19a, see also Califano V. Yamasaki, 442 U.S. 682, 696 (1979), and petitioners, having failed to request additional agency procedures, are barred from raising such a due process claim in this case. See FDIC V. Mallen, 486 U.S. 230, 247-248 (1988). Nor do ILSA or the APA require more formal procedures; ILSA is silent on the issue, and the issuance of a capital directive is not an "adjudication required by statute to be determined on the record after opportunity for an agency hearing." 5 U.S.C. 554(a). The fourth question presented, Pet. (i), is whether a bank's directors can be ordered to comply with a capital directive issued to the bank. Again, the petition does not discuss that issue, but the court of appeals correctly resolved it. The directive was sent to the Bank's board, Pet. App. 2a n.2, which has the responsibility for directing the affairs of the Bank. Id. at 8a n.5. As the court of appeals noted, "(t)he Board was clearly on notice of the directive," ibid., and its directors were properly held responsible for enforcing it.

REX H. REED, PETITIONER V. NATIONAL LABOR RELATIONS BOARD, ET AL.

No. 90-1915

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The District Of Columbia Circuit

Brief For The Respondents

TABLE OF CONTENTS Question presented Opinions below Jurisdiction Statement Argument Conclusion OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-6a) is reported at 927 F.2d 1249. The order of the district court (Pet. 7a-9a) is not yet reported.

JURISDICTION

The opinion of the court of appeals was entered on March 15, 1991. The petition for a writ of certiorari was filed on June 13, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether lists of employees' names and addresses, which the National Labor Relations Board obtains from employers and gives to unions participating in representation proceedings, are protected from disclosure to the public under Exemption 6 of the Freedom of Information Act (FOIA), 5 U.S.C. 552(b)(6).

STATEMENT

1. Petitioner Rex H. Reed filed a request with the National Labor Relations Board under the Freedom of Information Act (FOIA), 5 U.S.C. 552, for copies of the "Excelsior lists" compiled in representation cases closed after January 1, 1984. Pet. App. 1a. An Excelsior list is a compilation of the names and addresses of all employees eligible to vote in a pending representation election. The Board requires employers to submit such a list in advance of an election and makes the list available to the unions participating in the election. The Board distributes Excelsior lists to ensure that all eligible voters have the opportunity to be informed of the issues before exercising their statutory right to vote, and to avoid challenges to voters based on the union's lack of knowledge of their identities. Id. at 11a; see also Excelsior Underwear, Inc., 156 N.L.R.B. 1236 (1966); NLRB v. Wyman-Gordon Co., 394 U.S. 759 (1969).

The Board's FOIA officer denied Reed's request in its entirety, concluding that Excelsior lists are exempt from disclosure under FOIA Exemptions 6 and 7(C), 5 U.S.C. 552(b)(6) and 7(C), "since they consist entirely of information personal to individuals -- names and addresses -- and since (the FOIA officer) found that (petitioner) * * * submitted no consideration which would overcome the privacy rights of the affected individuals." Pet. App. 19a. The Acting General Counsel of the Board denied Reed's appeal. Id. at 28a-29a.

2. Reed then filed a complaint in the district court pursuant to 5 U.S.C. 552(a)(4)(B). On cross-motions by the parties, the district court entered summary judgment for the Board based on FOIA Exemption 6, 5 U.S.C. 552(b)(6), which protects from disclosure "personnel and medical files and similar files the disclosure of which would constitute a clearly unwarranted invasion of personal privacy." Pet. App. 7a-9a. The court found that Excelsior lists constitute "similar files" within the meaning of Exemption 6; the listed employees possess a viable privacy interest in their names and addresses, even though the lists had previously been disclosed to parties in representation cases; and there is no public interest in disclosure, since the lists "themselves do not in any direct sense reveal anything about the (NLRB's) operations." Id. at 9a, quoting Getman v. NLRB, 450 F.2d 670, 680 (D.C. Cir. 1971). /1/

3. The court of appeals affirmed the decision of the district court. Initially, the court of appeals agreed that Excelsior lists are "similar files" within the meaning of Exemption 6 since they are "(g)overnment records on an individual which can be identified as applying to that individual." Pet. App. 3a, citing United States Dep't of State v. Washington Post Co., 456 U.S. 595, 601-602 (1982). The court of appeals also agreed that employees possess a legitimate privacy interest in their names and addresses, and that the significance of the individuals' privacy interests was not undermined by the Board's "prior disclosure of Excelsior lists to unions during representation proceedings and (its) failure to place restrictions on the unions' use of the lists." Pet. App. 4a. The court explained that in United States Dep't of Justice v. Reporters Committee for Freedom of the Press, 489 U.S. 749 (1989) (Reporters Committee), this Court had recognized "the privacy interest inherent in the nondisclosure of certain information even where the information may have been at one time public." Pet. App. 4a, quoting Reporters Committee, 489 U.S. at 767.

The court of appeals further concluded that Reporters Committee also controls the analysis of the public interest in disclosure of Excelsior lists, which petitioner claims outweighs the employees' privacy interests. The court noted that in Reporters Committee this Court had explained that only "(o)fficial information that sheds light on an agency's performance of its statutory duties" merits disclosure under FOIA, and the "disclosure of information about private citizens that is accumulated in various governmental files" would generally "reveal() little or nothing about an agency's own conduct." Pet. App. 4a, quoting Reporters Committee, 489 U.S. at 773. Applying that standard, the court of appeals held that there was no public interest in the disclosure of Excelsior lists, since they "contain exclusively private information and would reveal nothing about the Board's conduct of representation proceedings or its performance of any other statutory duty." Pet. App. 5a. Nor, in the court's view, was a different conclusion required because Reed "plans to use the Excelsior lists to correct allegedly widespread misrepresentations the Board has made to employees concerning compulsory union membership and dues requirements." Ibid. An argument of that sort fails under Reporters Committee, the court of appeals stated, because the Supreme Court made clear in that case that "the identity and purpose of the requesting party are irrelevant under FOIA." Pet. App. 5a, citing 489 U.S. at 771.

Balancing "a viable privacy interest against a nonexistent public interest," the court of appeals agreed with the district court that disclosure of the Excelsior lists would constitute a clearly unwarranted invasion of personal privacy. Pet. App. 5a. Moreover, following this Court's instruction in Reporters Committee that "individual circumstances (may be) disregarded when a case fits into a genus in which the balance characteristically tips in one direction," 489 U.S. at 776, the court of appeals concluded that Exemption 6 protects Excelsior lists as a category -- not merely those lists sought by petitioner. Pet. App. 5a. /2/

ARGUMENT

1. Exemption 6 of FOIA, 5 U.S.C. 552(b)(6), protects from disclosure "personnel and medical files and similar files the disclosure of which would constitute a clearly unwarranted invasion of personal privacy." Petitioner's basic contention is that, even if Excelsior lists constitute "similar files" within the meaning of Exemption 6, the courts below erred in concluding that, on balance, disclosure of Excelsior lists would work "a clearly unwarranted invasion of personal privacy." Petitioner does not dispute that many persons choose to limit disclosure of their home addresses in order to avoid being contacted at home, but contends that the Board has "waived" the employees' privacy interest by turning the lists over to unions without placing any restrictions on their use of the lists. Petitioner also contends that any remaining privacy interest is outweighed by his "public interest" purpose of providing employees with accurate information as to their rights under the NLRA. Pet. 17-21.

We believe that the courts below correctly rejected those contentions in light of the principles enunciated in this Court's decision in Reporters Committee. In Reporters Committee, the Court held that the disclosure of criminal "rap sheets" to journalists would constitute an unwarranted invasion of privacy under Exemption 7(C). /3/ The Court recognized "the individual interest in avoiding disclosure of personal matters," and rejected the "cramped notion" that some public disclosure of personal information obliterates any interest in avoiding further disclosure. 489 U.S. at 762-763. The Court explained that "both the common law and literal understandings of privacy encompass the individual's control of information concerning his or her person" (id. at 763), and that "our cases have also recognized the privacy interest inherent in the nondisclosure of certain information even where the information may have been at one time public." Id. at 767, citing Department of Air Force v. Rose, 425 U.S. 352 (1976). /4/

In addition to making clear that individuals may retain a privacy interest in personal information that has been made public, the Court in Reporters Committee also reiterated that "whether disclosure of a private document * * * is warranted must turn on the nature of the requested document and its relationship to the basic purpose of the Freedom of Information Act to open agency action to the light of public scrutiny." 489 U.S. at 772 (internal quotations omitted). Thus, while there is a public interest in the disclosure of information that directly reveals the government's conduct of its affairs, "(t)hat purpose * * * is not fostered by disclosure of information about private citizens that is accumulated in various government files but reveals little or nothing about an agency's own conduct." Id. at 773. Therefore, as the Court also stated, "disclosure of records regarding private citizens, identifiable by name, is not what the framers of the FOIA had in mind." Id. at 765. Since the lists of employee names and addresses that petitioner seeks do not, by themselves, reveal anything about the Board's conduct of its affairs, the lists are protected by Exemption 6.

2. Although the court of appeals reached the correct result in this case, it is appropriate for this Court to hold the petition while United States Dep't of State v. Ray, cert. granted, No. 90-747 (Mar. 4, 1991), is pending.

At issue in Ray is whether the State Department must disclose names and other information identifying certain Haitian citizens who consented to be interviewed by State Department personnel after they were returned from this country to Haiti, or whether such information is protected against mandatory disclosure by Exemption 6. In Ray, the respondent argues that even though the information he seeks has no discernible public interest in and of itself, it should be disclosed because he can use the information to locate persons who were returned to Haiti by the United States and inquire about how they were treated after they were returned. Thus, he intends to make a "derivative use" of the information to determine whether the State Department correctly determined that the persons the United States returned to Haiti had not been harassed by the Haitian government.

In our view, disclosure cannot be required on the basis of a derivative use theory. But even if it could be, disclosure would not be warranted in this case for the primary reason petitioner advances, which is that "the NLRB, on a basis that can accurately be described as pandemic, repeatedly misleads persons making inquiry of the Agency." Pet. 20. Thus, it appears that petitioner "plans to use the Excelsior lists to correct allegedly widespread misrepresentations the Board has made to employees concerning compulsory union membership and dues requirements." Pet. App. 5a. Such an argument is insufficient, even under a derivative use theory, because petitioner does not allege that he plans to use the lists to determine how the Board has been conducting its affairs, and it is clear that private information would be protected where it does not reveal "what the() government is up to" (Reporters Committee, 489 U.S. at 773), either directly or derivatively.

However, petitioner also argues that he intends to use the Excelsior lists to study the Board's activities. He explains that "while the skeleton of the NLRB's defaults * * * is known," he is not entirely certain of the extent of the Board's alleged malfeasance, and must contact employees to confirm his accusations. Pet. 21; see Pet. App. 25a. That argument illustrates that it is difficult to find a logical limit to the derivative use theory, since it is possible to claim that almost any information in government files can be used to check whether the government is performing its duties properly. But since petitioner has advanced a derivative use argument similar to the argument made by the respondent in Ray, reconsideration of the decision below might be necessary if the Court disagrees with our submission in that case.

CONCLUSION

The petition for a writ of certiorari should be held and disposed of in light of this Court's decision in United States Dep't of State v. Ray, No. 90-747.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

JERRY M. HUNTER

General Counsel

D. RANDALL FRYE

Acting Deputy General Counsel

NORTON J. COME

Deputy Associate General Counsel National Labor Relations Board

AUGUST 1991

/1/ The court did not reach the Board's alternative argument that Exemption 7(C), 5 U.S.C. 552(b)(7)(C), also protects the lists from disclosure. Exemption 7(C) excludes from the disclosure requirement records compiled for law enforcement purposes, "but only to the extent that the production of such (materials) * * * could reasonably be expected to constitute an unwarranted invasion of personal privacy."

/2/ Given its affirmance of the district court's Exemption 6 holding, the court of appeals found it unnecessary to remand for consideration of the Board's alternative contention that the Excelsior lists were also protected from disclosure under Exemption 7(C). Pet. App. 6a.

/3/ The Court noted that the language employed to protect privacy under Exemption 7(C) differs from that found in Exemption 6, so that "the standard for evaluating a threatened invasion of privacy interests resulting from the disclosure of records compiled for law-enforcement purposes is somewhat broader than the standard applicable to personnel, medical, and similar files." 489 U.S. at 756. However, the Court recognized that the analytic framework for the evaluation of privacy invasions under both Exemption 6 and Exemption 7(C) is the same. 489 U.S. at 768-769. Petitioner agrees. Pet. 12 n.25.

/4/ As noted above, the Board releases Excelsior lists only to unions participating in scheduled representation elections. While the Board does not put any restrictions on the participants' use of the lists, there is no evidence that the lists have been used by unions or other parties in a way that would defeat the privacy interests of the employees named on the lists. Indeed, if the lists "were 'freely available,' there would be no reason to invoke the FOIA to obtain access to" them. Reporters Committee, 489 U.S. at 764.

JAMES B. MARINE AND VERA L. MARINE, PETITIONERS V. COMMISSIONER OF INTERNAL REVENUE

No. 90-1905

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Ninth Circuit

Brief For The Respondent In Opposition

TABLE OF CONTENTS Questions presented Opinions below Jurisdiction Statement Argument Conclusion OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1-3) is not reported, but the decision is noted at 921 F.2d 280 (Table). The opinion of the Tax Court (Pet. App. 4-102) is reported at 92 T.C. 958.

JURISDICTION

The judgment of the court of appeals was entered on January 2, 1991. A petition for rehearing was denied on February 21, 1991 (Pet. App. 0). The petition for a writ of certiorari was filed on May 21, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

1. Whether petitioners are entitled to theft loss deductions for tax years that ended before the claimed theft was discovered.

2. Whether petitioners are entitled to deduct depreciation and interest expenses derived from a transaction that lacks economic substance.

STATEMENT

1. Petitioner James B. Marine (petitioner) contributed $60,000 in 1979 to become a limited partner in Clark, Ltd. (Pet. App. 7). In 1980, petitioner contributed $36,000 to become a limited partner in Trout, Ltd. (id. at 10). Both partnerships were promoted by Gerald L. Schulman (Schulman). The alleged purpose of the partnerships was to acquire real property on which a United States post office was located (id. at 7, 10, 12).

Each prospectus characterized the partnership as a "tax shelter" and stated that "all dollars in the one time investment are written off either because they are shielded by depreciation or interest" (Pet. App. 9, 11). Neither prospectus contained an appraisal of the property or a projection of potential appreciation or economic profit (id. at 11). Although each prospectus stated that the property was subject to a non-cancellable 20-year lease with the United States, with several five-year renewal options, petitioners did not examine a copy of either lease prior to investing. They thus did not know that the leases gave an option to the United States to purchase the property at prices substantially lower than the prices paid by the partnerships (id. at 7, 10-11, 24-25, 29).

The partnerships were designed to generate purported interest deductions in the first year in an amount equal to the investor's cash contribution (Pet. App. 9, 11, 13). The interest was purportedly to be paid on an unsecured short-term loan to the partnership from a foreign corporation. The proceeds of that loan were, in turn, to be lent by the partnership (without security or interest) to a second foreign corporation, whose purported function was to locate properties to be acquired by the partnership and to provide the partnership with long-term financing for such acquisitions (id. at 13-14). In fact, however, the partnerships did not obtain such loans or pay interest on them. Instead, the partnerships engaged in circular financial transactions that merely simulated the payment of interest (id. at 19).

2. In 1985, Schulman was indicted on 20 counts of conspiracy, making or subscribing a false tax return or document and aiding in the preparation of a false tax return or document. The charges arose from his promotion and administration of schemes to generate ostensible interest deductions for various partnerships by circular financing (Pet. App. 34). On February 12, 1988, Schulman was convicted on all 20 counts (id. at 35).

Clark, Ltd., and Trout, Ltd., reported substantial losses on their partnership returns due to their deductions for depreciation, interest, insurance, and maintenance (Pet. App. 41-42). On their jointly filed 1979, 1980, 1981, and 1982 tax returns, petitioners deducted $63,664, $14,252, $13,733, and $13,676, respectively, as their proportionate shares of Clark's losses. On their 1980, 1981, and 1982 tax returns, they deducted $38,783, $8,428, and $8,404, respectively, as their proportionate share of Trout's losses (id. at 42-43). The Commissioner disallowed these deductions and asserted deficiencies. Petitioners sought review of these deficiencies in the Tax Court.

3. In the Tax Court, petitioners conceded that the partnerships' short-term loans were shams and that they were not entitled to deduct that part of the partnership losses attributable to the alleged "interest" expenses. They urged, however, that their cash contributions to the partnerships were deductible as theft losses in 1979 and 1980 (Pet. App. 45-46).

The Tax Court denied the claimed theft loss deductions for several reasons. First, it held that, under Section 165(e) of the Internal Revenue Code, a theft loss may be deducted only in the year that the theft is discovered. Since petitioners did not discover the alleged theft loss during any of the tax years in issue in this case, they were not entitled to a theft loss deduction for those periods (Pet. App. 49-54). Second, the court concluded that "(t)he evidence does not support a holding that Schulman fraudulently appropriated petitioners' money or intended to deprive them of it unlawfully" (id. at 55). Since the prospectus, which emphasized tax benefits, did not promise that these benefits would withstand IRS scrutiny, the court concluded that "(p)etitioners received exactly what they bargained for -- title to a post office building with no down payment and claims to tax deductions greatly exceeding their cash investment" (id. at 56). Finally, the court held that petitioners failed to demonstrate that there was no reasonable prospect that the alleged theft loss would be recovered (id. at 60-61).

The Tax Court also denied the deductions for petitioners' proportionate share of the partnership losses on the alternate grounds that the purchases of the post offices lacked economic substance and that the partnerships did not have a profit motive (Pet. App. 61-94). Several factors evidenced that these transactions lacked economic substance: (i) the purchase price of the properties significantly exceeded their fair market values (id. at 74-75); (ii) there was no potential for profit in the investment in the post office properties; (iii) the petitioners had no personal liability on the notes; (iv) the lessee had options to purchase the properties at prices significantly lower than the partnerships' indebtedness on them; (v) there was no possibility of a positive cash flow to the partnerships (id. at 76-82).

The Tax Court also sustained the Commissioner's determination that petitioners were liable for various penalties under the Internal Revenue Code (Pet. App. 94-102). In sustaining the negligence penalty, the Tax Court rejected petitioners' claims that they were "innocent victims of a fraudulent promoter" (id. at 95) and observed that "(e)ven a cursory examination of the partnerships' instruments would have raised grave doubts in the mind of a reasonable, prudent investor as to the promised tax benefits" (id. at 97).

4. The court of appeals affirmed. The court upheld the disallowance of the theft loss deductions because such deductions may be claimed only in the year in which knowledge of the theft occurs (Pet. App. 2). It affirmed the disallowance of the depreciation and interest deductions on the ground that the transactions on which the deductions were based lacked economic substance (id. at 2-3). The court of appeals' brief opinion did not expressly discuss the propriety of the penalties that were imposed.

ARGUMENT

The decision of the court of appeals is correct. It does not conflict with any decision of this Court or of any other court of appeals. Further review is therefore not warranted.

1. The court of appeals correctly concluded that even if an embezzlement of petitioner's investment had occurred, /1/ the 1979 and 1980 tax years that are involved in this case were not proper years for such a deduction to be claimed. Under Section 165(e) of the Internal Revenue Code, a theft loss may be deducted only "during the taxable year in which the taxpayer discovers such loss." 26 U.S.C. 165(e). The statute thus makes it clear that "(t)he relevant year is not the year in which a business 'loss' is incurred or reflected on the books of a business, but the year in which a 'theft loss' is discovered." Lary v. United States, 608 F. Supp. 258, 261 (N.D. Ala. 1985), aff'd, 787 F.2d 1538 (11th Cir. 1986) (emphasis by the court). /2/ Treasury regulations therefore specify that "a theft loss is not deductible under section 165(a) for the taxable year in which the theft actually occurs unless that is also the year in which the taxpayer discovers the loss." Treas. Reg. Section 1.165-8(a)(2). Since petitioners did not discover the alleged theft loss until several years after the tax years at issue here were concluded (Pet. App. 47), they quite plainly are not entitled to the deduction in this case.

The decision of the court of appeals does not conflict with the court's prior decision in Rod Warren Ink v. Commissioner, 912 F.2d 325 (9th Cir. 1990), on which petitioners erroneously rely (Pet. 32). /3/ Unlike the present case, Rod Warren Ink concerned the interplay of the theft loss deduction and the personal holding company tax on undistributed corporate income. The court recognized in Rod Warren Ink that, under "the literal meaning of section 165(e)," the year of the discovery of the theft was the appropriate year for the theft loss deduction. 912 F.2d at 327. Because a taxpayer could not carry back a theft loss (or any other loss) to prior tax years for personal holding company tax purposes under Section 545(b)(4) of the Code, however, the court held that, "under the unique factual pattern of this case, a literal application of section 165(e) would unduly penalize the taxpayer." 912 F.2d at 328. The "unique factual pattern" of Rod Warren Ink does not exist in this case.

2. The Ninth Circuit correctly held that petitioners were not entitled to the depreciation and interest deductions claimed on their returns because the partnership transactions on which those deductions were based lacked economic substance. It is, of course, well settled that taxation turns on the substance, not the form, of a transaction. Gregory v. Helvering, 293 U.S. 465, 470 (1935). See Commissioner v. P.G. Lake, Inc., 356 U.S. 260, 266-267 (1958). There was no economic substance to the partnerships' transactions in this case.

It has consistently been held that nonrecourse indebtedness may be treated as genuine indebtedness if, but only if, the fair market value of the property securing the debt is at least equal to the principal amount of the debt. Polakof v. Commissioner, 820 F.2d 321 (9th Cir. 1987), cert. denied, 484 U.S. 1025 (1988); Estate of Isaacson v. Commissioner, 860 F.2d 55 (2d Cir. 1988); Odend'hal v. Commissioner, 748 F.2d 908, 912 (4th Cir. 1984), cert. denied, 471 U.S. 1143 (1985); Brannen v. Commissioner, 722 F.2d 695 (11th Cir. 1984); Estate of Franklin v. Commissioner, 544 F.2d 1045, 1048 (9th Cir. 1976). /4/ The face amount of the debt far exceeded the fair market value of the property in this case (Pet. App. 74-75). Moreover, the partnerships had no economic incentive to make payments on the notes because the notes were nonrecourse obligations for which the limited partners had no personal liability. Even after 25 years of mortgage payments, each partnership's outstanding debt would still be substantially greater than the fair market value of the post offices at the time of their acquisition (id. at 22-23, 27-28, 75). The government's options to acquire the post offices at prices substantially lower than the prices paid by the partnerships further indicate that the purported sales lacked economic substance. See United States v. Schulman, 817 F.2d 1355, 1359 (9th Cir. 1987) ("the financing arrangement has to be evaluated separately on its own merits and cannot be found to have substance merely because the partnerships acquired real property or invested 'real' money"), cert. denied, 111 S. Ct. 51 (1990).

Petitioners err in contending (Pet. 39) that the decision in this case conflicts with Commissioner v. Tufts, 461 U.S. 300 (1983). The only issue presented in Tufts was whether the amount of a nonrecourse mortgage on real property should be included in the computation of the amount realized on the sale of property when the original amount of the mortgage had been included in the property's basis for purposes of depreciation deductions. Because the taxpayer had included the amount of the nonrecourse mortgage in the basis of the property, the Court held that, on the sale, he must include the amount of the mortgage as a proceed of the sale upon the transfer of the property. Id. at 313. The Court did not hold that all nonrecourse indebtedness is true indebtedness and did not authorize the inclusion of all nonrecourse indebtedness in the taxpayers' basis for purposes of computing deductions. Indeed, the Court noted in Tufts that the Commissioner may, in appropriate cases, properly adopt the position "that a nonrecourse mortgage is not true debt" (id. at 308 n.5).

3. Petitioners contend (Pet. 42-45) that additions to tax under Sections 6653(a) and 6661 and additional interest under Section 6621(c) should not have been imposed. Petitioners cite no decisions in support of their claim and their factual arguments were properly rejected by the court below. Further review of these issues is not warranted.

The addition to tax under Section 6653(a) is imposed when an underpayment results from negligence or from intentional disregard of rules and regulations. See Neely v. Commissioner, 85 T.C. 934, 947 (1985). The Tax Court quite properly did not credit petitioners' self-serving statement that they believed their investment was genuine. The court observed that "(e)ven a cursory examination of the partnerships' instruments would have raised grave doubts in the mind of a reasonable, prudent investor as to the promised tax benefits" (Pet. App. 97). The court concluded "that petitioners purposefully looked away from the realities of the partnerships' activities" (ibid.).

With respect to the addition to tax under Section 6661 -- which is imposed for a substantial understatement of income when there is no substantial authority to support the taxpayer's treatment of the tax shelter items (26 U.S.C. 6661; Pet. App. 98) -- the Tax Court correctly found that there was no authority to support petitioners' deductions (Pet. App. 99-100). The Tax Court also correctly held that Section 6621(c) -- which provides an increased rate of interest for tax deficiencies resulting from a substantial underpayment attributable to "tax motivated transactions" -- was applicable to petitioners because the partnerships' activities lacked economic substance and were not engaged in for profit.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

SHIRLEY D. PETERSON

Assistant Attorney General

DAVID ENGLISH CARMACK

JOAN I. OPPENHEIMER

Attorneys

AUGUST 1991

/1/ The Tax Court correctly determined that petitioners had not established that an embezzlement had occurred (Pet. App. 55). Schulman was indicted and convicted of crimes relating to his promotion and administration of abusive tax shelters -- conspiracy and making and aiding in the preparation of false tax returns -- not of embezzlement (id. at 34-35). It is unclear what happened to petitioner's cash contributions. Schulman obtained at least some of the cash generated by the partnership. He received a five percent commission for selling the post offices to the partnerships (Exh. 88-CJ, at 24). Postal Management Services Company, which Schulman controlled, received management fees from the partnerships (Pet. App. 21, 25-26). Furthermore, as general partner, Schulman received a portion of the cash contributions to the partnerships (id. at 8, 12).

/2/ Petitioners err in relying (Pet. 29 n.14) on Rainbow Inn, Inc. v. Commissioner, 433 F.2d 640 (3d Cir. 1970), and Ramsay Scarlett & Co. v. Commissioner, 61 T.C. 795 (1974), aff'd, 521 F.2d 786 (4th Cir. 1975). Those cases concern the entirely separate question whether a reasonable prospect of recovery existed in the year the theft loss was discovered.

/3/ Moreover, an intra-circuit conflict would not warrant Supreme Court review. See Sup. Ct. R. 10.1(a).

/4/ In Pleasant Summit Land Corp. v. Commissioner, 863 F.2d 263 (3d Cir. 1988), cert. denied, 493 U.S. 901 (1989), the court of appeals allowed a deduction for a portion of the interest and depreciation attributable to an investment made with nonrecourse debt even though the indebtedness exceeded the fair market value of the property. The court allowed a partial deduction for interest and depreciation to the extent attributable to the fair market value of the property. Petitioners have never claimed entitlement to a partial deduction, and the issue addressed in Pleasant Summit was thus neither presented nor decided in this case.

JOHN STANLEY, PETITIONER V. UNITED STATES OF AMERICA

No. 90-8343

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Second Circuit

Brief For The United States In Opposition

OPINION BELOW

The opinion of the court of appeals (Pet. App. A1-A9) is reported at 928 F.2d 575.

JURISDICTION

The judgment of the court of appeals was entered on March 21, 1991. The petition for a writ of certiorari was filed on June 17, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether, having been convicted of a drug trafficking offense and of using a firearm during that offense, petitioner was entitled to a downward departure from the applicable Sentencing Guidelines range to ensure that his sentence did not exceed the sentence he would have received if he had not been convicted of the firearm offense.

STATEMENT

After a jury trial in the United States District Court for the Eastern District of New York, petitioner was convicted of possessing more than five grams of "crack" cocaine with intent to distribute it, in violation of 21 U.S.C. 841(a)(1) and 841(b)(1)(B), and of using a firearm during and in relation to that offense, in violation of 18 U.S.C. 924(c). The district court sentenced petitioner to a total of 120 months' imprisonment. The court of appeals affirmed the convictions but vacated and remanded the sentence, holding that the district court improperly departed downward from the applicable sentencing range under the Sentencing Guidelines. Pet. App. A1-A9.

1. On August 11, 1988, federal law enforcement agents executed a search warrant at petitioner's apartment in Queens, New York. As the agents entered petitioner's bedroom, he lunged from the bed toward a dresser drawer that contained a pistol and ammunition. After subduing petitioner, the agents searched the apartment and found large quantities of crack cocaine and related paraphernalia scattered throughout the apartment. Pet. App. A3.

2. Petitioner was indicted in the United States District Court for the Eastern District of New York on one count of possessing more than five grams of crack cocaine with intent to distribute it, in violation of 21 U.S.C. 841(a)(1). After the indictment was returned, the prosecutor advised petitioner and his counsel that, if petitioner did not plead guilty, the government might file a superseding indictment adding a count charging him with using a firearm during a drug trafficking crime, in violation of 18 U.S.C. 924(c). Petitioner entered into a plea agreement, pursuant to which the government filed a superseding information charging him with possessing an unspecified quantity of crack cocaine. Pet. App. A4.

Petitioner thereafter obtained new counsel and moved to withdraw his guilty plea. The district court granted the motion based on concerns about the competence of prior counsel. Pet. App. A4. /1/

After petitioner withdrew his guilty plea, the government offered to renew its original plea agreement with petitioner. As before, the government advised petitioner and his new counsel that, if petitioner rejected the agreement, the government could file a superseding indictment adding the firearm count. Petitioner refused to plead guilty, and the government filed a superseding indictment charging petitioner on the narcotics count and the firearm count. The jury convicted petitioner on both counts. Pet. App. A4.

3. The district court determined that petitioner's offense level for the narcotics count was 28, resulting in a Guidelines range of 87-108 months' imprisonment. The court also determined that 18 U.S.C. 924(c) required it to sentence petitioner to a consecutive term of 60 months' imprisonment for his conviction on the firearm count. Pet. App. A10.

The court noted that petitioner would have faced a lower sentence if he had not been convicted of the firearm offense under 18 U.S.C. 924(c). In that event, petitioner would have received a two-level enhancement under Sentencing Guidelines Section 2D1.1(b)(1) for using a firearm during a narcotics offense. That would have resulted in a total term of 108-135 months' imprisonment, compared to the total term of 147-168 months' imprisonment that petitioner actually confronted. Pet. App. A10-A11.

The district court concluded that the difference in sentences attributable to petitioner's conviction under Section 924(c) was "unwarranted." Pet. App. A11. The court found that petitioner would not have been charged with violating Section 924(c) if he had agreed to plead guilty. Ibid. The court further found that, in the Eastern District of New York, it was "not unusual" for defendants in petitioner's situation to be charged under Section 924(c) only when they refused to plead guilty. Ibid. In the court's view, the Sentencing Commission "made it plain that plea bargaining should not be used to alter otherwise appropriate sentences." Id. at A12 (citing United States Sentencing Commission, Guidelines Manual, Ch. 6, Pt. B, Introd. Comment, at 6.5 (1989)). Based on this view, the court reduced petitioner's sentence on the narcotics count from the 87-108 month Guidelines range to 60 months. That made petitioner's total sentence 120 months, approximately midway in the range that would have applied if he had not been convicted on the firearm count. Ibid.

4. The court of appeals affirmed petitioner's convictions, but vacated his sentence and remanded for resentencing. Pet. App. A1-A9. The court held that the disparity in sentencing identified by the district court was expressly contemplated under the Guidelines and was therefore an improper basis for a departure. Pet. App. A6. The court rejected the notion that the disparity was unwarranted because it resulted in more severe penalties for defendants who refused to plead guilty and were convicted after trial than for those who pleaded guilty. /2/ The court reasoned that, "when the Supreme Court recognized that it is 'constitutionally legitimate' for the prosecutor to persuade the defendant to plead guilty, it also recognized that 'the prosecutor's desire to induce a guilty plea' * * * is not an 'unjustifiable standard' of selection in enforcement." Id. at A7 (quoting Bordenkircher v. Hayes, 434 U.S. 357, 364-365 (1978)). The court also observed that "(i)t was the intention of Congress that the five-year penalty mandated by Section 924(c) be imposed in addition to any other term of imprisonment." Pet. App. A8 (internal quotation omitted). The court found no evidence that "Congress did not intend to require additional punishment for conviction under Section 924(c) when that charge was used as a threat in plea-bargaining." Ibid. The court accordingly concluded that in departing downward the district court had improperly substituted its judgment for the prosecutor's and "nullified the legislative intent of additional punishment for violating Section 924(c)." Ibid. /3/

ARGUMENT

Petitioner contends (Pet. 7-15) that the district court properly departed downward from the Sentencing Guidelines range applicable to his drug trafficking offense. He argues that the Guidelines create an "unwarranted disparity" between, on the one hand, defendants convicted of using a firearm during a drug trafficking crime, in violation of 18 U.S.C. 924(c), and, on the other hand, defendants who are not convicted under Section 924(c) but are subject to a sentence enhancement under Sentencing Guidelines Section 2D1.1(b)(1) for possessing a firearm during a narcotics offense. The court of appeals correctly rejected that argument.

The Sentencing Reform Act permits a court to impose a sentence outside the applicable Guidelines range only when "there exists an aggravating or mitigating circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines." 18 U.S.C. 3553(b); see Guidelines Section 5K2.0. As the court of appeals determined (Pet. App. A6), the Guidelines do adequately consider the disparity on which the district court based the departure. The Guidelines provide that, when a defendant has been convicted under Section 924(c), "the term of imprisonment is that required by statute." Guidelines Section 2K2.4(a). They further provide that, when a defendant is convicted of violating both Section 924(c) and the underlying drug trafficking offense, "any specific offense characteristic for the possession, use, or discharge of a firearm * * * is not to be applied in respect to the guideline for the underlying offense." Guidelines Section 2K2.4(a), Application Note 2. The district court erred in departing from the Guidelines based on a situation that the Guidelines expressly address. See United States v. Foote, 898 F.2d 659, 666 (8th Cir.) ("The Sentencing Commission was fully aware of the existence of section 924(c) and its mandatory sentencing requirement when it constructed the Guidelines sentencing system."), cert. denied, 111 S. Ct. 112, 342 (1990).

As the court of appeals determined (Pet. App. A6), the disparity provided for in the Guidelines is completely compatible with the Commission's duty to "avoid() unwarranted sentencing disparities among defendants with similar records who have been found guilty of similar criminal conduct." 28 U.S.C. 991(b)(1)(B). A defendant who is subject only to a sentence enhancement for conduct similar to that proscribed in Section 924(c) has not been "found guilty" of that conduct. Moreover, the circumstances under which a sentence may be enhanced differ from those under which the sentence required pursuant to Section 924(c) may be imposed. A sentence may be enhanced when the sentencing court finds by a preponderance of the evidence that the defendant "possessed" a firearm "during" commission of a drug offense. Sentencing Guidelines Section 2D1.1(b)(1). In contrast, the sentence required under Section 924(c) may be imposed only after the government proves beyond a reasonable doubt that the defendant "use(d) or carrie(d)" a firearm "during and in relation to" a drug offense. 18 U.S.C. 924(c)(1). The more stringent standard applicable in the latter case justifies imposing a more severe sentence when that standard is met.

The court of appeals was correct in holding that a sentencing court's authority to avoid "unwarranted sentence disparities" in individual cases did not justify the departure in this case. See Pet. App. A6; see also 18 U.S.C. 3553(a)(6). The district court relied on the fact that petitioner would not have been charged under Section 924(c) if he had agreed to plead guilty. As the court of appeals recognized, however, Congress intended in Section 924(c) to provide for a five-year term of imprisonment in addition to any other term of imprisonment. Pet. App. A8. There is no evidence that Congress did not intend to provide for an additional five-year term when the charge under Section 924(c) was the subject of prior plea bargain negotiations. The district court violated congressional intent by reducing petitioner's sentence in order to eliminate the additional punishment attributable to his violation of Section 924(c).

The court of appeals was also correct in rejecting the district court's reliance on the prosecutor's alleged practice of bringing charges under Section 924(c) only against defendants who refused to plead guilty. Assuming such a practice existed, it was within the prosecutor's "broad discretion" to "select() among a variety of applicable criminal statutes with different penalties." Pet. App. A6. It is well settled that "so long as the prosecutor has probable cause to believe that the accused committed an offense defined by statute, the decision whether or not to prosecute, and what charge to file or bring before a grand jury, generally rests entirely in his discretion." Bordenkircher v. Hayes, 434 U.S. 357, 364 (1978). Accord, e.g., Ball v. United States, 470 U.S. 856, 859 (1985); Wayte v. United States, 470 U.S. 598, 607 (1985); United States v. Batchelder, 442 U.S. 114, 124 (1979). In exercising his discretion, the prosecutor may choose the harsher of two statutory penalty schemes applicable to defendant's conduct. See United States v. Batchelder, 442 U.S. at 125. Moreover, the prosecutor can use the threat of bringing more serious charges to induce a defendant to plead guilty. Bordenkircher v. Hayes, 434 U.S. at 364-365; see also United States v. Goodwin, 457 U.S. 368, 380 (1982).

Petitioner does not dispute that he was advised that, if he decided not to plead guilty, he might confront charges under Section 924(c). Under this Court's decisions, the prosecutor was entitled to use the threat of such charges to persuade petitioner to plead guilty and to carry out that threat if petitioner refused. The court of appeals correctly concluded that the district court lacked authority to relieve petitioner of the consequences of his decision. See Wayte v. United States, 470 U.S. at 607 (broad discretion accorded prosecutor "rests largely on the recognition that the decision to prosecute is particularly ill-suited to judicial review"). /4/

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, III

Assistant Attorney General

NINA GOODMAN

Attorney

AUGUST 1991

/1/ The district court cited prior counsel's failure to challenge certain aspects of the presentence report and his underestimation of the applicable Sentencing Guidelines range. Pet. App. A4. The court also expressed doubt whether the plea agreement afforded petitioner any benefit. The court was not aware, however, that in return for petitioner's plea the government had refrained from charging petitioner with a violation of 18 U.S.C. 924(c). Pet. App. A4.

/2/ The court of appeals found it unnecessary to address the government's argument that the district court erred in finding that the U.S. Attorney had a "practice" of bringing charges under Section 924(c) only against defendants who refused to plead guilty. The court of appeals noted, however, that the government's challenge to that finding was "substantial." Pet. App. A5 n.1.

/3/ The court of appeals rejected the district court's view that the Commission had expressed a policy that "plea bargaining should not be used to alter otherwise appropriate sentences." Pet. App. A8 (quoting district court's memorandum of sentencing). The court of appeals observed that the Sentencing Commission expressly disavowed any intention to "make significant changes in plea agreement practices." Ibid. (quoting Sentencing Guidelines, Ch. 1, Part A, Introduction 4(c), at 1.7 (1989)). The Guidelines therefore should not, the court of appeals determined, be understood to "prohibit the use in plea negotiations of the prosecutor's discretion to select among chargeable offenses and thereby alter sentence." Ibid. The court of appeals noted that, "if plea bargains could not alter sentences, most defendants would have little interest in bargaining." Ibid.

/4/ Petitioner misreads the court of appeals' decision as holding that a district court may never base a departure on factors unrelated to the individual defendant. See Pet. 7. The court of appeals did not so hold. It held that the downward departure was not justified by "the judge's disapproval of the manner in which the United States Attorney for the Eastern District of New York generally exercises his discretion in negotiating plea agreements in narcotics cases involving use of a firearm." Pet. App. A9. Petitioner's assertion (Pet. 8-9) of a conflict among the circuits is based on his mistaken reading of the court of appeals' holding. None of the cases cited by petitioner involved a departure based solely on the difference in sentences imposed on defendants who stood trial and those who pleaded guilty. See United States v. Melton, 930 F.2d 1096, 1098-1099 (5th Cir. 1991) (remanding for resentencing where defendant claimed that government breached agreement to request downward departure); United States v. Ray, 930 F.2d 1368, 1372 & n.7 (9th Cir. 1990) (downward departure was warranted based on a "unique situation" in which defendant was sentenced under Guidelines, while co-defendants who were convicted on identical charges received less severe sentences during brief period when Ninth Circuit refused to apply Guidelines), cert. denied, 111 S. Ct. 1084 (1991); United States v. Nelson, 918 F.2d 1268, 1273-1276 (6th Cir. 1990) (district court was not precluded from departing based on disparity between sentence applicable to defendant and sentences applicable to co-defendants convicted on identical conspiracy charge, but departure was not justified when disparity was attributable to co-defendants' extensive cooperation and acceptance of responsibility); United States v. Adonis, 891 F.2d 300, 302-304 (D.C. Cir. 1989) (remanding for resentencing where district court provided inadequate explanation for downward departure).

ABBOTT LABORATORIES, PETITIONER V. DAVID A. KESSLER, M.D., COMMISSIONER

No. 90-1898

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The District Of Columbia Circuit

Brief For The Respondent In Opposition

TABLE OF CONTENTS Question presented Opinions below Jurisdiction Statement Argument Conclusion OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-24a) is reported at 920 F.2d 984. The memorandum and order of the district court (Pet. App. 38a-61a) are reported at 691 F. Supp. 462. The district court's memorandum and order disposing of post-judgment motions (Pet. App. 25a-37a) are unreported.

JURISDICTION

The judgment of the court of appeals was entered on December 7, 1990. A petition for rehearing was denied on March 14, 1991. Pet. App. 100a-101a. The petition for a writ of certiorari was filed on June 12, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether the court of appeals properly determined that provisions of the Drug Price Competition and Patent Term Restoration Act of 1984 defining the eligibility of certain drugs for periods of limited protection from streamlined approval of generic copies (21 U.S.C. 355(j)(4)(D)(i) and (v)) are ambiguous, and that this matter therefore should be remanded to the Food and Drug Administration to choose among reasonable constructions of the statutory language.

STATEMENT

1. The Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585, often referred to as the Hatch-Waxman Amendments, made several major changes in the law concerning approval and marketing of new drugs. Title I established streamlined procedures -- dispensing with the expensive and time-consuming clinical trials usually required -- for approval by FDA of generic copies of previously approved drugs and for approval of new drugs based on published research data. 21 U.S.C. 355(j) and 355(b)(2). Under these procedures, a manufacturer may obtain approval to market a drug without performing the clinical tests normally required to support a full new drug application ("NDA") either by relying on clinical trials for a previously approved drug (the abbreviated new drug application or "ANDA" procedure) or by relying on published data in the scientific literature (the so-called "paper" NDA procedure). Title I also provides varying periods of marketing "exclusivity" for innovative drugs approved on the basis of new clinical testing. During these periods, FDA approvals of any abbreviated applications or "paper" NDAs will not be effective. 21 U.S.C. 355(j)(4)(D) and 355(c)(3)(D). /1/ Title II of the Hatch-Waxman Amendments provides for extension of the patent term of drugs meeting certain conditions to compensate for the period of patent life lost during FDA's pre-approval review process. 35 U.S.C. 156.

2. This case arises out of the denial by FDA of a citizen petition submitted by petitioner seeking ten years of market exclusivity under Title I of the Hatch-Waxman Amendments for Depakote, one of its drug products. Pet. App. 5a, 62a-99a. Under Title I, five categories of drugs are eligible for periods of market exclusivity ranging from two to ten years. 21 U.S.C. 355(j)(4)(D)(i)-(v). The period of market exclusivity applicable to Depakote is determined under one of two categories applicable to drugs approved during a "window period" prior to enactment of the Hatch-Waxman Amendments. /2/ Petitioner contends that Depakote is entitled to the maximum ten-year period of exclusivity, under 21 U.S.C. 355(j)(4)(D)(i). The FDA found that the product is instead entitled only to two years of exclusivity -- a period that has already expired. 21 U.S.C. 355(j)(4)(D)(v).

The ten-year provision applies to drugs approved during the "window period" that contain "no active ingredient (including any ester or salt of the active ingredient)" that has previously received FDA approval. 21 U.S.C. 355(j)(4)(D)(i). /3/ In contrast, the two-year provision applies to drugs approved during the "window period" that do contain "an active ingredient (including any ester or salt of the active ingredient)" that has been previously approved by FDA. 21 U.S.C. 355(j)(4)(D)(v). /4/

3. In 1978 FDA approved petitioner's new drug application for Depakene, an anticonvulsant drug for control of seizures in epileptics and others. Pet. App. 4a. Valproic acid is Depakene's "active ingredient" -- the form of the therapeutic agent in the drug prior to administration to a patient. That acid is also its "active moiety" -- the pharmaceutically active chemical which produces the therapeutic effect in the body after administration to the patient. Ibid. In 1982 FDA approved petitioner's new drug application for Depakote, another anticonvulsant drug. Depakote's active ingredient is divalproex sodium. Depakote breaks down in the body to valproic acid, and that substance achieves the drug's therapeutic effect. Ibid. Thus, Depakote has the same active moiety (valproic acid) as petitioner's earlier product, Depakene. Accordingly, petitioner sought and obtained FDA approval of Depakote by relying on the clinical studies of safety and efficacy that it had submitted for Depakene. Ibid.

Following passage of the Hatch-Waxman Amendments, FDA determined that petitioner was entitled to two years of marketing exclusivity for Depakote. Petitioner challenged that determination administratively by filing a citizen petition with the agency, seeking a ruling that Depakote was instead entitled to ten years of exclusivity. Pet. App. 5a.

FDA denied the petition, concluding first that divalproex sodium (the active ingredient of Depakote) is a salt of valproic acid (the active ingredient of petitioner's own previously approved product, Depakene) and not, as petitioner contended, a totally new chemical substance. Pet. App. 5a, 67a-77a. FDA then rejected petitioner's argument that even if divalproex sodium is a salt of valproic acid, Depakote nevertheless qualified for ten years' exclusivity because neither divalproex sodium nor any ester or salt of it had been previously approved. The agency explained that it interpreted the entire phrase "active ingredient (including any ester or salt of the active ingredient)" in the exclusivity provisions of the Hatch-Waxman Amendments to refer to the "active moiety" of the drug. Id. at 85a. The agency specifically interpreted Congress's use of the word "including" to indicate that the parenthetical portion of the phrase was not an exhaustive list of the additional substances that were comprehended by the phrase as a whole but rather a list of examples of the types of minor variations in chemical structure that Congress did not intend to reward with exclusivity." Ibid. Accordingly, because Depakote and the previously approved drug Depakene shared the same active moiety, FDA determined that Depakote was not entitled to ten years' market exclusivity.

4. Petitioner challenged FDA's denial of its citizen petition by filing this action in the district court. The district court observed that if it concluded -- as it believed FDA had -- that the term "active ingredient" in the ten-year exclusivity provision referred to the drug's active moiety, then Depakote plainly would not qualify for the maximum ten-year period of market protection (because its active moiety, valproic acid, had been previously approved). Pet. App. 55a-56a. /5/ The court also noted that if, as petitioner urged, "active ingredient" referred instead to an ingredient in the final dosage form of the drug, Depakote would meet the requirements for ten years' exclusivity (because neither divalproex sodium nor any ester or salt of it had been previously approved). Id. at 56a.

The district court found it unnecessary to choose between these two interpretations, however, because it concluded that even if petitioner's final dosage form approach were correct, Depakote would fall within the literal terms of both the ten-year and the two-year exclusivity provisions (a position advocated by neither party). Pet. App. 56a. This apparent conflict could be resolved, in the district court's view, by resort to the legislative purpose of the Hatch-Waxman Amendments, i.e., to reward substantial investment in new drug development. Because petitioner had not undertaken new clinical investigations to support its application for Depakote, but rather had relied on investigations performed in development of another previously approved drug, the district court concluded that petitioner's investment in Depakote did not warrant the lengthier ten-year period of exclusivity. Id. at 57a-59a. Thus, the district court held that regardless of which interpretation of the term "active ingredient" it applied, Depakote was entitled only to two years of exclusive marketing.

5. The court of appeals rejected the statutory interpretations of both parties and remanded the matter to the agency for a new construction of what the court concluded was ambiguous language in the statute. Focusing on the phrase "active ingredient (including any ester or salt of the active ingredient)" in 21 U.S.C. 355(j)(4)(D)(v), the court pointed out that it is not clear whether the "active ingredient" referred to in the parenthetical portion of that phrase refers to the active ingredient of the drug under consideration for a period of exclusivity or the active ingredient of a previously approved drug. Pet. App. 7a. Noting that the statutory scheme requires that a given drug's eligibility for a period of exclusivity be determined by comparing it to all previously approved drugs, the court of appeals explained that Congress may have intended the parenthetical portion of the phrase to refer to esters and salts of any previously approved active ingredient. Id. at 8a.

Observing that nothing in the legislative history reveals Congress's intent concerning the meaning of this ambiguous language (Pet. App. 8a), the court of appeals nevertheless rejected FDA's conclusion that the entire phrase "active ingredient (including any ester or salt of the active ingredient)" refers to the active moiety of the drug for which the applicable period of exclusivity is in question. Id. at 8a-9a. The court found that the agency's interpretation of the word "including" as an indication that what followed was an illustrative list of examples of a broader category was "linguistically infeasible even though logically possible." Id. at 9a.

The court of appeals then rejected petitioner's interpretation as well. Pointing out that it was the agency's prerogative to choose among reasonable constructions of ambiguous statutory language, the court of appeals explained that it could not accept petitioner's interpretation, even if reasonable, if the court perceived -- as it did -- "still other reasonable constructions." Pet. App. 9a. The court went on to find, however, that petitioner's construction was not reasonable. The court observed that under petitioner's construction the availability of the maximum period of market protection for a drug would depend on whether FDA had first approved the non-salt, non-ester form of the drug or had instead first approved its salt or ester; under petitioner's construction, "if a pharmaceutical manufacturer developed two usable drugs, one a salt of the other, he could gain extra protection by applying for approval of the acid first, followed by the salt, but not under the reverse sequence." Id. at 10a-11a. That reading would "promote() neither the interests of the research-oriented pharmaceutical industry nor the general drug industry in a rational way, producing instead a windfall depending on an accident of chemical nomenclature." Id. at 10a. In short, the court concluded, petitioner's interpretation of the statutory language was "possible linguistically but fails to serve any conceivable purpose"; petitioner could advance "no hypothetical reason why Congress (or indeed any of the interest groups) would have wanted the degree of protection a drug received to turn on this variable sequence." Ibid. Accordingly, the court remanded the case to the district court with instructions to remand to the agency for a new interpretation of the statute. Id. at 11a.

ARGUMENT

The court of appeals' decision is essentially interlocutory in nature. Review by this Court at this stage would accordingly be premature. Moreover, petitioner's central argument that the statutory language in question here has only a single possible plain meaning is belied by the multiplicity of interpretations supplied by the various parties and courts that have attempted to apply it. The court of appeals' decision to remand this matter to the Food and Drug Administration for a new construction of these complex and ambiguous provisions does not warrant this Court's review.

1. The court of appeals here has not authoritatively interpreted the phrase "active ingredient (including any ester or salt of the active ingredient)" as it occurs in the exclusivity provisions at issue, 21 U.S.C. 355(j)(4)(D)(i) and (v). Although the court rejected the two interpretations put forward by FDA and petitioner respectively, the court did not announce its own interpretation of the statute. It simply suggested that a third construction was possible and left FDA free on remand to choose that reading of the statute or some other reading that the agency might develop upon further consideration.

2. Although petitioner correctly points out that the court of appeals' decision differs from the decision reached by the Federal Circuit in Glaxo Operations UK Ltd. v. Quigg, 894 F.2d 392 (1990), there is no conflict between the two decisions warranting further review by this Court.

First, and of greatest importance in this case in which petitioner bases its entire argument on what it perceives to be the plain meaning of the particular statutory provisions at issue, the D.C. Circuit here and the Federal Circuit in Glaxo were addressing different statutory provisions that contain somewhat different language. /6/ As the court of appeals remarked (Pet. App. 6a), even identical terms in separate sections of the same statute may require different interpretations. Thus, the fact that the Federal Circuit in Glaxo interpreted certain statutory language differently from the way the D.C. Circuit here interpreted similar, but not identical, language from a different provision of the same statute does not create a conflict between Glaxo and this case.

Second, the provision of Title II of the Hatch-Waxman Amendments at issue in Glaxo, 35 U.S.C. 156(f), concerns the eligibility of certain drugs for patent term extensions to compensate for the time taken by the FDA to approve the drug. As such, the interpretation and enforcement of that provision is entrusted to the Commissioner of Patents and Trademarks, and that provision has no bearing on the FDA-administered exclusivity provisions of Title I of the Hatch-Waxman Amendments at issue here. In short, as a result of the holdings in Glaxo and this case, the same issue will not be decided differently depending on whether it is litigated in the District of Columbia or Federal Circuit. /7/ Accordingly, there is no conflict in the circuits.

3. Petitioner insists that the language of the ten-year exclusivity provision (21 U.S.C. 355(j)(4)(D)(i)) has a single possible plain meaning. Indeed, petitioner asserts that this provision is one that "Petitioner, Respondent, agency counsel from the Department of Justice and three federal courts" have unanimously agreed "could not be clearer." Pet. 3. Petitioner neglects to point out, however, that those parties and courts arrived at at least three entirely different interpretations of two distinct statutory provisions. /8/ That diversity of interpretation alone belies petitioner's claim of statutory clarity and explicit congressional intent concerning the scope of the ten-year exclusivity provision, and it confirms the propriety of the court of appeals' decision to remand this matter to the agency for a new administrative determination.

Petitioner attacks the court of appeals' conclusion that the language of the exclusivity provisions permits an interpretation other than petitioner's own on the ground that the court mistakenly focused on the two-year provision (21 U.S.C. 355(j)(4)(D)(v)), and "not on the ten-year exclusivity provision applicable to DEPAKOTE." Pet. 18. This bootstrap argument presents petitioner's own desired conclusion -- that the ten-year provision applies to its product -- as a fact that undermines the court of appeals' holding that the statute is ambiguous. Moreover, as petitioner itself argued below, the exclusivity provisions form a coherent structure in which "every drug falls into one -- and only one -- of five categories that are defined to be mutually exclusive." Pet. C.A. Br. 26. Thus, the scope of the two-year exclusivity provision (21 U.S.C. 355(j)(4)(D)(v)) is directly relevant to the issue of Depakote's eligibility for the maximum ten-year period of market protection under another provision in the five-part scheme.

Finally, petitioner insists that the court of appeals' decision fails to accord the market exclusivity provisions "the presumption of validity to which they are entitled." Pet. 21. Certainly no one, least of all the court of appeals, has suggested that the exclusivity provisions are invalid. Petitioner's argument is really only a reprise of its central contention that the ten-year exclusivity provision has a single possible plain meaning that the court of appeals failed to apply. Once the court identified an ambiguity in the statutory language, it reached the unexceptionable conclusion that it must permit the agency to make the choice among reasonable alternative constructions. Pet. App. 9a.

The court's additional finding that petitioner's interpretation was unreasonable in light of its practical consequences, although not necessary to the court's decision to remand this matter to the agency, was correct. As the court noted, petitioner has failed to advance "any scientific, technical, economic or other explanation why Congress would intend the grant of a ten year market exclusivity to depend on the temporal sequence in which * * * applications were approved." Pet. App. 10a. Moreover, every adjudicative body to consider the question -- the FDA, the district court, and the court of appeals -- has concluded that interpretations of the statutory language other than that of petitioner are possible. Unlike petitioner's proposed interpretation, none of those other interpretations makes market exclusivity turn on entirely arbitrary factors involving the order in which various chemical forms of a drug are approved. The court of appeals thus correctly concluded that petitioner's interpretation is unreasonable.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

JOHN G. ROBERTS, JR.

Acting Solicitor General /9/

STUART M. GERSON

Assistant Attorney General

ANTHONY J. STEINMEYER

IRENE M. SOLET

Attorneys

AUGUST 1991

/1/ The relevant statutory language defining the period of market exclusivity for a particular product is the same for both ANDAs and "paper" NDAs. For clarity, we will refer only to the ANDA provisions in the remainder of this brief.

/2/ The "window period" extended from January 1, 1982 through September 24, 1984 (the date the statute was enacted).

/3/ Such drugs approved after the "window period" are entitled to five years' exclusivity. 21 U.S.C. 355(j)(4)(D)(ii).

Esters and salts are chemical compounds formed by reactions between a "parent" substance and another chemical. An ester is formed by the reaction of an acid with an alcohol. A salt is formed when the hydrogen of an acid is replaced by a metal or its equivalent. Pet. App. 5a.

/4/ Such drugs approved after the "window period" are entitled to no exclusivity at all, unless their approval is based on some new clinical investigations. In that latter event, the drugs are entitled to three years' exclusivity. 21 U.S.C. 355(j)(4)(D)(iii) and (iv).

/5/ FDA never contended that the bare term "active ingredient" meant "active moiety." Rather, the agency interpreted the term "active ingredient" as modified by the parenthetical reference to salts and esters -- the way it appears in the exclusivity provisions -- to mean "active moiety." FDA noted that this interpretation was consistent with earlier agency decisions more narrowly construing "active ingredient" elsewhere in the Hatch-Waxman Amendments, where the term appears unmodified by any reference to related chemical entities. Pet. App. 82a-83a.

/6/ In Glaxo the Federal Circuit construed Title II of the Hatch-Waxman Amendments, which authorizes the Commissioner of Patents and Trademarks to extend the term of a patent on a drug product meeting certain other conditions if the product is the first permitted marketing or use of "the active ingredient * * * of * * * a new drug * * * including any salt or ester of the active ingredient." 35 U.S.C. 156(a)(5)(A) and 156(f)(2). By contrast, the provisions of Title I of the Hatch-Waxman Amendments at issue here provide for two-year exclusivity if an application includes "an active agreement (including any ester or salt of the active ingredient) that has been approved in another application," 21 U.S.C. 355(j)(4)(D)(v), or ten-year exclusivity if an application includes "no active ingredient (including any ester or salt of the active ingredient) of which has been approved in any other application." 21 U.S.C. 355(j)(4)(D)(i).

/7/ As petitioner notes, "'(m)arket exclusivity' * * * is different from a patent right: While a patent owner can exclude all others from competing with like products, market exclusivity only delays approval of ANDAs or 'paper' NDAs. A second company that obtains NDA approval for an existing product is free to compete even during the 'exclusivity' period." Pet. 6 n.2.

/8/ Obviously, petitioner and FDA had conficting interpretations of the statutory language at issue in this case. The district court provided a third reading. Pet. App. 54a-59a. The two other courts to which petitioner presumably refers are the district court and the court of appeals in Glaxo Operations UK Ltd. v. Quigg, 706 F. Supp. 1224 (E.D. Va. 1989), aff'd, 894 F.2d 392 (Fed. Cir. 1990), which were interpreting somewhat different language in a different provision of the Hatch-Waxman Amendments. See p. 9, supra.

/9/ The Solicitor General is disqualified in this case.

STEPHEN ADAMS, PETITIONER V. RESOLUTION TRUST CORPORATION, ET AL.

No. 90-1851

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Eighth Circuit

Brief For The Respondents In Opposition

TABLE OF CONTENTS Question presented Opinions below Jurisdiction Statement Argument Conclusion OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-28a) is reported at 927 F.2d 348. The February 9, 1990, order of the district court (Pet. App. 70a-97a) is reported at 731 F. Supp. 352. The February 23, 1990, order of the district court (Pet. App. 98a-100a) is unreported.

JURISDICTION

The judgment of the court of appeals was entered on February 28, 1991. The petition for writ of certiorari was filed on May 29, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether petitioner is entitled to rescind his purchase of subordinated securities from a now insolvent thrift institution where the purchase agreement and the applicable regulations indicated that the securities would be used to meet the institution's regulatory capital requirements.

STATEMENT

1. The Federal Home Loan Bank Board formerly served as the principal regulator of federally chartered thrift institutions. /1/ Among other matters, the Bank Board specified terms and conditions under which thrift institutions could issue subordinated debt securities. See 12 C.F.R. 563.8-1 (1988). On December 21, 1987, the Bank Board approved a request from Midwest Federal Savings and Loan Association (MWF), a federally insured savings institution, to issue up to $25 million in MWF subordinated debt securities. Petitioner, Stephen Adams, purchased $2.5 million of those securities from MWF through a private offering. Petitioner financed his investment with the proceeds from a promissory note with MWF that he executed on the same day. Shortly after the consummation of the sale, MWF applied the securities to its regulatory capital. Pet. App. 4a-5a, 8a-9a, 72a. /2/

Petitioner and MWF entered into a "Subordinated Debt Securities Agreement" at the time of the purchase. The Agreement gave petitioner certain limited remedies in the event of MWF's default. /3/ First, it provided that petitioner could accelerate payment in the event of default only to the extent that such payment did not leave MWF with insufficient capital to meet regulatory capital requirements set out in 12 C.F.R. 563.13 (1988). Second, it stated that if the Federal Savings and Loan Insurance Corporation (FSLIC) were appointed as a receiver for MWF, FSLIC would not have any obligation to arrange for the assumption of the securities. /4/ Third, it provided that petitioner agreed to abide by the Bank Board's priority regulations governing the distribution of assets in receivership proceedings. Both the security instruments themselves and the Agreement expressly provided that, in the event MWF were liquidated, petitioner's interests would be subordinated to claims of savings account holders and to all other claims having a priority equal to or greater than that of savings account holders. Pet. App. 5a-8a, 75a-77a.

2. In January 1989, the Bank Board concluded that MWF had improperly treated the securities issued to petitioner as regulatory capital, because petitioner had purchased them with unsecured funds borrowed from MWF. The Bank Board ordered MWF prospectively to cease treating the securities as such. On February 13, 1989, the Bank Board declared MWF insolvent and appointed the FSLIC as conservator for the institution. On March 21, 1989, petitioner filed a complaint in state court against MWF and its officers alleging that MWF's misrepresentations at the time of the sale violated both federal and state securities laws. Petitioner asked the court to rescind the securities sale and to allow a set-off of the amount that MWF owed him for the securities against his obligation to MWF under the outstanding promissory note. He also asserted state law remedies for fraud. Pet. App. 10a-12a, 73a.

On May 4, 1989, the Bank Board determined that MWF remained insolvent, and it appointed FSLIC as receiver pursuant to 12 U.S.C. 1464(d)(6)(A) and 12 C.F.R. Pt. 547 (1988) for the purpose of liquidating the institution. The Bank Board also found that the total liquidation of MWF could not generate sufficient funds to satisfy the claims of MWF's general creditors, and it therefore determined that all equity and subordinated debt interests in MWF were worthless. /5/ To effectuate the liquidation, the Bank Board created a new institution, Midwest Savings Association (Midwest), and immediately placed it into conservatorship. The Bank Board then directed FSLIC to enter into a purchase and assumption agreement with Midwest by which the majority of MWF's assets were transferred to Midwest in consideration for Midwest assuming certain liabilities of the failed institution. Under the agreement, Midwest did not assume any MWF subordinated debt or equity liabilities or obligations. As a result, Midwest received petitioner's promissory note while FSLIC, as receiver for MWF, retained MWF's obligations on the securities. Pet. App. 12a-14a, 73a-74a.

3. Petitioner's pending civil action was removed to the United States District Court for the District of Minnesota. Pet. App. 73a n.3. The Resolution Trust Corporation (RTC) thereafter assumed FSLIC's conservatorship and receivership responsibilities. RTC, acting as conservator for Midwest and receiver for MWF, sought to dismiss petitioner's claims seeking rescission of the securities transaction and a set-off against the promissory note. On February 9, 1989, the district court granted summary judgment for RTC. Id. at 70a-97a. The district court concluded that petitioner was estopped from rescinding his purchase because petitioner presumptively knew that the securities were used to increase MWF's regulatory capital, and the court concluded that petitioner was not entitled to a set-off because the securities and the promissory note were not mutual obligations. Id. at 80a-90a. The district court also dismissed petitioner's state-law based statutory and common law claims. Id. at 90a-94a. /6/

4. The court of appeals affirmed the district court's decisions, Pet. App. 1a-28a, relying on its decision, filed the same day, in Northwest Racquet Swim & Health Clubs, Inc. v. RTC, 927 F.2d 355, petition for cert. pending, No. 90-1825 (filed May 28, 1991). The court explained that "where investors in a federally regulated institution subordinate their claims in such a manner as to make the investments eligible for use as regulatory capital, and where the issuing institution applies such investments to regulatory capital, the investments must be regarded as fully encumbered by the regulatory obligation to remain subordinate to the claims of depositors and general creditors in the event of insolvency." Pet. App. 20a. Thus, once MWF was declared insolvent, petitioner could not rescind his obligation and share in any pro rata distribution with MWF's general creditors. Id. at 22a. The court also affirmed the district court's dismissal of petitioner's other claims. Id. at 22a-27a.

ARGUMENT

The court of appeals correctly affirmed the district court's determination that petitioner was not entitled to a rescission or set-off of the subordinated debt obligation. The court's decision rests on the application of established law to the facts of this case and does not conflict with any decision of this Court or another court of appeals. Further review is accordingly unwarranted. /7/

1. The court of appeals correctly applied its decision in Northwest Racquet to the essentially identical facts of this case. See Pet. App. 19a-23a. That decision holds that where a federally regulated financial institution has issued a subordinated debt security to meet regulatory capital requirements, an investor cannot rescind his purchase of the security once the institution becomes insolvent and the reserved capital must be called upon to satisfy the demands of unsubordinated creditors. See 927 F.2d at 362. In reaching that conclusion, the court of appeals properly followed the Second Circuit's decision in In re Weis Securities, Inc., 605 F.2d 590 (1978), cert. denied, 439 U.S. 1128 (1979). /8/

2. Petitioner mistakenly contends (Pet 26-30) that the court of appeals' decision is inconsistent with this Court's decision in Oppenheimer v. Harriman Nat'l Bank & Trust Co., 301 U.S. 206 (1937). In Oppenheimer, this Court permitted a shareholder of a national bank to maintain his action for rescission, but only after he had paid his statutory liability to other creditors pursuant to 12 U.S.C. 63 (1958) (repealed 1959). Oppenheimer, 301 U.S. at 211. The Court explained that the "(p)laintiff appeared by the bank's records to be a stockholder and, as against creditors for whose benefit the statutory liability was created, was estopped from denying that status." Id. at 214 & n. 14 (citing Scott v. Deweese, 181 U.S. 202 (1901)). The Court concluded, however, that "having fully paid his liability to the creditors, there is no reason why his claim should be subordinated to claims of stockholders on account of their deposit balances when the bank failed." Id. at 215. Thus, the court of appeals' decision follows Oppenheimer's underlying rationale that where an investor in an insolvent institution owes a legal obligation to the institution's general creditors, the investor must satisfy that obligation before it can rescind its investment. /9/

Petitioner also argues (Pet. 33-37) that the court of appeals' decision "distorts" the Second Circuit's decision in Weis because "the Weis investors knew that the broker-dealer was in precarious financial circumstances and their loans were being used to satisfy the regulators" (id. at 34). The court of appeals correctly rejected that argument in its Northwest Racquet decision. The court acknowledged that "the specific intention of the lenders in Weis was a factor in the Second Circuit's decision," but further explained that the Second Circuit's rationale "extends to situations in which parties subordinate their claims in such a manner as to make the investments eligible for use as regulatory capital." 927 F.2d at 362. "Any other result would undermine the regulatory protections and priorities accorded innocent third parties who rely upon stated capital reserves." Ibid. /10/

Petitioner is also mistaken in contending (Pet. 37 n.7) that the court of appeals' decision conflicts with the Ninth Circuit's decision in FDIC v. United States Nat'l Bank, 685 F.2d 270 (1982). In that case, the court permitted a defrauded subordinated debenture holder to rescind its purchase, because there was no evidence that the debentures were used as regulatory capital. 685 F.2d at 274. Indeed, the statute and regulations that applied in that case did not permit subordinated loans to be used as regulatory capital. Id. at 274-275. Hence, the Ninth Circuit's decision does not conflict with the court's decision in this case. See Northwest Racquet, 927 F.2d at 363 n.20.

3. Petitioner also argues (Pet. 40) that the court of appeals' decision deprives investors of "any realistic remedy." As the court expressly stated in Northwest Racquet, however, its decision does not affect an investor's remedies prior to a declaration of insolvency. 927 F.2d at 363. And contrary to petitioner's assertions (Pet. 40-43), there is no reason to believe that the court's decision will "impair the ability of surviving thrifts to raise capital." Indeed, petitioner's approach would result in thrifts raising reserved capital that simply vanishes, through rescission, upon a declaration of insolvency. The court's decision, by contrast, will provide greater prospects that a thrift's stated capital reserves will actually be available to meet the thrift's obligations to its creditors, and it will encourage investors to make prudent inquiry before investing in subordinated debt. /11/

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ALFRED J. T. BYRNE

General Counsel

GERALD L. JACOBS

Special Counsel

ANN S. DUROSS

Assistant General Counsel

RICHARD J. OSTERMAN, JR.

Senior Counsel

GREGORY E. GORE

Counsel Resolution Trust Corporation

AUGUST 1991

/1/ The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), Pub. L. No. 101-73, abolished the Bank Board and replaced it with the Office of Thrift Supervision, Sections 301, 401, 103 Stat. 278, 354; see 12 U.S.C. 1462a (Supp. I 1989).

/2/ Federally chartered financial institutions must meet federally prescribed capital requirements. Under the Bank Board's regulations, regulatory capital included reserve accounts, retained earnings, permanent common stock, securities constituting equity capital, appraised equity capital, and any other nonwithdrawable reserve accounts that could be used to satisfy the claims of depositors and other account holders. Pet. App. 9a n.6. The Bank Board also included subordinated debt securities as regulatory capital pursuant to 12 C.F.R. 561.13(c)(1) (1988). See Pet. App. 9a n.6.

/3/ The Agreement defined default by MWF to include the failure to make timely payments of interest or principal, the declaration of insolvency and appointment of a conservator, receiver or liquidating agent, and any false representations or warranties made by MWF in connection with the contemplated transactions. Pet. App. 5a-6a.

/4/ Congress has since abolished FSLIC. See FIRREA, Section 401(a), 103 Stat. 354. The Resolution Trust Corporation (RTC) assumed the FSLIC liquidation function for all savings and loan institutions placed in conservatorship or receivership after January 1, 1989. FIRREA, Section 501(b)(3)(A), 103 Stat. 369, 12 U.S.C. 1441a(b)(3)(A) (Supp. I 1989).

/5/ Under the FSLIC priority scheme, subordinated debt holders were paid only after all other creditors, except equity interest holders, were paid. 12 C.F.R. 569c.11 (1989). See Pet. App. 8a n.5.

/6/ Petitioner also filed a separate, but related, action against FSLIC in its corporate capacity alleging that FSLIC's purchase and assumption agreement was unlawful and that he was entitled to pro rata distribution. Pursuant to FIRREA, the Federal Deposit Insurance Corporation (FDIC) was substituted for FSLIC with respect to that claim. See FIRREA, Section 401, 103 Stat. 354. On February 23, 1990, the district court dismissed that action based on its reasoning in the prior action. Pet. App. 98a-100a.

/7/ The same issue is presented in the petition for a writ of certiorari in Northwest Racquet Swim & Health Clubs, Inc. v. RTC, No. 90-1825.

/8/ In Weis, a securities broker borrowed money to meet the securities industry's regulatory capital requirements. The lenders subordinated their loans to the claims of other creditors in exchange for a higher rate of return. When the broker became insolvent, the lenders sought to rescind the loan agreements based -- as here -- on claims of fraudulent inducement. The Second Circuit held that the lenders were not entitled to post-insolvency rescission, because the loans were applied to meet regulatory capital requirements and the lenders were estopped, by their acceptance of their subordinated status, to make post-insolvency challenges to that status. 605 F.2d at 596-597.

The same principle applies in this case. As the court of appeals explained, the regulatory capital requirements of the thrift industry, like those in the securities industry, are designed to protect the interests of the unsubordinated creditors. Northwest Racquet, 927 F.2d at 360-361. That protection would be similarly undermined if an investor who purchases a thrift institution's subordinated debentures may rescind his agreement and compromise the associated capital reserves once insolvency occurs. Cf. Scott v. Deweese, 181 U.S. 202 (1901) (holding that an equity shareholder of a national bank who alleged fraud in the inducement may not obtain a post-insolvency rescission of his subscription).

/9/ Petitioner suggests that Oppenheimer stands for the proposition that "unless Congress 'unquestionably' demonstrates an intention not to allow investors to rescind fraudulently induced investments, they have that right." Pet. 30. Both the Eighth and the Second Circuits, however, have rejected that argument. See Northwest Racquet, 927 F.2d at 362 n.17; Weis, 605 F.2d at 596 n.12. No other court of appeals has considered the matter. Thus, even if there were merit to petitioner's argument, the question is not ripe for this Court's resolution.

/10/ Here, petitioner was clearly on notice that his investment would be applied to regulatory capital requirements. See Pet. App. 20a-21a, 88a-89a. Compare Weis, 605 F.2d at 595 ("one who purchased bank shares must be conclusively presumed to have known that he had increased the bank's capital and had facilitated its conduct of business" (citing Scott v. Deweese, 181 U.S. at 212)).

/11/ There is no merit to petitioner's argument (Pet. 31-33) that the court of appeals' "real rationale" in this case was to protect the government at the expense of a private party. The court's "real rationale" is the rationale set forth in the panel's unanimous opinion. Similarly, there is no merit to petitioner's rhetoric (Pet. 38-40) that the court of appeals has allowed the federal government to "complete" MWF's alleged fraud. The court of appeals' decision simply gives effect to the expectations of all general creditors, both public and private, that their claims will remain superior to subordinated claims.

NORTHWEST RACQUET SWIM & HEALTH CLUBS, INC., PETITIONER V. RESOLUTION TRUST CORPORATION, ET AL.

No. 90-1825

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Eighth Circuit

Brief For The Respondents In Opposition

TABLE OF CONTENTS Question presented Opinions below Jurisdiction Statement Argument Conclusion OPINIONS BELOW

The opinion of the court of appeals (Pet. App. A3-A19) is reported at 927 F.2d 355. The September 25, 1989, memorandum opinion and order of the district court (Pet. App. A20-A33) is reported at 721 F. Supp. 211. The December 5, 1989, memorandum opinion of the district court (Pet. App. A35-A39) is unreported.

JURISDICTION

The judgment of the court of appeals was entered on February 28, 1991. The petition for writ of certiorari was filed on May 28, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether petitioner is entitled to rescind its purchase of subordinated securities from a now insolvent thrift institution where the purchase agreement and the applicable regulations indicated that the securities would be used to meet the institution's regulatory capital requirements.

STATEMENT

1. The Federal Home Loan Bank Board formerly served as the principal regulator of federally chartered thrift institutions. /1/ Among other matters, the Bank Board specified terms and conditions under which thrift institutions could issue subordinated debt securities. See 12 C.F.R. 563.8-1 (1988). On December 21, 1987, the Bank Board approved a request from Midwest Federal Savings and Loan Association (MWF), a federally insured savings institution, to issue up to $25 million in MWF subordinated debt securities. Petitioner, Northwest Racquet Swim & Health Clubs, Inc., purchased $15 million of those securities from MWF through a private offering. Petitioner financed its investment with the proceeds from two promissory notes with MWF, totaling $59 million, that it executed shortly before the securities purchase. Shortly after the consummation of the sale, MWF applied the securities to its regulatory capital. Pet. App. A4-A6, A21-A23. /2/

Petitioner and MWF entered into a "Subordinated Debt Securities Agreement" at the time of the purchase. The Agreement gave petitioner certain limited remedies in the event of MWF's deault. /3/ First, it provided that petitioner could accelerate payment in the event of default only to the extent that such payment did not leave MWF with insufficient capital to meet regulatory capital requirements set out in 12 C.F.R. 563.13 (1988). Second, it stated that if the Federal Savings and Loan Insurance Corporation (FSLIC) were appointed as a receiver for MWF, FSLIC would not have any obligation to arrange for the assumption of the securities. /4/ Third, it provided that petitioner agreed to abide by the Bank Board's priority regulations governing the distribution of assets in receivership proceedings. Both the security instruments themselves and the Agreement expressly provided that, in the event MWF were liquidated, petitioner's interests would be subordinated to claims of savings account holders and to all other claims having a priority equal to or greater than that of savings account holders. Pet. App. A4-A6, A21-A22.

2. In January 1989, the Bank Board concluded that MWF had improperly treated the securities issued to petitioner as regulatory capital, because petitioner had purchased them with unsecured funds borrowed from MWF. The Bank Board ordered MWF prospectively to cease treating the securities as such. Shortly thereafter, petitioner notified MWF that it considered the subordinated debt securities to be in default, accelerated payment of the principal, and demanded immediate payment. It also declared a set-off of MWF's obligations to petitioner under the securities arrangement against the amounts petitioner owed MWF under the two promissory notes that petitioner had used to finance the securities purchase. Pet. App. A6-A7, A23.

On February 13, 1989, the Bank Board declared MWF insolvent and appointed the FSLIC as conservator for the institution. One month later, petitioner returned the securities with a letter of rescission declaring that MWF had misrepresented its financial condition and that petitioner was entitled to an immediate set-off. Shortly thereafter, petitioner filed a complaint in state court alleging that MWF's misrepresentations at the time of the sale violated both federal and state securities laws. Petitioner asked the court to declare that the securities sale was rescinded and that the rescission gave petitioner the status of a general creditor, thus entitling petitioner to set-off the amount MWF owed it for the securities against the amount petitioner owed MWF on the notes. Pet. App. A7-A8, A23-A24.

On May 4, 1989, the Bank Board determined that MWF remained insolvent, and it appointed FSLIC as receiver pursuant to 12 U.S.C. 1464(d)(6)(A) and 12 C.F.R. Pt. 547 (1988) for the purpose of liquidating the institution. The Bank Board also found that the total liquidation of MWF could not generate sufficient funds to satisfy the claims of MWF's general creditors, and it therefore determined that all equity and subordinated debt interests in MWF were worthless. /5/ To effectuate the liquidation, the Bank Board created a new institution, Midwest Savings Association (Midwest), and immediately placed it into conservatorship. The Bank Board then directed FSLIC to enter into a purchase and assumption agreement with Midwest by which the majority of MWF's assets were transferred to Midwest in consideration for Midwest assuming certain liabilities of the failed institution. Under the agreement, Midwest did not assume any MWF subordinated debt or equity liabilities or obligations. As a result, Midwest received petitioner's promissory notes while FSLIC, as receiver for MWF, retained MWF's obligations on the securities. Pet. App. A8-A9, A24.

3. Petitioner's pending civil action was removed to the United States District Court for the District of Minnesota. Pet. App. A24 n.3. FSLIC, acting as conservator for Midwest and receiver for MWF, then sought to dismiss petitioner's claims seeking rescission of the securities transaction and a set-off against the promissory notes. On September 25, 1989, the district court granted FSLIC's motion, on behalf of Midwest, for summary judgment. Id. at A20-A33. The district court concluded that petitioner was estopped from rescinding its purchase because petitioner presumptively knew that the securities were used to increase MWF's regulatory capital, and the court concluded that petitioner was not entitled to a set-off because the securities and the promissory notes were not mutual obligations. Id. at A26, A29. The Resolution Trust Corporation (RTC) thereafter assumed FSLIC's conservatorship and receivership responsibilities. On December 5, 1989, the district court granted the RTC's motion, on behalf of MWF, for summary judgment. The court rejected petitioner's claims against MWF for the same reasons that it rejected petitioner's claims against Midwest. Id. at A34-A39.

4. The court of appeals affirmed the district court's decisions. Pet. App. A3-A19. The court of appeals agreed with the district court that petitioner "clearly subordinated its investment in a manner that made it eligible for use as regulatory capital," id. at A17, and that petitioner's investment "must be regarded as fully encumbered by the regulatory obligation to remain subordinate to the claims of depositors and general creditors in the event of insolvency," id. at A18. Thus, once MWF was declared insolvent, petitioner could not rescind the obligation. Ibid. "The continuing subordinated status of the Securities means that they lack the requisite mutuality of obligation required to set them off with the promissory note which possesses a superior general creditor rank." Id. at A18-A19.

ARGUMENT

The court of appeals correctly affirmed the district court's determination that petitioner was not entitled to a rescission or set-off of the subordinated debt obligation. The court's decision rests on the application of established law to the facts of this case and does not conflict with any decision of this Court or another court of appeals. Further review is accordingly unwarranted. /6/

1. The court of appeals and the district court held that where a federally regulated financial institution has issued a subordinated debt security to meet regulatory capital requirements, an investor cannot rescind his purchase of the security once the institution becomes insolvent and the reserved capital must be called upon to satisfy the demands of unsubordinated creditors. Pet. App. A16. As the court of appeals explained, "Any other result would undermine the regulatory protections and priorities accorded innocent third parties who rely upon stated capital reserves." Ibid. See also id. at A30. In reaching that conclusion, the lower courts properly followed the Second Circuit's decision in In re Weis Securities, Inc., 605 F.2d 590 (1978), cert. denied, 439 U.S. 1128 (1979).

In Weis, a securities broker borrowed money to meet the securities industry's regulatory capital requirements. The lenders subordinated their loans to the claims of other creditors in exchange for a higher rate of return. When the broker became insolvent, the lenders sought to rescind the loan agreements based -- as here -- on claims of fraudulent inducement. The Second Circuit held that the lenders were not entitled to post-insolvency rescission, because the loans were applied to meet regulatory capital requirements and the lenders were estopped, by their acceptance of their subordinated status, to make post-insolvency challenges to that status. 605 F.2d at 596-597. See Pet. App. A11-A14.

The same principle applies in this case. As the court of appeals explained, the regulatory capital requirements of the thrift industry, like those in the securities industry, are designed to protect the interests of the unsubordinated creditors. Pet. App. A13-A14. That protection would be similarly undermined if an investor who purchases a thrift institution's subordinated debentures may rescind his agreement and compromise the associated capital reserves once insolvency occurs. Cf. Scott v. Deweese, 181 U.S. 202 (1901) (holding that an equity shareholder of a national bank who alleged fraud in the inducement may not obtain a post-insolvency rescission of his subscription).

2. Petitioner mistakenly contends (Pet 12-14) that the court of appeals' decision is inconsistent with this Court's decision in Oppenheimer v. Harriman Nat'l Bank & Trust Co., 301 U.S. 206 (1937). In Oppenheimer, this Court permitted a shareholder of a national bank to maintain his action for rescission, but only after he had paid his statutory liability to other creditors pursuant to 12 U.S.C. 63 (1958) (repealed 1959). Oppenheimer, 301 U.S. at 211. The Court explained that the "(p)laintiff appeared by the bank's records to be a stockholder and, as against creditors for whose benefit the statutory liability was created, was estopped from denying that status." Id. at 214 & n. 14 (citing Scott v. Deweese, supra). The Court concluded, however, that "having fully paid his liability to the creditors, there is no reason why his claim should be subordinated to claims of stockholders on account of their deposit balances when the bank failed." 301 U.S. at 215. Thus, the court of appeals' decision follows Oppenheimer's underlying rationale that where an investor in an insolvent institution owes a legal obligation to the institution's general creditors, the investor must satisfy that obligation before it can rescind its investment. See Pet. App. A14 n.17.

Similarly, petitioner is mistaken in contending (Pet. 15-17) that the court of appeals' decision conflicts with the Ninth Circuit's decision in FDIC v. United States Nat'l Bank, 685 F.2d 270 (1982). In that case, the court permitted a defrauded subordinated debenture holder to rescind its purchase, because there was no evidence that the debentures were used as regulatory capital. 685 F.2d at 274. Indeed, the statute and regulations that applied in that case did not permit subordinated loans to be used as regulatory capital. Id. at 274-275. Hence, as the court of appeals explained, Pet. App. A18 n.20, the Ninth Circuit's decision does not conflict with the court's decision in this case.

3. Petitioner also asserts (Pet. 17-18) that the court of appeals' decision bars investors from pursuing statutory remedies for fraud under the federal securities laws and Minnesota law. The court expressly stated, however, that "we do not hold that a subordinated investor who has agreed to terms and conditions that make his investment eligible for inclusion in regulatory capital never has recourse for fraud. We hold only that such investors may not rescind after the issuing institution has been declared insolvent." Pet. App. A18. Thus, the court of appeals' decision involves only post-insolvency remedies and does not have the broad consequences that petitioner suggests.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ALFRED J. T. BYRNE

General Counsel

GERALD L. JACOBS

Special Counsel

ANN S. DUROSS

Acting Assistant General Counsel

RICHARD J. OSTERMAN, JR.

Senior Counsel

GREGORY E. GORE

Counsel Resolution Trust Corporation

AUGUST 1991

/1/ The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), Pub. L. No. 101-73, abolished the Bank Board and replaced it with the Office of Thrift Supervision, Sections 301, 401, 103 Stat. 278, 354; see 12 U.S.C. 1462a (Supp. I 1989).

/2/ Federally chartered financial institutions must meet federally prescribed capital requirements. Under the Bank Board's regulations, regulatory capital included reserve accounts, retained earnings, permanent common stock, securities constituting equity capital, appraised equity capital, and any other nonwithdrawable reserve accounts that could be used to satisfy the claims of depositors and other account holders. Pet. App. A6 n.8. The Bank Board also included subordinated debt securities as regulatory capital pursuant to 12 C.F.R. 561.13(c)(1) (1988). See Pet. App. A6 n.8.

/3/ The Agreement defined default by MWF to include the failure to make timely payments of interest or principal, the declaration of insolvency and appointment of a conservator, receiver or liquidating agent, and any false representations or warranties made by MWF in connection with the contemplated transactions. Pet. App. A5.

/4/ Congress has since abolished FSLIC. See FIRREA, Section 401(a), 103 Stat. 354. The Resolution Trust Corporation (RTC) assumed the FSLIC liquidation function for all savings and loan institutions placed in conservatorship or receivership after January 1, 1989. FIRREA, Section 501(b)(3)(A), 103 Stat. 369, 12 U.S.C. 1441a(b)(3)(A) (Supp. I 1989).

/5/ Under the FSLIC priority scheme, subordinated debt holders were paid only after all other creditors, except equity interest holders, were paid. 12 C.F.R. 569c.11 (1989). See Pet. App. A6 n.7.

/6/ The same issue is presented in the petition for a writ of certiorari in Adams v. RTC, No. 90-1851.

ANA LUCIA HODGE, ET AL., PETITIONERS V. UNITED STATES DEPARTMENT OF JUSTICE

No. 91-83

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Fifth Circuit

Brief For The Respondent

OPINIONS BELOW

The opinion of the court of appeals in Hodge v. United States Department of Justice (Pet. App. A1-A12) is reported at 929 F.2d 153. The opinion of the Board of Immigration Appeals in that case (Pet. App. A13-A15) is unreported.

The opinion of the court of appeals in Escobedo-Gonzalez v. INS (Pet. App. A21-A22) is unreported, as is the opinion of the Board of Immigration Appeals (Pet. App. A23-A25) in that case.

The opinion of the court of appeals in Amador-Castillo v. INS (Pet. App. A28-A30), is unreported, as is the opinion of the Board of Immigration Appeals (Pet. App. A31-A33) in that case.

JURISDICTION

The judgments of the court of appeals in Hodge and Amador-Castillo were entered on April 4, 1991, and the judgment in Escobedo-Gonzalez was entered on April 22, 1991. The petition for a writ of certiorari, including all three cases, was filed on July 2, 1991. This Court's jurisdiction is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether the Equal Access to Justice Act, 5 U.S.C. 504 and 28 U.S.C. 2412(d), authorizes the award of attorney's fees for work performed in connection with administrative deportation proceedings conducted by the Immigration and Naturalization Service.

STATEMENT

Petitioners are three individuals who prevailed in individual administrative deportation proceedings; each thereafter sought an award of attorney's fees under EAJA for his attorney's work in those proceedings. In each case, an immigration judge denied the fee request, and the Board of Immigration Appeals affirmed. Pet. App. A13, A23, A31-A32.

Each petitioner thereafter sought review by the Fifth Circuit of the denial of EAJA fees. In Hodge, the lead case, the court of appeals issued an opinion holding that EAJA does not apply to administrative deportation proceedings. Pet. App. A1-A11. The panel noted the "overwhelming judicial authority" contrary to petitioner's position (id. at A7), and aligned itself with that authority. /1/ Judge Goldberg dissented. Id. at A11-A12.

The same panel decided Amador-Castillo on the same date, on the basis of Hodge; Judge Goldberg again dissented. Pet. App. A28-A30. Shortly thereafter, a different panel relied on Hodge in denying the petition for review in Escobar-Gonzalez. Id. at A21-A22.

ARGUMENT

As petitioners acknowledge (Pet. 15-16, 20), their petition raises the same issue that is before the Court in Ardestani v. INS, cert. granted, No. 90-1141 (Mar. 4, 1991). Ardestani has been fully briefed in this Court, and is scheduled for oral argument on October 8, 1991. Accordingly, the instant petition should be held pending the Court's decision in Ardestani, and should then be disposed of in light of that decision.

Contrary to petitioners' suggestion, there is no reason for the Court to grant plenary review in the instant case. Although petitioners state that they have raised "additional arguments" (Pet. 20), their arguments are not significantly different from the arguments of petitioner and amici in Ardestani. /2/ Thus, there is no reason for the Court to depart from its customary practice of holding subsequent petitions for certiorari raising issues identical to those already pending on writ of certiorari, and then disposing of the subsequent petitions as appropriate in light of the decision in the case pending on writ of certiorari.

CONCLUSION

The petition for a writ of certiorari should be held pending this Court's decision in Ardestani v. INS, No. 90-1141, and thereafter disposed of as appropriate in light of that decision.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

STUART M. GERSON

Assistant Attorney General

WILLIAM KANTER

JOHN S. KOPPEL

Attorneys

AUGUST 1991

/1/ The court of appeals noted that while the Ninth Circuit has held (in Escobar-Ruiz v. INS, 838 F.2d 1020 (1988)) that EAJA applies to INS administrative proceedings since they are similar to those governed by the Administrative Procedure Act, four other circuits have concluded that EAJA extends only to administrative proceedings which -- unlike those conducted by the INS -- are subject to the APA. Pet. App. A4-A6, citing Clarke v. INS, 904 F.2d 172 (3d Cir. 1990); Ardestani v. INS, 904 F.2d 1505 (11th Cir. 1990), cert. granted, No. 90-1141 (Mar. 4, 1991); St. Louis Fuel & Supply Co. v. FERC, 890 F.2d 446 (D.C. Cir. 1989); and Owens v. Brock, 860 F.2d 1363 (6th Cir. 1988). Two more circuits have since joined the majority view, concluding that EAJA fees are not available for work performed in INS deportation proceedings. Escobar v. INS, 935 F.2d 650 (4th Cir. 1991); Hashim v. INS, 936 F.2d 711 (2d Cir. 1991).

/2/ We have addressed those arguments in our brief in Ardestani, a copy of which we are supplying to counsel for petitioners.

TRAPPER MINING, INC., ET AL., PETITIONERS V. MANUEL LUJAN, JR., SECRETARY OF THE INTERIOR, ET AL.

No. 90-1940

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Tenth Circuit

Brief For The United States In Opposition

TABLE OF CONTENTS Questions presented Opinions below Jurisdiction Statement Argument Conclusion OPINIONS BELOW

The opinion of the court of appeals, Pet. App. A1-A14, is reported at 923 F.2d 774. The bench ruling and orders of the district courts, Pet. App. A15-A32, A35-A40, are unreported. The decisions of the Interior Board of Land Appeals (IBLA), Pet. App. A41-A51, A52-A65, are reported at 106 I.B.L.A. 339 and 103 I.B.L.A. 366.

JURISDICTION

The judgment of the court of appeals was entered on January 15, 1991. A joint petition for rehearing was denied on March 20, 1991. Pet. App. A66-A67. The petition for a writ of certiorari was filed on June 18, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

Petitioners entered into leases to mine coal on federal land pursuant to a statute that provided for readjustment of the terms of such leases at 20-year intervals "unless otherwise provided by law at the time of the expiration of such periods," 30 U.S.C. 207 (1970). The questions presented are:

1. Whether petitioners' coal leases, which incorporate the statutory provision, permitted Congress to reduce the readjustment interval from 20 years to 10 years effective at the expiration of the 20-year readjustment period.

2. Whether the 1976 amendments to the statute, 30 U.S.C. 207(a), reduced the readjustment interval of petitioners' coal leases from 20 years to 10 years at the expiration of the 20-year readjustment period.

STATEMENT

1. Petitioners Trapper Mining Inc. (Trapper) and Wyodak Resources Development Corp. (Wyodak) obtained leases to mine coal on federally-owned lands in Colorado and Wyoming from the Department of the Interior under Section 7 of the Mineral Leasing Act (MLA), 30 U.S.C. 207 (1970). Section 7 required that leases be granted "for indeterminate periods upon condition of diligent development and continued operation of the mine or mines"; that the Secretary condition leases upon payment of a minimum production royalty of five cents per ton; and that "at the end of each twenty-year period succeeding the date of the lease such readjustment of terms and conditions may be made as the Secretary of the Interior may determine, unless otherwise provided by law at the time of the expiration of such periods." Ibid.

Each of petitioners' leases provides for readjustment in terms and at intervals consistent with Section 7. Section 3(d) reserves to the government:

The right reasonably to readjust and fix royalties payable hereunder and other terms and conditions at the end of 20 years from the date hereof and thereafter at the end of each succeeding 20-year period during the continuance of this lease unless otherwise provided by law at the time of the expiration of any such period.

Pet. App. A3, A76.

2. In 1976, Congress revised the coal leasing provisions of the MLA in the Federal Coal Leasing Amendments Act (FCLAA), Pub. L. No. 94-377, 90 Stat. 1083. Section 6 of the FCLAA, 90 Stat. 1087 (codified at 30 U.S.C. 207), amended Section 7 of the MLA, 30 U.S.C. 207 (1970). Among other changes, Section 6 requires the payment of royalties, "in such amount as the Secretary shall determine," of not less than 12.5 percent of the value of coal mined. 30 U.S.C. 207(a). Section 6 also requires readjustment of leases at the end of the "primary term of twenty years and at the end of each ten-year period thereafter if the lease is extended." Ibid. /1/ Consistent with Section 6, the Secretary promulgated regulations in 1976 providing that "(a)ll coal leases will be subject to readjustment at the end of the first 20-year period following issuances of the lease and at each ten-year period thereafter." 41 Fed. Reg. 56,646 (formerly codified at 43 C.F.R. 3522.2-1(b)(1977)). The current regulations, issued in 1979, likewise provide that all pre-FCLAA leases (i.e., those issued prior to August 4, 1976) "shall be subject to readjustment at the end of their current 20-year period and at the end of each 10-year period thereafter." 43 C.F.R. 3451.1(a)(1).

3. Since Trapper's predecessor in interest obtained its two leases in 1958, and Wyodak obtained its lease in 1959, the leases at issue in this case first became subject to readjustment in 1978 and 1979. The Interior Department's Bureau of Land Management (BLM) forfeited the government's right to readjust the terms of the leases at that time, however, by sending an untimely notice of readjustment to Trapper and by failing to send actual changes in terms and conditions to Wyodak despite a timely notice. Pet. App. A4, A25, A54; see Rosebud Coal Sales Co. v. Andrus, 667 F.2d 949, 952-953 (10th Cir. 1982); Kaiser Steel Corp., 63 I.B.L.A. 363 (1982). The BLM subsequently notified petitioners that their leases would be readjusted 10 years after the twentieth anniversaries of the leases in accordance with Section 6 of the FCLAA. /2/ Pet. App. A4.

Both petitioners told the BLM that they objected to the 1988 and 1989 readjustment of their coal leases. They argued that the readjustment interval could be modified only through a valid readjustment by the Secretary, which could not occur until the expiration of another 20-year period. The BLM overruled that objection. Pet. App. A44, A56. On appeal, the IBLA affirmed the BLM's decisions in relevant part. Pet. App. A41-A51, A52-A65.

4. Trapper and Wyodak filed petitions for review in the United States District Courts for the Districts of Colorado and Wyoming. Pet. App. A4.

The Colorado district court affirmed the readjustment of Trapper's leases. Pet. App. A35-A39. It noted that the government may modify contracts by subsequent legislation and held that the "clear language" of the statute and relevant case law indicate that Congress intended the ten-year period mandated by the FCLAA to apply automatically to Trapper's leases on their twentieth anniversaries. Ibid.

The Wyoming district court reversed the readjustment of Wyodak's lease. Pet. App. A23-A32. It held that the 20-year readjustment period is simply a "term" of the lease, and, like other terms and conditions of Wyodak's lease, could not be changed absent a valid readjustment by the Secretary. Ibid.

5. The court of appeals consolidated the two cases and upheld the readjustment of petitioners' leases. Pet. App. A1-A22. First, the court stated that Congress has the authority to modify contracts through subsequent legislation unless such authority is "surrendered in unmistakable terms." Pet. App. A7. Petitioners' leases did not surrender the power to modify the readjustment interval by statute; to the contrary, they expressly provided for readjustment by the Secretary every 20 years "unless otherwise provided by law" at the end of such a period. Ibid. The court rejected petitioners' argument that this "exception" only reserved to Congress the power to control the Secretary's authority to readjust the coal leases. It held that Congress instead reserved the power to establish by statute a new readjustment interval for federal coal leases to apply at the expiration of a 20-year period. Pet. App. A7-A9.

Second, the court of appeals concluded that Congress exercised its authority in Section 6 of the FCLAA. The plain language of the statute states that leases "will be" subject to readjustment every ten years after the first 20-year period ends. Pet. App. A10. The court concluded that the mandatory language is "self-executing" and "directly imposes the new interval rather than just modifying the Secretary's authority over the term." Ibid. The court distinguished other provisions in Section 6, such as the one requiring a minimum royalty rate, because they are "couched as a restriction on the Secretary's power" to readjust, "not as a direct imposition of the new rate." Pet. App. A10, A12.

ARGUMENT

1. The first question presented is of limited and diminishing significance. It concerns the readjustment interval in federal coal leases entered into before passage of the FCLAA in 1976. It arises only in leases that the Secretary mistakenly fails to adjust. And it has been decided only by the court of appeals in this case. Since the lower court's decision is correct and does not conflict with any decision of this Court or of any other court of appeals, further review is not warranted.

a. Petitioners read their coal leases to say that "Congress did not reserve the power to directly modify the twenty-year interval or any other terms in the petitioners' lease agreements by legislation." Pet. 14. Petitioners rely on Section 3(d) of their leases, which reserves to the government:

The right reasonably to readjust and fix royalties payable hereunder and other terms and conditions at the end of 20 years from the date hereof and thereafter at the end of each succeeding 20-year period during the continuance of this lease unless otherwise provided by law at the time of the expiration of any such period.

Pet. App. A3, A76 (emphasis added).

Contrary to petitioners' interpretation, the "unless otherwise provided by law" clause reserves to the government the authority to change -- "by law" -- the readjustment interval (and any "other terms and conditions" of the lease) "at the time of the expiration of any such (20-year readjustment) period." Although petitioners suggest that the scope of the clause is ambiguous, Pet. 13-14, that ambiguity does not affect the proper disposition of this case. Whether the clause modifies all the "terms and conditions" of the lease or just the readjustment interval, it plainly reserves Congress's statutory authority to reduce from 20 years to 10 years the period during which the Secretary may not readjust the lease.

The "unless otherwise provided by law" clause cannot plausibly be read to modify the Secretary's "right" to readjust. Congress has the right to limit the Secretary's authority, regardless of the lease provision, and may exercise that right at times other than "at the time of the expiration of any such (20-year readjustment) period." Pet. App. A3. It is likewise implausible to read the clause to modify the word "reasonable," for on that view, Congress would have reserved to itself the power to impose "unreasonable" terms on lessees. See Pet. App. A8. /3/

Although Section 3(d) goes on to provide petitioners with notice and an opportunity to object to proposed readjusted terms, Pet. 5, the notice and comment provision does not (contrary to petitioners' contention, Pet. 12 & n.3) surrender the government's authority to impose a new readjustment interval by law. The Secretary's "right reasonably to readjust" the lease terms -- and the notice and comment procedure that accompanies it -- is expressly superseded if "otherwise provided by law at the time of the expiration of any such" readjustment interval.

Petitioners also cite the introductory paragraph of their leases, which incorporates the law in effect at that time, as evidence that the lease agreements are immune from subsequent legislation. Pet. 12. The affirmative incorporation of existing law, however, does not impliedly exclude the applicability of subsequent legislation. Instead, the reservation of authority to readjust the lease and to impose other changes "provided by law" makes clear that the parties to the lease anticipated the need to comply with subsequent legislation.

b. Even if the leases did not expressly "reserve" Congress's authority to modify the readjustment interval by law, Pet. 14 (emphasis added), Congress would nevertheless retain that authority because it did not "surrender()" it "in unmistakable terms," Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 52 (1986) (quoting Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 148 (1982) (emphasis added)). In Public Agencies, this Court reiterated the principles governing contractual relationships between the United States and private parties. It emphasized "this Court's often-repeated admonitions that contracts should be construed, if possible, to avoid foreclosing exercise of sovereign authority." 477 U.S. at 52-53. Accordingly, contracts -- including those to which the government is a party -- remain "'subject to subsequent legislation' by the sovereign" unless its authority to exercise such right is "surrendered in unmistakable terms." Id. at 52 (quoting Merrion, 455 U.S. at 148).

The coal leases in this case did not surrender Congress's power to enact subsequent legislation affecting the government's contracts under the MLA. As the court of appeals pointed out, the statutory phrase, "unless otherwise provided by law at the time of the expiration of such (readjustment) periods," 30 U.S.C. 207 (1970), is echoed in petitioners' original pre-FCLAA leases. Pet. App. A7. Reasoning that interpretations of contracts "which would immunize them from the sovereign power of the United States to change its laws should be avoided," ibid. (citing Public Agencies), the court of appeals correctly concluded that Congress did not surrender its power to change the readjustment interval by statute, ibid.

Petitioners assert that since the government drafted the coal leases (in language tracking Section 7 of the MLA), any ambiguity should be construed against the United States, as it might be construed against a private party. Pet. 14. But the government is not a private party, and -- as this Court has repeatedly held -- any surrender of governmental regulatory authority through contract must be expressed in "clear and unmistakable" terms. Merrion, 455 U.S. at 148; accord Public Agencies, 477 U.S. at 52. Although petitioners assert that the rules applicable to private parties apply to the government when it enters into a commercial contract, the Court rejected precisely that argument in Public Agencies:

While the Federal Government, as sovereign, has the power to enter contracts that confer vested rights, and the concomitant duty to honor those rights, see Perry v. United States, 294 U.S. 330, 350-354 (1935); Lynch v. United States, 292 U.S. 571 (1934), we have declined in the context of commercial contracts to find that a "sovereign forever waives the right to exercise one of its sovereign powers unless it expressly reserves the right to exercise that power in" the contract.

477 U.S. at 52 (quoting Merrion, 455 U.S. at 148) (emphasis added). Compare Pet. 16 (omitting italicized words). /4/

2. The second question presented is whether Congress exercised its authority to change the readjustment interval in petitioners' coal leases by Section 6 of the FCLAA. Petitioners concede (Pet. 17) that this question does not independently merit this Court's review. It presents a narrow question of statutory construction which the court of appeals correctly decided.

Section 6 of the FCLAA expressly states that "rentals and royalties and other terms and conditions of the lease will be subject to readjustment" every 10 years after the first 20-year period ends. 30 U.S.C. 207(a) (emphasis added). The court correctly characterized that change as "mandatory" and "self-executing." Pet. App. A10. Petitioners argue that the lease conditions subject to readjustment are limited to those specified in the preceding sentences of Section 6. Pet. 18. But the quoted language does not state that "the preceding conditions will be subject to readjustment every ten years"; it states that "rentals and royalties and other terms and conditions" will be. 30 U.S.C. 207(a) (emphasis added).

Petitioners also contend that the "design" and legislative history of the statute fail to support the court of appeals' interpretation. Pet. 18. As the court of appeals correctly recognized, however, the statutory provisions petitioners cite do not deprive Congress of the authority to modify the readjustment interval by law. Pet. App. A12. And although the court rested its holding on the plain language of Section 6, "without reference to the legislative history," it noted that the House debate "supports our conclusion that Congress intended to change the readjustment interval by statute," rather than through the readjustment process. Pet. App. A13. Compare H.R. Rep. No. 681, 94th Cong., 2d Sess. 24 (1975) ("H.R. 6721 provides for a readjustment in the terms of the lease at the end of the 20th year and every ten years thereafter instead of a readjustment every 20 years as provided in the present law" (emphasis added)), with ibid. ("H.R. 6721 permits the Secretary to waive the requirement for continued operation" (emphasis added)).

Petitioners assert that the court of appeals' interpretation makes an "irrational distinction" between the ten-year interval and "other terms and conditions" of the leases. Pet. 18, 19. Contrary to petitioners' contention, treating the readjustment interval differently from other provisions of Section 6 (such as the one governing the Secretary's determination of royalty rates), is entirely consistent with Section 6. As the court of appeals explained:

(T)he language in (Section) 6 mandating the royalty rate only affects the Secretary's control over the term. It states that "(a) lease shall require payment of a royalty in such amount as the Secretary shall determine of not less than 12 1/2 per centum." (Emphasis added.) This requirement is couched as a restriction on the Secretary's power, not as a direct imposition of the new rate.

Pet. App. A10. By contrast, there is no express provision subjecting the length of the readjustment period to readjustment. That reflects the fact that the Secretary has never had the authority to dictate the readjustment iterval of coal leases, and therefore "cannot thwart the intent of Congress by simply not undertaking a readjustment" -- leaving the leases with their original twenty-year readjustment intervals in force despite the terms of the FCLAA. Pet. App. A11.

Although petitioners appeal to the sanctity of contracts and "basic fairness," Pet. 16, they have no contractual right to oppose a ten-year readjustment interval. If the Secretary had proposed that change in 1988 and 1989, petitioners would have no legal ground for avoiding it. The Secretary's procedural misstep allowed petitioners to operate ten more years under the terms of their original leases. They are not entitled to 20 years.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

BARRY M. HARTMAN

Acting Assistant Attorney General

MARTIN W. MATZEN

EVELYN S. YING

Attorneys

AUGUST 1991

/1/ The amendment provides in relevant part:

(a) A coal lease shall be for a term of twenty years and for so long thereafter as coal is produced annually in commercial quantities from that lease. Any lease which is not producing in commercial quantities at the end of ten years shall be terminated. The Secretary shall by regulation prescribe annual rentals on leases. A lease shall require payment of a royalty in such amount as the Secretary shall determine of not less than 12 1/2 per centum of the value of coal as defined by regulation, except the Secretary may determine a lesser amount in the case of coal recovered by underground mining operations. The lease shall include such other terms and conditions as the Secretary shall determine. Such rentals and royalties and other terms and conditions of the lease will be subject to readjustment at the end of its primary term of twenty years and at the end of each ten-year period thereafter if the lease is extended.

30 U.S.C. 207.

/2/ The Wyoming State Office of the BLM had previously sent Wyodak a letter erroneously stating that its lease would be subject to readjustment again in 1999. Wyodak argued before the lower courts that the Secretary was estopped from readjusting its lease in 1989, an argument that the court of appeals rejected. Pet. App. A12-A13. See Utah Power & Light Co. v. United States, 243 U.S. 389, 409 (1917) ("the United States is neither bound nor estopped by acts of its officers or agents in entering into an arrangement or agreement to do or cause to be done what the law does not sanction or permit").

/3/ The court of appeals' interpretation of the "unless otherwise provided by law" clause is consistent with its construction of the clause in two prior decisions. See FMC Wyoming Corp. v. Hodel, 816 F.2d 496, 501 n.9 (10th Cir. 1987), cert. denied, 484 U.S. 1041 (1988); Coastal States Energy Co. v. Hodel, 816 F.2d 502, 505-506 n.6 (10th Cir. 1987). There is even less reason for review by this Court now than there was when certiorari was denied in FMC Wyoming Corp. Moreover, as the court of appeals correctly recognized, Pet. App. A8 -- contrary to petitioners' contention, Pet. 13 n.5 -- its earlier decisions did not read the clause to preserve only Congress's right to circumscribe the Secretary's readjustment authority. In any event, any allegation of an intra-circuit conflict is for the court of appeals, not this Court, to resolve. Wisniewski v. United States, 353 U.S. 901, 902 (1957).

/4/ For the same reasons, petitioners' contention (Pet. 14-15) that the court erred in construing the statutory phrase to be "synonymous" with language reserving Congress's right to "repeal, alter, or amend" the statute is without merit. This Court has recently denied certiorari in a case raising a similar issue. Peterson v. Department of the Interior, 111 S. Ct. 567 (1990). The court of appeals in that case, faced with a statute containing no express reservation, had rejected the claim that Congress must expressly reserve its right to "repeal, amend or alter" legislation to retain that authority. See Peterson v. United States Dep't of the Interior, 899 F.2d 799, 807-808 (9th Cir. 1990).

INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA, AFL-CIO, PETITIONER V. UNITED STATES OF AMERICA

No. 90-1904

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Second Circuit

Brief For The United States In Opposition

TABLE OF CONTENTS Question presented Opinions below Jurisdiction Statement Argument Conclusion OPINIONS BELOW

The court of appeals' order (Pet. App. 1-4) is not reported. The district court's opinion and order entered on May 6, 1991 (Pet. App. 7-54), and the district court's order entered on May 7, 1991 (Pet. App. 5-6) are not yet reported.

JURISDICTION

The court of appeals' order was entered on June 7, 1991. The petition for a writ of certiorari was filed on June 13, 1991. The jurisdiction of this Court is invoked pursuant to 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether the courts below correctly construed a consent decree settling the government's civil RICO action against the union to: (1) amend the union's constitution to provide for new election procedures; and (2) permit amendments to the union's constitution that are inconsistent with the terms and objectives of the consent decree only upon prior approval by the government or the district court.

STATEMENT

1. In June 1988, the United States filed this civil action under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961 et seq., against petitioner union (also referred to herein as IBT), petitioner's governing General Executive Board and its 18 members, and a number of alleged organized crime operatives. The complaint alleged that the IBT had long been under the control of organized crime, and sought equitable relief to rid the union of such control. Compl. 109-111. See also United States v. IBT, 931 F.2d 177, 180 (2d Cir. 1991).

In March 1989, on the eve of trial, the parties agreed to a consent decree, which the district court entered as an order of the court. Pet. App. 55-107. The principal goal of the consent decree is to wrest the union from the influence of organized crime and return authority to the union members by, inter alia, establishing a new system of rank-and-file elections of IBT officers. Pet. App. 56-57, 64-65, 78-83. See United States v. IBT, 931 F.2d at 181. The consent decree requires three court-appointed officers to carry out the terms of the decree and monitor the union's activities. /1/

The consent decree expressly states that "(t)he IBT Constitution shall be deemed amended, and is hereby amended, to provide for the following new election procedures." Pet. App. 78. Candidates for international union officer positions are to be nominated at the union convention by delegates chosen in rank-and-file elections conducted at the local union level. Pet. App. 78-79. After the candidates are nominated, the officers are to be elected by a direct rank-and-file, one-member/one-vote, secret ballot. Pet. App. 81.

The decree's election provisions additionally provide:

At the IBT 1991 International Convention, the delegates shall be presented with the aforesaid amendments for vote; provided further that nothing herein shall be deemed or interpreted or applied to abridge the Landrum-Griffin free speech right of any IBT officer, delegate or member, including the parties hereto.

Pet. App. 83.

The decree, at para. D.9, also generally states:

(a) The IBT Constitution shall be deemed and hereby is amended to incorporate and conform with all of the terms set forth in this order.

(b) By no later than the conclusion of the IBT convention to be held in 1991, the IBT shall have formally amended the IBT Constitution to incorporate and conform with all of the terms set forth in this order by presenting said terms to the delegates for a vote. If the IBT has not formally so amended the IBT Constitution by that date, the Government retains the right to seek any appropriate action, including enforcement of this order, contempt or reopening this litigation.

Pet. App. 63-64.

Paragraph L.17 of the decree further declares that the "parties intend the provisions set forth herein to govern future IBT practices in those areas." Pet. App. 101. That paragraph requires the union to give the government prior written notice of any proposed changes to the consent decree provisions incorporated in the union's constitution. If the government objects to the proposed change as "inconsistent with the terms and objectives" of the consent decree, then "the change shall not occur." Ibid. The union may then seek a determination from the district court as to whether the proposed change is inconsistent with the terms and objectives of the consent decree. Pet. App. 101-102.

Finally, the consent decree provides that the district court shall have continuing jurisdiction over implementation of the decree and that the court shall enter final judgment upon satisfactory completion and implementation of the decree. Pet. App. 58.

2. The IBT International Convention was scheduled for June 24, 1991. Pursuant to the terms of the consent decree, delegates to the convention were to nominate the candidates who would be on the ballot for the December, 1991, rank-and-file election of union officers. Prior to the convention, the government learned that members of the IBT leadership were attempting to derail the rank-and-file election. These officials were orchestrating an effort to have the convention repudiate the consent decree's rank-and-file election procedure and replace it with an election of the union's executive officers by a vote of delegates at the convention itself. Pet. App. 10; C.A. App. 137, 144-150, 218-252, 254-262. To protect the rank-and-file elections provided for by the consent decree, the government sought a declaration from the district court that the consent decree's election procedures could not be altered except in accord with para. L.17 of the decree, entitled "Future Practices." Pet. App. 101. The government further sought an order enjoining the IBT's executive board, members, agents and affiliates from taking any action to alter the function of the nominating convention, except in compliance with the decree's future practices provision. Pet. App. 9-11.

3. On May 6, 1991, the district court issued an order granting the relief requested by the government.

As an initial matter, the district court rejected the union's argument that the government's allegations were too speculative. The court noted that the IBT's attorneys, including its General Counsel, refused to deny or dispute the government's allegations that IBT executives were planning to use the convention to avoid the rank-and-file elections required by the consent decree. Pet. App. 23-24.

The court held that the terms of the consent decree were expressly incorporated into the IBT constitution and could not be vetoed by the convention delegates. Pet. App. 27-28. The court explained that the decree's requirement of a convention vote on the decree was added only because of then-existing uncertainty about whether the General Executive Board could bind the IBT's affiliates and members to the constitutional changes made by the consent decree. Pet. App. 27. The district court determined that the clear intent of the parties was to amend the constitution forthwith to incorporate the decree and bind all subordinate entities. Pet. App. 27-32. The court further noted that, since entry of the consent decree, the court of appeals had firmly established that the General Executive Board did have authority to bind the IBT's members and affiliates. Pet. App. 32-39. The court concluded that the convention vote on the decree thus "will now have no legal effect" and that "(n)o action by the IBT at the convention can undercut the provisions of this Consent Decree." Pet. App. 40.

Accordingly, the court issued a declaration that the electoral and disciplinary terms of the consent decree are part of the IBT constitution and are binding upon the IBT's subordinate entities, unless the decree's provisions are changed in accordance with para. L.17 of the decree. Pet. App. 53. Further, the court declared that the function of the 1991 IBT convention in nominating candidates for the December rank-and-file elections "may not be expanded, limited, altered, or otherwise changed in any way without full compliance with the provisions of Paragraph L.17 of the Consent Decree." Ibid. Finally, the court enjoined the IBT and its subordinates from attempting to alter or circumvent the nominating function of the 1991 convention as delineated in the consent decree, unless their actions are authorized pursuant to para. L.17 of the decree. Pet. App. 53-54.

On May 7, 1991, the district court amended its May 6th order to include the sentence: "Nothing in this opinion shall be construed to alter the provisions of the Consent Decree that require the Consent Decree's amendments to be put to the convention delegates for a vote." Pet. App. 5-6.

4. The IBT filed an expedited appeal with the Second Circuit. On June 7, 1991, the Second Circuit issued an order affirming the district court's decision on the merits. Pet. App. 1-4. /2/

5. On June 13, 1991, the IBT acting through its executive officers, filed the present petition for certiorari in this Court. On June 17, 1991, a group of elected convention delegates who had been denied permission to intervene in this action by the district court (Pet. App. 25-26), but had been permitted to intervene on appeal (Pet. App. 3-4), filed an application for an emergency stay with Justice Marshall, who denied it on June 19, 1991.

ARGUMENT

1. Petitioner objects to the enforcement of the express terms of a consent decree to which it voluntarily agreed. Petitioner does not contend that the decisions of the Second Circuit or the district court enforcing the consent decree conflict with decisions of this Court or any other court. The question of whether the courts below properly construed the consent decree accordingly does not warrant review by this Court.

2. In any event, the courts below correctly construed the consent decree. The decree by its own terms amends the IBT constitution and prohibits further amendments to the constitution inconsistent with the terms and objectives of the decree unless the union receives approval of the government or the district court. These terms do not, as the IBT contends (Pet. 26, 28), grant the government "control" over the union. Rather, they simply ensure that the rank-and-file election procedures provided for by the decree will be honored. The rank-and-file election is central to the consent decree's goal of wresting the union from the influence of organized crime by returning power to the union membership. The decree does not in any way diminish the free speech rights of the membership or require the convention delegates to vote in any particular manner. The lower courts' orders upholding the express terms of the decree are thus correct and the petition should be denied.

a. Petitioner argues that the consent decree should be construed to allow the convention delegates to rescind all of the decree's provisions, including the provisions requiring rank-and-file elections. However, the decree clearly provides that its terms are incorporated into the union's constitution and that the union may not amend the constitution in the future to alter the terms of the decree absent prior approval of the United States or the district court. See Pet. App. 63-64, 101-102. The union's contention that it may unilaterally terminate its agreement with the government is not supported by the decree's express terms or by the intent of the parties as presented to the district court at the time the decree was entered.

Consent decrees "should be construed basically as contracts," United States v. ITT Continental Baking Co., 420 U.S. 223, 236-237 (1975), and "should be interpreted in a way that gives effect to what the parties have agreed." SEC v. Levine, 881 F.2d 1165, 1179 (2d Cir. 1989). Consistent with that approach, this decree must be read to amend the union's constitution. In the section specifically addressing changes in the union constitution, the consent decree expressly provides: "The IBT Constitution shall be deemed and hereby is amended to incorporate and conform with all of the terms set forth in this order." Pet. App. 63. Again, before setting out the new rank-and-file election procedures, the decree states: "The IBT Constitution shall be deemed amended, and is hereby amended, to provide for the following new election procedures." Pet. App. 78. That language unambiguously demonstrates that the parties intended that the decree would, upon its entry by the district court, become a part of the union constitution.

The union argues that, although the constitution was amended by the decree at the time the decree was entered, the decree should not be read to bar the convention delegates from amending the constitution to nullify any or all of the decree's provisions. Pet. 30-31. That argument ignores the fact that the union agreed to para L.17 of the decree. That paragraph, entitled "Future Practices," expressly states that the parties "intend the provisions set forth (in the decree) to govern future IBT practices." Pet. App. 101. Further, para. L.17 establishes the exclusive mechanism for amending the decree terms incorporated in the union constitution. If "the IBT wishes to make changes, constitutional or otherwise, in those provisions, the IBT shall give prior written notice to the (United States)." Ibid. If the United States "objects to the proposed changes as inconsistent with the terms and objectives of (the consent decree), the change shall not occur; provided, however, that the IBT shall then have the right to seek a determination from (the district court) * * * as to whether the proposed change is consistent with the terms and objectives set forth herein." Pet. App. 101-102.

There is nothing unclear about para. L.17. It provides the mechanism to alter or modify the decree provisions incorporated into the union constitution. See United States v. IBT, 905 F.2d 610, 620 (2d Cir. 1990) (para. L.17 "specifically requires the IBT to refrain from any unilateral changes, 'constitutional or otherwise,' in the broad areas covered by the Consent Decree"). Paragraph L.17 (and the decree itself) would be rendered a nullity if the convention delegates could simply veto any or all of the decree provisons at will. Ibid.

b. In arguing that the convention delegates had power to veto the decree's provisions, the union relies upon the decree provisions mandating a delegate vote upon the decree. Pet. 30. However, as the district court recognized, those provisions do not provide the delegates with veto authority. See Pet. App. 26-32.

At a hearing on March 14, 1989, immediately prior to entry of the consent decree, the district court raised the issue of whether there was any inconsistency between the provisions in the decree amending the union constitution forthwith to incorporate the consent decree's terms and the provisions for a vote by convention delegates upon the decree. C.A. App. 301. Government counsel, speaking for the parties, explained:

The document makes clear that the constitution of the IBT is deemed amended immediately. In the government's view, that is a permanent amendment and not subject to change, absent the provision we were just talking about (para. L.17, the future practices provision), first coming to the government for change, and if the government says no, then going to this Court or another court of competent jurisdiction.

However, your Honor, there have been legal issues raised in this case. Your Honor saw it when certain locals made motions * * *. Certain local officials or local unions may in the future raise legal challenges about the amendment of an international constitution in a manner that was by court order rather than pursuant to the constitution which calls for ratification at a convention.

We believe, the government believes, your Honor, there is no question that the amendments can be ordered by this Court pursuant to a consent decree, and that they are automatically in effect. But if down the road there is a challenge by a local official or a local union, ratification at the convention would eliminate any legal issue at all.

C.A. App. 313-314. Counsel for the IBT did not take exception to this explanation or the reason for submitting the decree's provisions to the convention delegates for a vote, i.e., to eliminate any doubts that might later be raised about the decree's legal effect.

Upon hearing this explanation, the district court requested the parties to clarify the document accordingly. C.A. App. 314. The parties modified certain language in the document and reported back to the district court later that day. C.A. App. 390. Government counsel stated, again without contradiction from IBT counsel, that "(e)very provision in the document is deemed automatically amended in the IBT constitution as of the date of entry of the Court order" and that paragraph 9(a) and (b) of the consent decree "explain(s) fully the intent of the parties." C.A. App. 395.

As adopted, paragraph 9 of the decree provides:

(a) The IBT Constitution shall be deemed and hereby is amended to incorporate and conform with all of the terms set forth in this order.

(b) By no later than the conclusion of the IBT convention to be held in 1991, the IBT shall have formally amended the IBT Constitution to incorporate and conform with all of the terms set forth in this order by presenting said terms to the delegates for a vote. If the IBT has not formally so amended the IBT Constitution by that date, the Government retains the right to seek any appropriate action, including enforcement of this order, contempt or reopening this litigation.

Pet. App. 63-64.

The district court was satisfied by the parties' clarification and ordered, with the parties' approval, that the colloquy between the parties and the court set out above be "deemed incorporated by order of this Court" and "be read and considered together with the formal consent order." C.A. App. 397. The district court then approved the consent decree. C.A. App. 397-405.

In light of the above proceedings, the intent of the parties is clear. The consent decree provisions are part of the IBT constitution and cannot be changed without prior approval of the United States or the district court. The delegate vote was included only as a safety net provision, so that in the event a court found that the General Executive Board could not bind the IBT's affiliates or membership, the government would not be left without a remedy.

c. Petitioner asserts that reading the consent decree to preclude the delegates from rescinding the decree's terms would grant the United States government "control of the union * * * in perpetuity." Pet. 27. See also Pet. 26, 28, 32. That is a mischaracterization of the consent decree. The decree's cardinal purpose is to eliminate organized crime's influence over the IBT and return control of the union to its rank-and-file membership. To ensure that result, the decree amends the union constitution, establishing rank-and-file election procedures. To ensure the permanence of its reforms, the decree provides that constitutional changes in the areas covered by the decree cannot be made without prior approval of the United States or the district court. These provisons of the decree do not "disenfranchise() the rank-and-file" (Pet. 34); rather, they ensure that the union leadership will be selected by the rank-and-file and will therefore represent the interests of the membership.

d. Petitioner argues that the decree should not be read to limit the free speech rights of the delegates or the membership. Pet. 29-30. The United States agrees. The decree itself guarantees that "nothing herein shall be deemed or interpreted or applied to abridge the Landrum-Griffin free speech right of any IBT officer, delegate or member, including the parties hereto." Pet. App. 83.

Accordingly, the union members are free to speak and vote against the decree and any or all of the decree's terms. Indeed, the June convention has already been held and the union delegates are reported to have exercised those rights with no inhibitions. See Proceedings, 24th Convention, IBT 172-199 (June 24, 1991). The decree's terms were presented to the delegates, who voted to reject them. Id. at 199. While the members and delegates retain their free speech rights, amendments to the union constitution that implicate the consent decree may be made only in conformance with para. L.17. Accordingly, the district court correctly held that the delegates' vote on the decree "will now have no legal effect." Pet. App. 40. /3/

3. Petitioner implies that the decree should not be enforced because the General Executive Board members who signed the agreement did not have the power to bind the union membership to amendments in the union constitution. Pet. 33. That argument is without merit.

The Second Circuit in prior appeals by the IBT and certain of its subordinate entities has firmly established that the General Executive Board did have authority to bind the union's affiliates and membership to the decree's constitutional changes. The IBT constitution allowed the union leaders to amend the constitution as a "result of judicial direction." See United States v. IBT, 905 F.2d at 622. Thus, the court of appeals held that "as far as the constitutionally delegated powers of the IBT and its officers are concerned, IBT members * * * are bound by the Consent Decree." United States v. IBT, 931 F.2d 177, 184 (1991).

The court of appeals further explained that "the collective IBT membership was adequately represented in the litigation leading to the Consent Decree" (931 F.2d at 187), and consequently could be bound by that decree. Id. at 185-187. The court noted that, had the government pursued the lawsuit to final judgment and prevailed, the relief granted "would have led to the appointment of a trustee to take over the IBT's affairs," thus rendering "questions concerning the method of selecting IBT Convention delegates and IBT officers insignificant." Id. at 186. In the face of that possibility, the IBT was not "powerless to accept a settlement" to avoid a result that "would have abrogated even greater portions of the IBT Constitution." Ibid. To the contrary, the decree represented the "collective interest of the IBT membership in both eliminating the influence of organized crime within the union and in doing so at the least cost to internal union processes." Ibid. Accordingly, because the union membership was adequately represented when the decree was fashioned, the membership was bound by the changes made to the union constitution.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

STUART M. GERSON

Assistant Attorney General

MICHAEL JAY SINGER

ROBERT M. LOEB

Attorneys

AUGUST 1991

/1/ The three officers include an Independent Administrator, an Investigations Officer, and an Election Officer. Pet. App. 66. Among other powers, the administrator is vested with powers equivalent to the union's General President and General Executive Board to discipline corrupt officials and to appoint temporary trustees to run the affairs of affiliated entities. Pet. App. 67-68. The Investigator is empowered to bring disciplinary charges and, where appropriate, institute trusteeship proceedings. Pet. App. 68-72. The Election Officer supervises all phases of the electoral process. Pet. App. 82. With certain exceptions, the authority of the court-appointed officers will terminate when the union's 1991 elections are certified. Pet. App. 58-60.

/2/ The June convention was held as scheduled. The consent decree's terms were presented to the delegates, who voted to reject them after extensive debate. See Proceedings, 24th Convention, IBT 172-199 (June 24, 1991).

/3/ Petitioner contends that the district court's order required the delegates to vote for the decree. Pet. 34-35. When read in context, however, the district court simply said that the union delegates could not rescind the rank-and-file voting procedures and attempt to elect the executive officers themselves. Pet. App. 50-52. The district court correctly held that such an action would conflict with the consent decree and should be enjoined. Pet. App. 52-54.

ABELARDO MUNERA-CADAVID, PETITIONER V. UNITED STATES OF AMERICA

No. 90-8394

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Eleventh Circuit

Brief For The United States

OPINION BELOW

The judgment orders of the court of appeals (Pet. App. 1a, 2a) are unreported, but the judgments are noted at 932 F.2d 976 (Table).

JURISDICTION

The judgments of the court of appeals were entered on April 12, 1991. The petition for a writ of certiorari was filed on June 17, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

1. Whether the district court improperly admitted similar act evidence in the first of two separate prosecutions of petitioner.

2. Whether the Double Jeopardy Clause barred the second prosecution of petitioner, which was based in part on the similar act evidence used in the first prosecution.

STATEMENT

Petitioner seeks review of two convictions arising from separate jury trials in the United States District Court for the Southern District of Florida. At the first trial, petitioner was convicted of various offenses arising from his involvement in a scheme to import cocaine, in August 1988, from Haiti to the United States. /1/ He was sentenced under the Sentencing Guidelines to 262 months' imprisonment, to be followed by seven years' supervised release. At the second trial, petitioner was convicted of additional offenses arising from his involvement in a scheme to import cocaine, in February 1989, from Colombia to Puerto Rico. /2/ He was sentenced under the Sentencing Guidelines to an additional 405 months' imprisonment, to be followed by five years' supervised release. The court of appeals summarily affirmed both convictions. Pet. App. 1a, 2a.

The evidence at the first trial showed that petitioner participated in a plan to import 492 kilograms of cocaine from Haiti to Miami, Florida, aboard a Haitian freighter. When the shipment arrived, petitioner's confederates loaded the cocaine into a van and subsequently delivered four kilograms to one individual and 101 kilograms to two other individuals. Petitioner was arrested after parking a borrowed automobile in preparation to receive the remaining 387 kilograms of cocaine. Petitioner contended at trial that his presence at that location was merely coincidental. To rebut that contention, the government introduced testimony from an undercover FBI agent of petitioner's involvement in the attempt, six months later, to import cocaine from Colombia to Puerto Rico. See Gov't 89-6093 C.A. Br. 3-9.

The evidence at the second trial established petitioner's involvement in the conspiracy to import 480 kilograms of cocaine by plane from Colombia to Puerto Rico. The evidence showed that petitioner arranged for the purchase of a $200,000 Piper airplane and paid other expenses involved in the attempt to smuggle the cocaine into Puerto Rico. After agents from the Customs Service seized the plane and its cargo, petitioner confided to the undercover FBI agent that he was involved in the smuggling attempt and that he had additional cocaine in Colombia that he wished to import to the United States. Gov't 89-6178 C.A. Br. 4-11.

ARGUMENT

1. Petitioner first contends (Pet. 3-7) that the trial court erred in allowing the government to use similar act evidence to prove that he was guilty of the offenses charged at the first trial. That contention has no merit. The Federal Rules of Evidence provide that, subject to certain exceptions, all relevant evidence is admissible. Fed. R. Evid. 402. In this case, petitioner contended that his presence at an apparent cocaine distribution point was merely coincidental. The government's evidence that petitioner was involved in another large-scale, international cocaine importation scheme was certainly relevant in rebutting that contention because it made "more probable" the fact that petitioner was not an "innocent bystander" and that he was present at the location to receive a shipment of cocaine. Fed. R. Evid. 401.

In addition, the government's evidence was not subject to exclusion under Rule 404(b), which prohibits the use of similar act evidence "to prove the character of a person in order to show action in conformity therewith." Fed. R. Evid. 404(b). Petitioner's defense raised questions whether he was a knowing and intentional participant in the cocaine importation scheme and whether his arrest was the result of mistake or accident. The government's evidence was properly admitted to rebut petitioner's contentions as to those issues. See ibid. Finally, the probative value of the government's evidence was not "substantially outweighed by the danger of unfair prejudice." Fed. R. Evid. 403. The evidence was neither inflammatory nor misleading. Instead, it provided information for the jury to consider in determining whether petitioner's presence was mere happenstance. Thus, the trial court properly admitted the government's similar act evidence. See, e.g., Huddleston v. United States, 485 U.S. 681 (1988).

2. Petitioner also contends (Pet. 7-9) that the Double Jeopardy Clause barred the second prosecution because the government had used evidence of the offense involved there in the first prosecution. That contention also lacks merit. The Double Jeopardy Clause bars two prosecutions based on the same offense. Two crimes do not become the same offense merely because the evidence that establishes one crime is also relevant to the other. Nevertheless, petitioner's claim finds some support in United States v. Felix, 926 F.2d 1522 (10th Cir. 1991), cert. pending, No. 90-1599 (filed April 15, 1991). In that case, the court of appeals reversed a defendant's conviction on five substantive counts based on the fact that the conduct charged in those counts had been the subject of evidence introduced against the defendant under Rule 404(b) in an earlier prosecution. 926 F.2d at 1530. The Court may therefore wish to hold this case pending the disposition of the government's petition for a writ of certiorari in that case.

CONCLUSION

The petition for a writ of certiorari should beheld, as to the second question presented, and disposed of in light of the Court's resolution of the petition for a writ of certiorari in United States v. Felix, No. 90-1599. In all other respects, the petition should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

ROBERT S. MUELLER, III

Assistant Attorney General

JOSEPH C. WYDERKO

Attorney

AUGUST 1991

/1/ Petitioner was convicted of conspiracy to import cocaine, in violation of 21 U.S.C. 963; importation of cocaine, in violation of 21 U.S.C. 952(a); conspiracy to possess cocaine with intent to distribute it, in violation of 21 U.S.C. 846; and possession of cocaine with intent to distribute it, in violation of 21 U.S.C. 841(a)(1).

/2/ Petitioner was convicted of conspiracy to import cocaine, in violation of 21 U.S.C. 963, and conspiracy to distribute cocaine, in violation of 21 U.S.C. 846.

EDWARD A. BLACK, TONY F. SWANSON, AND JACOB STEWART, PETITIONERS V. UNITED STATES OF AMERICA

No. 90-8358

In The Supreme Court Of The United States

October Term, 1991

On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Sixth Circuit

Brief For The United States In Opposition

OPINION BELOW

The opinion of the court of appeals (Pet. App. 1-16) is reported at 927 F.2d 1361.

JURISDICTION

The judgment of the court of appeals was entered on March 18, 1991. The petition for a writ of certiorari was filed on June 17, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether the evidence was sufficient to support petitioners' convictions for aiding and abetting the possession of crack cocaine with intent to distribute it.

STATEMENT

After a jury trial in the United States District Court for the Southern District of Ohio, petitioners were convicted of possessing crack cocaine with intent to distribute it, in violation of 21 U.S.C. 841(a)(1). In addition, petitioner Swanson was convicted of using or carrying a firearm in relation to a drug-trafficking offense, in violation of 18 U.S.C. 924(c)(1). Petitioner Black was sentenced to 97 months' imprisonment; Stewart was sentenced to 132 months' imprisonment; Swanson received consecutive prison sentences of 162 months on the drug count and 60 months on the firearms count. Each petitioner also was sentenced to a five-year term of supervised release. The court of appeals affirmed the convictions and sentences in all respects, except that it remanded for resentencing of Swanson and a co-defendant. /1/ Pet. App. 1-16.

1. In September 1988, the Columbus, Ohio, Police Department received complaints of illegal drug activity in one unit of a duplex on East 21st Avenue. On September 14 and 16, 1988, officers made controlled purchases of crack cocaine from occupants of the duplex. Pet. App. 2.

About 25 minutes after the second purchase was made, a SWAT team executed a warrant to search the apartment. The occupants of the apartment were alerted to the team's approach. The portion of the duplex that the police entered was a small, single-story apartment, about 25 feet by 25 feet in size, with a basement. The only electricity was provided by an extension cord from the adjoining unit. Pet. App. 2.

Eleven individuals were present in the apartment at the time of the officers' entry. Gov't C.A. Br. 8. Co-defendant Dwayne Head, to whom the apartment was leased, was sitting on a chair near the front door. Co-defendant Daniel Neal and petitioner Stewart were seated on a sofa in the living room of the apartment. When Neal was ordered by the police to stand, a pistol fell from his lap. Neal was carrying .19 grams of crack. Stewart was in possession of the money used to make the controlled purchase of crack just before the raid. Pet. App. 2-3, 7.

When the officers entered, petitioner Swanson ran toward the rear of the house. The officers stopped him after he had gone only a few feet. They found a loaded shotgun at Swanson's feet and, after they ordered him to lie on the floor, they found a loaded pistol under his legs. Pet. App. 2, 3.

The officers discovered petitioner Black in the basement under the staircase "curled up in a ball." Pet. App. 2. Also in the basement, on a table a few feet from Black, were 112 bags containing crack. An individual in the basement had earlier ordered Head out of the basement after Head had seen crack on the table. Pet. App. 2, 3, 12. Each petitioner was present in the apartment during four or five sales of crack on the day of the raid. Gov't C.A. Br. 11.

2. On appeal, petitioners contended that the evidence was insufficient to support their convictions. Th